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Re: Bringing Linux to the OEM's

Roy Schestowitz wrote:
> Linux and its closing window of opportunity with OEMs
> ,----[ Quote ]
> | Right now, the following factors are true:
> |     * Linux has a very viable desktop and office suite--for free.
> |       OpenOffice being bloated is basically not an issue anymore,
> |       since even a basic computer today will run OpenOffice completely
> |       fine. Thanks to Ubuntu, end users can now use Linux and not notice
> |       the difference.

Ubuntu, SUSE, Linspire, Mandriva.  Though my guess is that if Novell
keep crippling itself with contracts from Microsoft, the industry might
go hard left into Ubuntu.

> |     * Again thanks to Ubuntu, Linux is amazingly simple to configure.

Possibly too simple?  30% of the market last year was White Boxes.  Of
the remaining market, 25% was AMD-64 machines.  All of these machines
can be configured to run Linux in less than an hour.  But the OEM
market still preinstalls Windows on 99% of the desktop/laptop  machines
they ship.  Of the remaining desktop/laptop machines, Dell only ships
FreeDOS.  Even these machines sold without Windows much be purchased in
large quantities, usually the minimum order is 100 units.

Net result, Microsoft can tell the industry that they have 99% of the
market, and the OEMs can't disprove it.  Of course, even the OEMs
aren't stupid.  The biggest profit margins are in "Linux Ready"
machines.  The leading edge technology was designed to support
virtualization, which allows Windows and Linux to share the same
machine at the same time.  Furthermore, there are numerous advantages
to using Linux as the primary operating system, including performance,
stability, and security.

Linux servers and OSS have been so successful in the server market that
many corporations are now quite eager to migrate their desktops to
Linux.  Most are looking at transitional strategies such as
Virtualization or emulation.  Linux supports at least 4 virtualization
strategies (as host), Microsoft supports 2.

> |     * Computers are getting cheaper and cheaper. I am using a $950
> |       laptop, and it's an amazing machine which will probably last
> |       many years.

Many Windows-only machines have been getting hit with massive
price-erosion.
Some have fallen to as low as $300 for desktop machine.  Laptops have
also been dropping as well.  Some Windows-Only laptops have fallen
below $500.

Linux-Ready laptops on the other hand, have been holding their value
longer, with slower price erosion.  Some Linux Ready laptops,
especially those designed for virtualization are selling for as much as
$1500, and those with high resolution displays and memory/display
designed for Linux hosted virtualization - are going for over $2000
each.

> |     * Linux's hardware support is impressive.

More and more OEMs are targeting Linux with their hardware.  Again for
the same reason as above.  The OEMs lose money on "Windows Only"
machines, and make nearly all of their profits from "Linux Ready"
machines.  Windows Only losses are often subsidized with profits from
peripherals.  Dell has gone into the HDTV market, and Sony has put
Linux into their HDTVs.  HP subsidized with printers, and now
subsidizes with consulting.  IBM subsidized their Windows-Only machines
with consulting.  Lennovo now has to rely almost exclusively on
Linux-Ready machines to maintain their profits.  Nearly all thinkpads
are Linux ready.

> |     * Vista is being released. All the anti-piracy procedures will
> |       annoy users immensely. Plus, Vista is a new system: a big break
> |       from XP.

It seems that XP has many of the same problems as XP, and lots of new
problems.  The licensing has also become a huge issue.  After some of
the license terms from XP, the corporate legal departments are going
over the Vista licenses with a fine tooth comb, and many are advising
against accepting ANY Vista until Microsoft softens it's licenses.

> | [...]

> | Microsoft lobbying. There is no conspiracy theory here: it's
> | something everybody knows.

Yes, but there is a river in Egypt called denial.  Many WinTrolls, and
even Bill Gates will tell you that their overatures have been
"misinterpreted".  But that's really the key isn't it.

Keep in mind that Microsoft lobbying has gone beyond the overatures to
the OEM executive board.  Now, Microsoft is funnelling contributions to
a number of "pet charities" of a number of political leaders.  The
money is channeled through the Gates Foundation, which has the right to
privacy and free speech, and is immune from most campaign contribution
laws.

Microsoft was named in the Jack Abramov Investigation.

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/03/AR2006010300474.html
http://www.google.com/search?num=100&hl=en&lr=&safe=off&q=Jack+Abramov+Microsoft&btnG=Search

http://tinyurl.com/yk7gxo

Jack Abramoff. The crimes of Republican mega lobbyist Abramoff are so
numerous as the prevent listing them all here. In addition to paying
for trips and golf outings for Tom Delay and David Safavian, Abramoff
swindled over $60 million from Indian tribes whose casino interests he
represented. (Abramoff was indicted in August.) Together, Abramoff and
Safavian could spell a lot of trouble for a lot of Republicans.

Ralph Reed. The Safavian web also entangles Ralph Reed, formerly of the
Christian Coalition and Bush's southeastern campaign chairman. Reed was
on those golf outings with Safavian and Abramoff. Like Abramoff, Reed
also feasted on native Americans to the tune of $1 million in fees for
casino lobbying. Interestingly, Reed also worked for Bill Gates in
2000, lobbying then candidate and Reed ally George W. Bush regarding
the Department of Justice against Microsoft.

> | Executives of big companies are being
> | pressured (see blackmailed) so that they will never allow people to
> | buy a Linux laptop.

They are only required to order the machines as Windows machines.  The
corporation has very little control over what the end-user does to the
final configuration.  Many end-users have been adding Linux to their
machines.  The management generally doesn't want to interfere with this
because a hard-fisted approach could mean that they would lose many key
employees to competitors.  Many large companies have started using
Linux officially because competitors, especially smaller competitors,
are slicing them to ribbons by using OSS and Linux.  When you want
people to manage a corporate web site that's powered by Linux and/or
UNIX, you can pretty much expect the people who support these systems
to want Linux on their desktops and/or Laptops.

The biggest problem with all of this unsupported aftermarket upgrading
is that it becomes almost impossible to track, or control, how the
systems are configured.  Up until mid 2005, the trend was for people to
purchase new machines with Windows and put Linux on the older machines.
 With changes to the XP licenses, the introduction of 64 bit
processors, dual-core processors, and improved virtualization
technology, more and more of the NEW machines have been reconfigured to
run Linux immediately.

Estimates of new Linux deployments tend to be in the 40-70 million
range for 2006, this would  mean the equilvalent of 40-70% of the
machines sold this year were Linux deployments.

Again, these Linux deployments don't necessarily mean the exclusion of
Windows.  Virtualization has made it very easy to install a Linux VM on
a Windows machine or to install a Windows VM on a Linux system.
Microsoft is so acutely aware of the trend that they are trying to
"cash in" charging as much as twice the price for PERMISSION to run
Windows as a VM Client to Linux.

Ironically, it looks like Microsoft might even be forcing the issue and
driving more users into using Linux as the host system.  The Vista
system now tries to lock-out Ring zero operations, which means that
even the VM installation becomes uncertain.  If such VM installations
are prevented, this could push corporate and retail users over the edge
and trigger a migration to "Linux as Primary" configurations.

Both Windows XP and Vista are very memory hungry and give up their
memory very reluctantly.  Switching to a Linux VM can take several
seconds as the VM fights the host OS libraries for memory.  On Windows,
about 80% of the binary code for Office is embedded in the libraries
use to run IE.  All of that code gets loaded, and if there is enough
physical memory, the operating system lets it sit there in physical
RAM.  When the Linux VM tries to get memory, the operating system has
to figure out what memory isn't being used and give it back to the OS,
but usually only a few hundred bytes at a time.

On the other hand, Linux very quickly and eagerly gives up it's memory,
which is normally used for disk buffers instead of as ballast to keep
third party applications from starting quickly.

The net result is that using Linux as the primary OS gives more control
over what Windows is ALLOWED to grab for itself.  If you just need it
to access the travel agency web site using IE, you can allocate 128
meg, start up the VM, start up IE, and then take a snapshot.  You can
then pause the VM, and when you actually need it, you can restart the
snapshot in 2-3 seconds.

Companies who want a hybrid Linux/Windows solution should also consider
Crossover which enhances WINE with Microsoft licensed libraries and
allows most Windows applications to run.  You can also consider Win4Lin
which is a Micrososft Licensed Xen client which has been stripped of
the overhead used to manage and load device drivers and complex GDI
components.

The problem in the past has been that these other products were
expensive, most cost more than the OEM version of Windows.  Since XP
users could install Windows in a VM and run WINE applications using the
XP libraries - as long as the machine was properly licensed to run XP,
there wasn't much need to license these other products unless you were
purchasing a white box.

The problem now, is that Microsoft is demanding extra funds and
explicitly forbids the use of Vista libraries on anything else but
Vista.  They demand a significantly higher price (almost double) for
the permission to run Vista as a VM.  This makes Crossover and Win4Lin
far more attractive and makes Vista downright undesirable.

Microsoft may end up forcing the hands of some of the OEMs, not the big
ones like Dell, HP, and Lennovo, but the smaller companies who have now
made "Linux Ready" systems their bread and butter.  Companies like
Acer, AST, and E-machines are now looking at Linux as a product
differentiator.  When selling "Windows Only" machines, they get killed
in the price wars as Dell eats them up with their supply chain
strategies, or HP pushes loss-leaders just to retain market share
against Dell.

In 2006, numerous machines were sold as "Linux Ready", and many of them
were off-brand or just misbranded.  For example the "Nascar" PCs.
These were "stock cars" that had the core equipment and Windows
licenses, but they were designed to be reconfigured as Linux machines,
using the XP license for legal use by WINE or as a Xen VM.

Intel eventually rolled out it's "dual core" processor, which pretty
much spelled it out.  "One core for Linux, one core for Windows, and
let Linux manage the two".

Keep in mind that for Linux, virtualization was critical to their
ability to achieve market penetration.  For Microsoft, virtualization
was a way to introduce an upstart competitor.
It was only when VMWare started offering free virtualization in the
form of VMWare Player, that Microsoft began to realize that they had a
problem, and offered their Virtual PC virtualization as a free
download.  The only problem is that by the time they did this, Virtual
PC didn't support the latest virtualization technology, didn't support
the latest clients, and the VMWare tools included with the commercial
product had the ability to turn Virtual PC images into VMWare Player
images.

Finally, users have begun to discover that there are other advantages
to making Linux the "Host" OS and making Windows the VM Client.  It's
much easier to back up Windows Images than it is to back up Windows
applications.  Ironically, this even made piracy more difficult,
because the VM copy was usually registered to the end-user instead of
an anonymous user.  The Update features made it real easy to tell if
someone was passing out Windows VM images as CD or DVD images.  And
running a pirated version of Windows on a Linux host was just plain
stupid.  Linux would provide the audit trail to confirm the piracy.

The author makes one assertion I do disagree with.  He suggests that
there are very few Linux users, not enough to merit a mass migration.

His assertion is 1/2 true.  There are probably less than 10 million
"Linux Only" users.  These would be users who only used Linux and did
not use Windows on any other machine.  The people who would show up
only as Linux users even in their NAT firewall.

And even then, most of these "Linux Only" users would probably not be
in the United States.  We see more of this in Latin America, Eastern
Europe, and Central Asia including mainland China, Mongolia, and
Malaysia where government agencies have formally adopted an "Linux
Only" or "Linux first" stance.  In these countries, use of Microsoft
software must be justified and the case must be presented in a number
of hearings.  For example, if you decided you needed 50 Windows
workstations to view and translate American web documents, you would
have to present your case, first in writing, then in a hearing,
possibly even a public hearing, at which point you would be
interrogated to confirm that there really were no other options.
Requesting Microsoft software when other options were available was a
good way to lose your credibility.  As a result, the net effect was to
raise the price of Microsoft software from a few days pay to a few
months pay.  And the more you needed, the more rock-solid your case had
to be that no other alternative would be possible.

Even in many cities, towns, and countries, where Microsoft is allowed,
the justification process has become the equivalent of political
suicide.  You can request Microsoft, but you are going to have to
testify in a public hearing that you feel it's worth the equivalent of
someone's annual salary to purchase Windows/Office/++ and that no
other, less expensive, option is acceptable.  Even if you remain
steadfast, you will still have to explain why Linux, OpenOffice,
FireFox, and OSS software was unacceptable and why Microsoft must be
paid instead of domestic workers.

Imagine going into a government hearing, with your political opponents
staring you down, as you insist that you must have 200 copies of
Windows/Office/Microsoft at a cost of $1000 per machine, along with 200
machines costing over $2000 per machine - because you want to be able
to play WarCraft 2!  Keep in mind that dinner for 2 in a nice safe
restaurant costs $3

Regardless of your reason, you insist that only Office can display the
documents, that only Windows can run the application, and that it would
be impossible to rewrite the Macros to work with anything else.
Remember, you had to present all of this in writing before the public
hearing in front of your political opponents.  So now you show up at
the hearing, and you make a huge presentation explaining how this would
be nearly impossible to do, and that you must have
Windows/Office/Microsoft.  During the interrogation phase, you are
asked about the other alternatives, and you emphatically state that
these are unsuitable.  Your political allies are as nice as they can
be.

Then, your political opponents start displaying your "impossible"
documents on OpenOffice.  The information is accurate, understandable,
and even the macro generated information is correctly updated as your
political opponent begins changing values and comparing the OO display
to the similar MS-Office display.  As your entire case and presentation
disintigrates in front of you, your political opponents ask if you are
a liar, a fraud, if you care more about Microsoft than you do about
your staff, why you wasted so much of the comittee's time with this
totally selfish demand for software which seems to benefit Microsoft,
and by the way, how much did Microsoft contribute to your favorite
charity, campaign fund, or pet cause?

In those countries, and those cities and states, the trend to more and
more "Linux only" workstations is getting more and more common.

Keep in mind, politics exists everywhere.  You can't have an
organization of 3 people without two of the extreme views trying to
persuade the 3rd to his point of view.  Does in really matter whether
it's the PRC technical agency, The Mexico Board of Ed, or the CEO, COO,
CFO, listening to the CIO and CTO try and explain why the company
should lay off 20% of the work force to fund an upgrade to Vista/Office
2007?  The bottom line is that, at some point, the CIO and CTO have to
explain why it shouldn't be THEIR budget that gets cut to cover all of
these expenses.

The director of marketing will ask why his people should have to work
twice as hard to cover the increased revenue demands as well as the
decreased staffing - just to pay Microsoft a Monopoly-inflated price
for Vista/Office 2007?  Will Vista/Office2007 allow them to close twice
as many sales using 20% fewer people?

The director of production will ask why his people should have to work
twice has hard to fulfill the contracts using 20% fewer people.  Will
they be able to twice as much with 20% fewer people?

Then comes the finance department.  The CFO starts asking why investors
should have to watch their stock price fall because revenue growth has
slowed due to the reduction in staff, or why profits have fallen due to
the increased costs.  When the amount being requested by the IT
department for a very short period exceeds the company profits for
their best quarter, the investors aren't going to be happy about this.
And with the new reporting laws under SOX, it's not so easy to bury
those Microsoft costs in a bunch of divisional pigeon-holes.

In 2007, the CIO is right in the cross-hairs.  If he walks in and
demands a huge budget to upgrade the entire company to Vista,
regardless of how it is amortized, he is literally putting not only his
own job on the line, but the jobs of the entire IT department.
Companies that have outsourced are looking even more closely.  Should
they consider a new outsourcing vendor?  One who can keep costs down by
squeezing as much life as possible out of the XP licenses and migrating
us to Linux as quickly as possible?

The problem for the CIO is that he can't say he didn't see it coming.
Microsoft tried to strong-arm CIOs into signing contracts for XP even
before it was stable.  According to Microsoft, they "shipped" something
like 30 million copies of Windows in the first 30 days. Of course, the
licenses hadn't been deployed, the contracts were support contracts,
and the payments had been financed to stretch out over 2-4 years, but
since the companies had agreed to take delivery and the serial numbers
were sent on a CD or encrypted internet file, the licenses had been
"shipped" or sold.

Microsoft does the same thing with the OEMs.  The OEMs are expected to
make minimum commitments, and prices are set based on those minimum
commitments.  Under the DOJ Antitrust settlement, Microsoft was
required to pubish their price schedule with the court in a manner that
would allow the other competitors to know the "standard rates".
Microsoft artfully negotiated a claus which allowed them to funnel
kick-backs in the form of "research funding" to companies who supported
Microsoft approved hardware.

For the OEMs, there is another dicey issue.  Should they jump into the
new OS with both feet, and commit to purchase 120% of what they need in
the new OS for a 60% discount, or should they hold back and maintain a
blend, but only at a 20% discount.  It's about the same number of
dollars either way.  The difference is that if the OEMs buy the excess
licenses, Microsoft can claim that they have 99% of the OEM market.
Keep in mind that if the industry sells 100 million PCs, and Microsoft
OEMs sell 80 million of them, that extra 20% now covers the 20 million
PCs that weren't covered by Microsoft bundlware licenses.  I wonder if
Microsoft has increased the minimum commitment to 130% to cover the
increased "White Box" market?

Remember, if the OEM commits to Vista, the PC cannot be downgraded to
XP.  Furthermore, if he commits to Office 2007, it can't be downgraded
to Office 2003.  As a result, the customers who buy huge numbers of PCs
will have to now upport two different platforms.

Furthermore, Microsoft can deactivate the VLM Vista licenses "at will"
if they feel that their licenses have been violated.  Given that
Microsoft can snoop into any Vista (or XP) PC at will, they COULD pull
the plug at any time.

Even more spooky, a hacker could do it for them.

Is your customer willing to pay a premium price for a premium
configuration to run Vista?  If you assume they do, and they don't,
you'll end up with $billions in inventory which is depreciating faster
than an iceberg on the equator off the north-african coast.

Are you feeling Lucky?

You can almost guess why IBM decided to sell off the PC division now,
can't you?

> http://www.freesoftwaremagazine.com/blogs/linux_and_its_closing_window_of_opportunity_with_oems
> http://tinyurl.com/yknye9


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