Bonum Certa Men Certa

Is Microsoft 'Pulling an EDGI' on Kerala? (Updated)

Finally -- solid proof of targeted Microsoft dumping against GNU/Linux and Free software

Kerala boy
Microsoft turns against the people of Kerala again



ANIVAR Aravind, who led friendly protests in favour of Free software in India, told us last night that "Kerala is moving to Non Free Way again [...] 2 major supporters for Free Software in Govt is Removed by The Govt. (Leaded by Communist Party of India (Marxist)."



This sounded familiar because Microsoft has a track record of tossing people out of their jobs if they don't serve Microsoft's agenda [1, 2, 3] and diplomats are not particularly impressed by this behaviour. "Chief Ministers IT advisor and Arun M (Special Officer, ICFOSS & FSF India Secretary) is removed," tells Anivar.

Anivar also says that "there is a move to Change IT Policy of the state." They have been trying this for a long time, even with the help of celebrities whom they attempted to hire [1, 2, 3, 4].

People like Anivar are rightly -- or leftly -- pissed off. "Also see new Reports like this", he adds.

Anybody visited the www.keralataxes.in[1] for VAT e-filing ? From 1st of Jan 2009 onwards e-filing of VAT returns is compulsory for all the dealers in Kerala. Please go through the site and see the documentation and procedures for e-flining.. Site is developed for and by the Microsoft Community. Govt has arranged e-filing from Akshaya Centers for dealers who have no internet facility at "Free Of Cost" (Thanks to "Microsoft Unlimited Potential Programme")


This specifically mentions "Microsoft Unlimited Potential Programme" which, to put it simply, is Microsoft's anti-Linux programme [1, 2, 3, 4, 5]. For education, Microsoft has a particular programme called "Education and Government Incentives program" (EDGI) for blocking GNU/Linux adoption. It may be related to those kickback entanglements and the BECTA situation. From the latest antitrust case [PDF], which Microsoft settled very quickly in hopes of hiding new evidence of crime:

From: David Driftmier Sent: Tuesday, August 06, 2002 2:46 PM To: Anna Aubry; Candace Grisdale Cc: Christine Bomstead; Kurt Kolb Subject: RE: "EDGI" Marketing funds Importance: High

EDGI is a customer-focused program that is for circumstances (like the one you reference) where an education and/or government customer is going to purchase naked PC'S or PC'S w/Linux. IF we do everything possible it still comes down to price differential between the Windows PC’s and Linux PC’s, then we can invest some/all of the royalty revenue from the deal back to the customer in the form of training, services, or even rebates. For more detail see that attached and let me know if you want to chat before your call. Note: This is not a partner program and is MS-internal only.

[...]

.... Original Message .... From: Candace Grisdale Sent: Tuesday, August 06, 2002 11:20 AM To: Anna Aubry; Christine Bomstead Subject: "EDGI" Marketing funds Importance: High

Okay I have a strange request...There is a situation in Indonesia where one of our OEMs is planning to ship Linux into the channel on some desktops. Do you know about the EDGI program (I think that’s how you spell it) and if an initiative like this one (likely to be government and education accounts receiving the offer)? Sorry if this is totally random but we’ve got an urgency at the executive level within the company about pulling together a Windows marketing program offer. NOTE: there’s a call at 3:30 today so I need to get to the right folks by 2pm today. Any advice I’d welcome.

[...]

From: David Driftmier Sent: Thursday, August 01,2002 4:27 PM To: Mark East; Yasushi Iwao; Rafael Perez-Colon; Prasanna Meduri; George Kyriakis Cc: EDGI HQ Team; Tit Meng Ang; Kurt Kolb; Ed Marcheselli; Sherri Bealkowski; David Driftmier Subject: EDGI Importance: High Attachments: *Microsoft Confidential* : Education and Government Incentives program

Shortly before MGB, Orlando sent a mail to the GM’s to let them know about an exciting new program to equip the field with a new tool to ensure that we never lose to Linux - the Education and Government Incentives [EDGI] program. We now need to make sure our people in the field understand how and when to leverage this program. Please use the attachments included in the original Orlando email and the into below to communicate with the education people in your region. I am sending this to the regional leads instead of to the broader alias so that you may modify with any regional processes as necessary. Please distribute as quickly as possible, though.

Below is a quick Q&A:

What is EDGI? EDGI (pronounced 'edgy') is both a process for responding to large competitive threats and a large source of funding to level the playing field between Windows and Linux when a deal involves the purchase of new PC's.

Did you say ’funding’?! How much? EDGI does not have a set limit for funding, but is instead limited on a per-deal basis. The maximum amount of funding that can be approved for an individual deal is the total amount of OEM revenue that Microsoft will recognize from the OEM/COEM from which new legal Windows PC’s are purchased.


Readers are smart enough to see what is happening here. The full document is 28 pages long and the text is particularly enlightening, so we append the full text below (OCRed and edited with some typographical errors).

Here is Microsoft talking about "Linux infestation" [PDF] and how to fight this "infestation". It's related to the one above (see full text at the bottom for details about CompHot).

From: Peter Wise Sent: Monday, October 07, 2002 9:43 AM To: Server Platform Leadership Team Subject: CompHot Escalation Team Summary - Month of September 2002

CompHot Escalation Team Summary - Month of September 2002



Microsoft Confidential

[...]

Observations and Issues



* Linux infestations are being uncovered in many of our large accounts as part of the escalation engagements. People on the escalation team have gone into AXA, Ford, WalMart, the US Army, and other large enterprises, where they've helped block one Linux threat, only to have it pop up in other parts of the businesses. At General Electric alone, at least five major pilots have been identified, as well as a new "Center of Excellence for Linux" at GE Capitol.

* Linux on the mainframe continues to be the most common escalation scenario largely because the mainframe is unfamiliar to most of our sales team. Paul Morse of CATM has had a success at AXA, PNC Financial, the State of Pennsylvania and elsewhere in blocking this threat.

[...]

* We have a couple of questions about the 100 $50,000 prizes that will be awarded as part of the MGB Linux contest.


For a company whose "technical evangelists" love to claims that "Linux" is just some insignificant market factor, well... they sure seem pretty terrified of it. Microsoft's Gerri Elliott, who fought Free software using a hat in government (mentioned in [1, 2, 3]), appears in the correspondence as well. So are Steve Ballmer and Orlando Ayala, who fought GNU/Linux on OLPC and wrote the main document. In emphasis, he writes: "It is essential, therefore, that we use this in only in deals we would lose otherwise" (i.e. when GNU/Linux or Star/OpenOffice win). Later on, with underlined bold face he writes: "under NO circumstances lose against Linux."

Scroll down to the bottom and see that Kerala is among those which EDGI targeted.

Update (04/01/2009): We have received additional information about the happenings in Kerala. The CPIM State committee has decided to ask for the resignation of Joseph Mathew, the IT advisor to the Chief Minister (the Party and Joseph are highlighting different reasons for this). But there is also a move against Arun, who had been appointed the special Officer of ICFOSS a few months earlier. He was asked to resign just after Joseph's resignation, and that is troubling. Arun was the main Organiser of the Free Software Free Society Conference which took place in December.

Some more details appear in in the FSF-Friends mailing list:

http://mm.gnu.org.in/pipermail/fsf-friends/2009-January/006019.html

http://mm.gnu.org.in/pipermail/fsf-friends/2009-January/006021.html

Arun's E-mail:

http://mm.gnu.org.in/pipermail/fsf-friends/2009-January/006097.html

Friends inside the Party told Anivar that in the party meeting there was criticism against Joseph for a Novell boycott campaign [1, 2, 3, 4] in the Kochi conference (Organised by CPIM Sympathisers), but he does not have any role in it. Neither have us.






Appendix: Comes vs. Microsoft - exhibit px09685, as text






 



From: Melody O’Tierney Sent: Tuesday, August 06, 2002 5:15 PM To: Ken Goetsch’s Direct Reports; Melody O’Tiemey’s Direct Reports Subject: FW: "EDGI" Marketing funds

Attachments: EDGI

We had a presentation on Edgi (aka Wedgi) at MGB, but this document actually takes you through what it entails. Brian had mentioned a school district that this might be an excellent candidate for -- are there others? Let’s make sure we use this new tool in our tool box if we can make it make sense.

.... Original Message .... From: Candace Grisdale Sent: Tuesday, August 06, 2002 4:40 PM To: Melody O’Tierney; Ken Goetsch Subject: FW: "EDGI" Marketing funds

All you ever wanted to know about EDGI....might be helpful data....

.... Original Message .... From: David Driftmier Sent: Tuesday, August 06, 2002 2:46 PM To: Anna Aubry; Candace Grisdale Cc: Christine Bomstead; Kurt Kolb Subject: RE: "EDGI" Marketing funds Importance: High

EDGI is a customer-focused program that is for circumstances (like the one you reference) where an education and/or government customer is going to purchase naked PC'S or PC'S w/Linux. IF we do everything possible it still comes down to price differential between the Windows PC’s and Linux PC’s, then we can invest some/all of the royalty revenue from the deal back to the customer in the form of training, services, or even rebates. For more detail see that attached and let me know if you want to chat before your call. Note: This is not a partner program and is MS-internal only.

royalty revenue from the deal back to the customer in the form of training, services, or even rebates. For more detail see that attached and let me know if you want to chat before your call. Note: This is not a partner program and is MS-internal only.

D

.... Original Message .... From: Anna Aubry Sent: Tuesday, August 06, 2002 1:40 PM To: Candace Grisdale; David Driftmier Cc: Christine Bomstead Subject: RE: "EDGI" Marketing funds Importance: High

Hi Candace- Sorry for the slow response - been in meetings. I’m not familiar with EDGI. David is our Dir of International Operations; maybe he can help? Thanks, Anna

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.... Original Message .... From: Candace Grisdale Sent: Tuesday, August 06, 2002 11:20 AM To: Anna Aubry; Christine Bomstead Subject: "EDGI" Marketing funds Importance: High

Okay I have a strange request...There is a situation in Indonesia where one of our OEMs is planning to ship Linux into the channel on some desktops. Do you know about the EDGI program (I think that’s how you spell it) and if an initiative like this one (likely to be government and education accounts receiving the offer)? Sorry if this is totally random but we’ve got an urgency at the executive level within the company about pulling together a Windows marketing program offer. NOTE: there’s a call at 3:30 today so I need to get to the right folks by 2pm today. Any advice I’d welcome.

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From: David Driftmier Sent: Thursday, August 01,2002 4:27 PM To: Mark East; Yasushi Iwao; Rafael Perez-Colon; Prasanna Meduri; George Kyriakis Cc: EDGI HQ Team; Tit Meng Ang; Kurt Kolb; Ed Marcheselli; Sherri Bealkowski; David Driftmier Subject: EDGI Importance: High Attachments: *Microsoft Confidential* : Education and Government Incentives program

Shortly before MGB, Orlando sent a mail to the GM’s to let them know about an exciting new program to equip the field with a new tool to ensure that we never lose to Linux - the Education and Government Incentives [EDGI] program. We now need to make sure our people in the field understand how and when to leverage this program. Please use the attachments included in the original Orlando email and the into below to communicate with the education people in your region. I am sending this to the regional leads instead of to the broader alias so that you may modify with any regional processes as necessary. Please distribute as quickly as possible, though.

Below is a quick Q&A:

What is EDGI? EDGI (pronounced 'edgy') is both a process for responding to large competitive threats and a large source of funding to level the playing field between Windows and Linux when a deal involves the purchase of new PC's.

Did you say ’funding’?! How much? EDGI does not have a set limit for funding, but is instead limited on a per-deal basis. The maximum amount of funding that can be approved for an individual deal is the total amount of OEM revenue that Microsoft will recognize from the OEM/COEM from which new legal Windows PC’s are purchased.

So this is only for deals where new Windows PC’s are purchased from OEM’s or COEM’s? Yes.

When should I request funding under the EDGI program? EDGI should only be used when every other attempt to close the business has been exhausted and the customer will be buying naked PC’s with Linux.

So how does EDGI level the paying field when it comes to price? Won’t the customer still have to pay for Windows as part of purchasing a Windows-based PC? Yes, the customer will stay pay for Windows as part of the purchase price of the new PC. We can however, use EDGI to re-invest in the customer in the form of training, services, or, in extreme cases, even rebates so that the total cost of the project is the same as if the bought PC’s with Linux and then had to pay for the training and/or services, etc.

So I have an account I think may need this program. What do I do? Assuming you have exhausted all tools available to you in your subsidiary, escalate to the regional Education director for your region. They will the work with you to determine how best to win and can bring additional resources to bean as well as the experience of how these deals have been won in other subsidiaries in the region. The regional teams will then escalate to the competitive team in Redmond via the CompHot alias. The CompHot team will immediately

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involve EdSG and the Windows product group on any EDGI deals. We will then provide

funding information II/O codes, etc.) so that money can be transferred or checks cut by local operations centers. This will also provide for a central point of reporting and tracking of these competitive deals. (For those subs who don’t have a regional education lead yet, escalate directly to comphot)

Who ultimately approves EDGI funds? The WW Area VP’s (Kevin Johnson, Jean-Philippe Courtois, Michael Rawding). Before EdSG approves the funding, we will make sure VP approval has been obtained.

How does this impact the subsidiary financially? What about my quota? We are still working out reporting and accounting issues. At a minimum you can expect the following:

  • Review at MYR to ensure the deals ended up being net positive for Microsoft


  • Subsidiary (and sales team) should only expect revenue credit for the net impact of the deal. i.e. If we do a deal that generates $500k in COEM Windows Revenue and $500k in MS Office revenue, but we had to invest $250k back into the customer, then the sub would only see $750k total revenue credit. Also the rep responsible for the account should only expect to receive credit for net revenue after the investment. In other words, we still have to meet our revenue targets, so we should only use this if it means that we would not normally have seen the revenue as it would have been lost to Linux or another low-cost competitor.


  • Can I use this money to fund pilots, or other pre-sales activities? EDGI funds are only disbursed after the OEM revenue is recognized. This is not to be used to support pro-sales activities. Pro-sales activities such as pilots, architecture assessments, etc. should be funded through BIF. EDGI is neither a replacement nor an extension of BIF.

    I cover government accounts, also. Can I use EDGI for those accounts? While it is expected that the majority of EDGI deals will be government-driven education deals, EDGI can be used for government-only deals if appropriate.

    Is EDGI just for developing countries? What about developed countries? While it is expected that this is a larger issues in countries that have extremely limited resources available, EDGI can be used in both developed as well as developing countries.

    Should I educate my partners on this? Due to our reluctance to compete with Linux or any other competitor solely on price, this should be treated as Microsoft-internal only.

    OK, what do I do now? Read the attached email and attachments thoroughly. IF you have an opportunity in the pipeline that you fear will be lost to Linux or other low- cost/no-cost competitor, then escalate appropriately, provided that you have already exhausted every means at your disposal to win the account. IF you have further questions, contact your regional education lead or daviddri.

    Thanks all,

    Dave

    David Driftmier

    Director, International Operations



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Microsoft Education Solutions Group +1 425-705-4113

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From: Orlando Ayala Sent: Tuesday, July 16, 2002 8:17 AM To: SMSG Leadership Team; Pat Fox; Kurt Kolb; Sherri Bealkowski; Rogers Weed; Asia Pacific General Managers; EMEA General Managers; HUSK:icon general managers; Gerri Elliott; Linda Testa (LCA); Pamela Passman (LCA); Peter Wise Cc: Steve Ballmer; David Driftmier; Rafael Perez-Colon; Mark East; Jeff Raikes; Jim AIIchin; Chris Jones (WINDOWS) Subject: *Microsoft Confidential* : Education and Government Incentives program Importance: High Attachments: Final EDGI Slide.ppt; Program Document - Winning Government and Education.doc

As many of you know, the Education Solutions Group [EdSG], and the Windows Client group team have been leading a cross-group effort involving LCA, OEM, WW Licensing and Pricing, and SMSG.

The goal of this project is to provide a mechanism for emerging markets to build a rich, active, legal ecosystem around PC computing, and at the same time, make computers with Microsoft Windows preinstalled more affordable, especially in the education segment.

We recognize the critical importance of helping emerging markets build healthy and legal PC ecosystems and clearly the answer is having Windows be a core component. But in today’s difficult economic environment it is clear that some institutions and countries are making decisions based on short-term price, rather than long-term cost and benefits of their IT investments. If is clear that Windows offers far more benefits to an emerging economy and to the immediate use of customers, we have to do more in emerging markets to help foster a Windows ecosystem.

Until all the details of the program have been developed, it is important that we have a way to address large PC purchases that involve low-cost/no-cost competitors in the education (and government) sectors, especially in emerging markets. Effective immediately, we are significantly enhancing empowerment by the GM to provide services and, where necessary’, even dollars back to the customer to offset the cost of buying new OEM PC’s with *legal* Windows preinstalled instead of naked PC’s with Linux and/or other low-cost/no-cost software.

Example scenario:

The government of "X" is advocating using open source for all government-funded computers in order to keep "X" dollars inside the country and save the taxpayers millions of dollars. They are therefore looking at rolling out 50,000 PC’s with Linux to all their K-I 2 schools and run StarOffice for free or a locally-produced package that they can purchase for $5/desktop.

After extensive selling by the local MS account team, including the country GM, to convince them of the higher value, lower TCO, and overall advantages of the Windows-based ecosystem in their country, the government still maintains that while there might be some premium attached to our software, it’s not enough fo justify the investment and they will stick with their plan to go open source across all schools.

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In order to compete more effectively against Linux and other providers on these deals, we can now leverage the Education and Government Incentive [EDGI] program to help tip the scales to MS in the deal. After engaging the regional team, the region may use funds to provide services and/or rebates to the customer with the following limitation: Not to exceed the estimated Windows royalties recognized by MS from the OEM selling the PC’s to the customer (in the example, 50,000 PC’s at approx. $100/PC for OEM Windows XP Professional would result in a maximum of $5M for the individual deal).

An outline of the sales process is included in the attached program document.

While this program is available for both developed and developing countries, initial focus is being given to those areas where economic conditions often dictate low-cost/no-cost software as the only solution. This would include LATAM, Africa, Middle East, South Asia including India and PRC.

Ideally, this will still result in a net positive on the Executive P&L as the OEM revenues would not have been realized if the deals had been lost. It is essential, therefore, that we use this in only in deals we would lose otherwise. Initially, we will track each deal, then reevaluate in aggregate at the end of Q1 and again at MYR to validate effectiveness.

IF an opportunity meets the criteria in the attached sales process and normal sales process has not been sufficient to close the deal then the GM should ensure that the following takes place:

  1) Engage regional team in sales opportunity   2} Escalate to the "comphot" alias for review by the competitive team, EdSG, and the Windows Client group.   3) EdSG will work with Windows Client Group and SMSG WW controller to ensure that funds are tracked and managed appropriately   4) Until appropriate OEM tracking systems are in place, it may be necessary for local account teams to validate appropriate Windows purchases by OEM’s in order to ensure funds invested in customer do not exceed funds actually realized through the channel.

Action required:

  1) RVP’s should ensure local response teams are designated as per the attached sales process. It is critical that we are really present and actively working in this accounts way before it is too late. We don’t want to be surprised by being "out of the game:"   2) RVP’s should establish an approval process or empowerment guideline for their region   3) GM’s to communicate program to appropriate sales teams in the subs   4) GM’s to ensure regional response teams are engaged on any EDGI opportunities once teams are formed   5) EdSG (daviddri) to track and communicate EDGI account pipeline, work with Windows Client Group (patfox) to validate requests, and report back to results to RVP’s.   6) Bottom line do our best to show the great value of our software to these customers and ensure we get opaid for it under NO circumstances lose against Llnux before ensuring we have used this program actively and in a smart way. We believe for those customers to stay with Windows is in their best long term interest to protect and expand the great value in their investment and also for our long term relationship with this critical segments in your markets. Use this actively as an opportunity to also build great relationships and recognition for our honest desire to partner with them because that is the true intention of the program.

As detailed processes are implemented, new, detailed guidance will be published. There will

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also be additional guidance provided at MGB. Questions may be sent to edgihq. As always, thanks for your efforts in continuing the fight to help countries realize their potential through truly great software!

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EDGI definition

- What EDGI is:

- A tool that supports the MS strategy for winning against low-cost/no-cost competitors in the government and government-driven education space

- A framework for responding to large (state/country-wide) deals, involving a designated regional team to support the subsidiary, using consistent processes

- An effort that is integrated into the overall sales process, utilizing the same tools (e.g. Siebel) and processes.

- What EDGI is not:

- A tool to help win commercial (non-government accounts) - A complete competitive strategy - A tool for small/breadth opportunities - A new selling methodology - A bottomless source of funding for account managers to close deals!

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I Next Steps

€¯ -Financial processes to be finalized   - Financial accounts have been created   - Creation of GM and Subsidiary measurements underway

-RVP’s to designate Regional Response Teams -EDGI HQ team to field top issues while regional teams are ramped up -EdSG team to provide pipeline management and reporting of top competitive accounts (Gov’t group will coordinate non-edcuation government deals). This process will be harmonized with the overall competitive deals reporting engine (Peter Wise) - Investment will be reviewed by SLT at end of Q1 and MYR

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Winning Government and Education

"EDGI" (Education & Government Incentive) Program

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Executive Summary



In order to more effectively win in the large education/government deals where we compete against low/no-cost offerings, Microsoft will introduce a predictable and replicable process to engage in and win these deals. A common current scenario is one where a government wants to provide for a common technology platform across all schools in the country/province/state. They are either seriously considering open source due to cost and political pressures or are using Linux and StarOffice or other low/no-cost software as levers to negotiate price with Microsoft. This scenario is closely tied to, but not limited to, the challenges seen in developing countries where economic pressures often force governments to seek low-cost/no-cost solutions (see Appendix for recent examples.)

Just as we are focused on delivering end-to-end solutions to our commercial customers, we will endeavor to approach these deals with an end-to-end approach at addressing the underlying needs of the community and/or educational institution.

Goals



There are two major goals of the Education and Government Incentive program:

- Ensure government and education customers can experience the value of Windows, Office and other Microsoft products

€¯ Address affordability, application compatibility, teacher training and curriculum, additional software needs

It is important to note that there are two major issues that need to be solved:

1. How to best help developing countries jumpstart the establishment of an effective educational infrastructure that can leverage the benefits of technology 2. How to meet competition and effectively win against the no-cost/low-cost competitor in large government deals.

This proposal is squarely aimed at the second issue, although there is considerable overlap between the two. There are deals (primarily large government deals in developed countries) that fall outside of the first issue but are still included in the second. However, the majority of instances where Microsoft finds itself addressing the first issue, it will be addressing the second at the same time. Consequently, providing assistance to developing subs is a subset of the larger problem of responding to the large deals.

Assumptions



This proposal is shaped by some underlying assumptions about the business environment:

- A completely ’free’ model for education is not desirable for the following reasons:

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    o Approx. $1B annual revenue stream currently being realized through sales     to academic institutions     o The current pricing (deeply discounted) helps ensure that a healthy ecosystem     exists where MS and its partners continue to innovate and deploy a     sales force to work with customers to define and realize the full value of     the software. - Customer concessions cannot impact OEM royalties or rely on an OEM delivering "naked" PCs without an OS (i.e. no reduced price full OS offering in academic space) - Many subs do not have sufficient dedicated resources to drive the fully-integrated vertical ISS sales process needed to re-engineer the large customers’ vision of needs - We cannot and will not compete with Linux/StarOffice and other open source providers solely on price, however the price allure of ’free’ must be addressed as part of competitive response, including where necessary matching competitive offers. - Scenarios are not limited to Linux/StarOffice, nor are they limited to developing subs, although these are our current primary areas of urgency - We do not want to develop a standard ’offering’ as this becomes not only our new price point, but also invites large customers to create new tenders which we may not be competitive with on price

Plan



Taxonomy



In order to better analyze the opportunity, the following taxonomy is proposed: - Developed country (e.g. US, Japan, Belgium) These countries typically have per capita GDP’s greater than USD$3,500. - Developing country [Large, High Potential] (e.g. Brazil, India, China, Russia) These countries typically have lower GDP’s (< $3,500 per capita), large populations with the potential to support a considerable IT infrastructure in the next 3-5 years - Developing country [Large, Low Potential] (e.g. Indonesia, Bangladesh). Same as above but with little potential for real IT infrastructure in the near term. - Developing country [Small and Medium] (e.g. Eastern Caribbean, Philippines, Ecuador) Countries with low GDP and potential that is limited by their size.

Note: A revenue report is attached in the Appendix that shows countries currently generating revenue and their status according to the taxonomy above.

Funding



Since these opportunities are largely tied to specific competitive opportunities, investments will be funded using OEM revenue.

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It is also important to note that in many countries, there exist untapped funding sources, especially in developing regions. Close cooperation between business groups and LCA will be needed to identify initiatives and programs from sources such as the World Bank, IDB, IMP, etc that can potentially be used to help fund the community development portion of large government deals.

Response



A process will be put in place whereby the following occurs:

1) EdSG will work with LCA to produce a consolidated view of all Microsoft’s efforts in the academic space to ensure that customers understand the value of what we have already provided and can provide in the future. This would include initiatives by EdSG, LCA, MSR University Relations, Recruiting, CDDG, Developer Evangelism, Product Marketing Group, etc.

2) Empowerment guidelines for subsidiary and regional pricing in education will be put in place, similar to those in force in the Enterprise segment

3) When local management determines that local empowerment will not provide the flexibility needed to win a deal, they will escalate to a regional response team. An example of potential members of the regional response team:

   - Regional Education Director (or Government Director in the case of a non- Education deal)

   - Regional Linux Competitive lead / Product Management

   - Regional WWLP resource

   - Regional LCA

4) The regional response team will engage with the local account team and the customer to provide a full-integrated solutions sales effort, in order to re-engineer what the customer sees as their needs so that they can understand how the MS platform will uniquely address their needs.

4) If necessary, the regional response team will escalate to the corporate competitive team via the comphot alias. The competitive team will involve the EDGI HQ team in any deals that fit within the parameters of the EDGI program.

6) If needed, the EDGI HQ team will work with the regional team to provide additional value-add services and/or products in order to balance the investment the customer is making in the software (when obtained through OEM PC’ s) with RVP approval. When offering the customer services or training, you should give the customer the choice of Microsoft services or training or Microsoft will pay for equivalent services or training from another vendor.    Services and products may include:

   - Integration services    - Application Migration

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   - Training    - Curriculum content    - ... 7) New PC sales will be made as usual from OEMs to entity, though we may add some requirements on the OEMs as pre-requisite for participation in the program (i.e., meet certain system specs for education, or meet education specific training or channel needs) 8) Below is a flow-chart of the competitive selling process in the education vertical, using the empowerment guidelines and this process. The Give List represents customer offerings that Microsoft can bring to the table in closing a deal. The following is a prioritized list of ’gives’ beyond our normal discounted licensing programs:    - Training/Skills Development        o Innovative Teachers        o IT Academy’        o Project Access    - Services Offerings        o MCS and Partners        o Premier        o University support model    - Additional solutions:        o Blackboard        o Microsoft Class Server    - Financial        o Creative funding models (e. g. foundation model)        o Software donations        o Discounts        o Direct customer investment

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EDGI - Microsoft - talking points






There are several benefits to this program. First and foremost, it will enable more customers to obtain the benefit of using our technology. Additionally, the following are expected benefits of the proposal:

    - Increase our win percentage against competition     - Improve our partnership with governments     - Improve Microsoft image     - Protect our product price points by removing discounts below empowerment guidelines     - Have a process that is reactive, but predictable and controllable     - Ensure optimum use of resources (current one-off negotiations resource-intensive and painful)     - Centrally track use of resources enabling us to match both with business value received, instead of suffering hard-to-track revenue erosion due to one-off discounts.

Donations



It is recognized that there will still be a significant portion of these deals where software donations may be appropriate as part of the overall offering. The intention is not to limit a subsidiary’s ability to do this, but to work cooperatively with LCA to insure the customer and Microsoft both receive the full benefit of the donation and that the donation

MS-CC-RN 000001381460 HIGHLY CONFIDENTIAL




is part of a larger partnership with the customer and partners to create a self-sustaining infrastructure. This will also help us track and recognize the investment we are making world-wide.

Community Affairs



Community Affairs will continue to play a key role in large education and government deals, especially in the developing countries. LCA has committed to working with the business to define a set of offerings that will provide end-to-end community development approaches and are responsible for the related economic development issues. These offerings may be tactical in nature and can be used as a component in a large negotiation, or may be a proactive and comprehensive plan that we offer to those countries in greatest need.

It is important that we recognize the role of timing in providing community affairs leadership. Presenting community development initiatives at the same time as a response to a large deal can often be viewed negatively by our customers. It is critical!, therefore, that GM’s ensure that long-range community affairs approaches are synchronized with the business needs in the sub. This may also mean that we make community development offers that are not contingent upon the customer making related purchase commitments. An exception would be deals where we decide to donate a portion of the licenses being purchased in lieu of discounting the overall price, thereby preserving our unit price point and delivering the same overall cost to the customer.

The proposed investment funds are therefore not targeted at community development, but at ensuring that we can address and if necessary match a lower competing offer from low-cost/no-cost competitors. If there are needs for broader free programs, these should still be identified by the sub leadership and addressed with their LCA teams.

MS-CC-RN 000001381461 HIGHLY CONFIDENTIAL




Appendix



Recent Deals



- BRIC Project - China education PCs - Czech (School Internet Project) - 25,000 PCs - Saudi Arabia (King Abdul Aziz Univ) - 4,500 PCs - Saudi Arabia (President’s Girls School) - 25,000 PCs - South Africa (Learning Bridge - education) - country-wide; EMEA proposal for all low-GDP countries - Pakistan - 50,000 PCs - Other MENA (academic, east med) - 64,000 (?) PCs - US K-12 Access Device - up to 1MM laptops - Michigan (K-12) - $10MM state program funded - Colombia government - 200K PCs over 3 years

Anatomy of a Deal



Name: Girls Schools in Saudi Arabia Desktops: 20,000 (1200+ servers) Revenue: $4MM (50% OEM) Competitor Linux/StarOffice Product Mix: Windows2000 Server, Windows 2000/XP Pro, Office XP Pro, Front Page 2002, VB 6.0 Microsoft Investments to win:    - Create special package including media and guidance    - Highlight customer accomplishments (shared PR)    - Commitment to invest in E-Ministry ($450,000)       o SE and two admin for a year (Contingent Staff)       o Train 220 FTE’s on Office Tools       o Initial implementation services       o Minimal application development

Story: The local team created a special 3 CD kit that included CD’s for Tools, Teachers, and Students with appropriate content and products They also agreed to fund a special ministry of education training pilot. This investment ($450k) was funded through the additional margin on the per desktop price.

Name: Hungary Higher Education Desktops: 235,000 students, 18,000 teachers Revenue: $2.2M over 3 years Competitor: Linux/IBM Product Mix: Windows XP, Office XP, Front Page, Visual Studio, BackOffice CAL

MS-CC-RN 000001381462 HIGHLY CONFIDENTIAL




Microsoft Investments to win: 66% discount = $4.4MM off of normal Campus Agreement pricing Story: In this deal, the total amount of the deal represented the maximum amount of money that the customer had to spend. If we did not do the deal for this price, then IBM was ready to execute. As a higher ed customer, there was requisite technical knowledge to support a successful implementation, so additional services were not imperative. The sub also had a successful evangelism and knowledge transfer program in place with the technical universities.

MS-CC-RN 000001381463 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






Linux Account Wins/Threats/Losses

Account Country Date No. of PCs Industry Linux Ddvers Reasons: Win/Loss Wins Proven better TCO vs Vassa Finland Gov’t Finland 11/1/2001 ? Pubhc Sector I ! TCO, Standard=zat~on current environment and L~nux. Proven better TCO vs Lappeenranta Finland Gov’t Finland 11/1/2001 ? Public Sector TCO, Standardization current environment and Linux. Losses Account Name Country Customer No. of PCs Industry Reasons for Loss Other reasons for Segment Loss Corporate Express Australia MORG 400 Services Cost Dept of Education Northern Territory Austraha Academic 10,000 Public Sector Cost Beijing Local Govt. China Major 2,000 Public Sector Govt Endorsement Central Excise & Customs India Major 900 Public Sector Cost Tata Institute of Fundamental Research India Academic 300 Education Anti-MS Govemment Procurement Agency Korea Corporate 1,000 Public Sector Govt Endorsement Department of General Education Thailand MORG 1,500 Public Sector Cost University Systems Thailand Major 1,000 Public Sector Performance Department of Local Administration Thailand MORG 3,000 Public Sector Govt Endorsement Columbia Sportswear US MORG 182 Public Sector Cost

HS-CC-RN 000001381464 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






Advantage Sales &

8,000 Pubhc Sector Cost MS- D~sastisfaction

Marketing US ~astertrade New Zealand MORG 400 Manufacturing Cost HNVVendor

Kachingo New Zealand MORG 800 Retail & Hospitality

Recommend Southern Cross New Zealand Corporate 300 Health Care Cost Coffee Bean & Tea

Singapore SORG 20 Retail & Hospitality Cost

Leaf Total: 29,802

Threats

Customer Other reasons for

Account Name Country No of PCs Vertical Industry Reasons for threat

Segment Threat Department of Defence Australia Corporate 40,000 Public Sector Cost Department of

Australia Academic 52,000 Education Cost Lmux/StarOffice

Education of WA Department of Health

Australia Corporate 11,000 Public Sector Cost StarOffice

WA Catholic Education

Australia Academic 2,265 Education Cost Linux / StarOffice

Office of WA Association of Independent Schools of Australm Academic 2,460 Educabon Cost StarOftice WA Sun offeringDept of Education

Australia Academic 45,000 Education Other (Please specify) partnership with the

Western Australia dept to develop their vision 29 of 39 Universities in

Australia Academic 60,000 Education Cost

Australia

MS-CC-RN 000001381465 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






Political statement that says the dept will

Dept of Education - supply every student

Australia 25,000 Education Govt Endorsement

South Aust with a SSNVord Processor and database.

Belgian Ministry of

Pubhc Sector

Finance Belgium Major 28,000 Cost

Brazil Gov’t Brazil Major 220,000 Public Sector Cost

Alcadia Mayor Venezuela 38,000 Education Cost

ANEP - K12 Uruguay 11,000 Education Cost

BED Columbia 8,500 Education Cost

Ministry of Education Chile 100,000 Education Cost Think corn Linux and Redoffice( StarOffice China

Govt of He Nan China Other 10,000 Public Sector Other (Please specify)

Partner) will offer source code to them

all China gov in

China BORG 1,000,000 Public Sector Govt Endorsement

provices Lower Saxony-Choose from

Major 13,500 Public Sector Cost

Germany List They are testing out toStock Exchange Hong Kong Major 1,300 Public Sector Other (Please specify) use Linux as the dumb terminal Hong Kong

Hong Kong Strategic 80,000 Pubhc Sector Govt Endorsement

Government Pdmary and Secondary

Hong Kong Academic Education

Schools 3,600 Cost PicoWodd Hong Kong MORG 200 Public Sector Cost Ministry of Urban

India Corporate 400 Pubhc Sector

Development

Govt. of Goa India Academic 800 Education Cost MIT India Major 6,000 Public Sector Cost Haryana Govt. India Academic 2,000 Education Cost

MS-CC-RN 000001381466 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






Ministry of Surface

India Pubhc Sector

Transport Ministry of Finance India Major 4,000 Public Sector

Ministry of HRD India Major 8,000 Public Sector Govt. of TN India Major 1,000 Pubhc Sector Govt. of Maharashtra India Academic 10,000 Education

Govt. of Karnataka India Academic 10,000 Education Other (Please specify) Staroffice (AE) Govt. of Kerala India Academic 4,500 Education Other (Please specify) Staroffice (AF_) Govt. of Gujarat India Academic 5,000 Education

Govt. of West Bengal India Academic 5,000 Education Govt. ofUtl.ar Pradesh India Academic 5,000 Education Govt. of Dehli India Academic 5,000 Education

Govt. of Tamilnadu India Academic 30,000 Education Punjab India Academic 200 Education Rajasthan India Academic 1,000 Education Uttaranchal India Academic 2,000 Education Andhra Pradesh India Academic 10,000 Education Madhya Pradesh India Academic 2,500 Education Chattisgarh India Academic 5,000 F,ducation Ministry of Defence India Other 500 Unknown Security Linux / Sta~Office iFlex India Corporate 500 Financial Services Cost StarOffice Planetasla India Corporate 200 Services Cost StarOffice IDBI Bank India Corporate 500 Financial Services Cost Linux/StarOffice Adani Group India Corporate 200 Manufac{udng Cost Linux/StaK:)ffice Hiranandani Group India Corporate 300 Unknown Cost Linux/StarOffice Zandu Pharma India MORG 150 Health Care Cost Linux/StarOffice Nimbus

India MORG 150 Services Cost StarOffice

Communications Ace Hardware Indonesia Corporate 1,000 Retail & Hospitality Cost Department of Finance Indonesia Major 1,000 Public Sector Cost Department of Internal Indonesia

Major 2,000 Public Sector Cost

Affair

MS-CC-RN 000001381467 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






Department of Transportation indonesia 1,500 Public Sector Cost Bank of Ireland Ireland MORG 10,000 Public Sector Cost Ministry of Education and 8,500 schools Malaysm Academic 120,000 Education Govt Endorsement Ministry of Finance Treasury Malaysia Corporate 600 Public Sector Govt Endorsement Hgng Leong Finance Malaysia Corporate 800 Financial Services Other (Please Specify) ISPF Destop Financing Scheme Malaysia Other Public Sector Cost Holland Railconsult Netherlands Major Public Sector Cost NZ Government (G2000 ’all of govt’ agreement) New Zealand Corporate 20,000 Public Sector Cost StarOffice Urban Redevelopment Autority Singapore Corporate 600 Publ~cSector Govt Endorsement National Library Board Singapore Corporate 900 Public Sector Govt Endorsement SMRT Singapore Corporate 3,000 Public Sector Govt Endorsement MINDEF Singapore Major 22,000 Public Sector Govt Endorsement iDA- HQ Singapore Corporate 40,000 Public Sector Govt Endorsement Singtel S~ngapore Corporate 15,000 Telecommunications Govt Endorsement ITRI Taiwan Major 6,000 Public Sector Cost Bangkok Metropolitan Administration Thailand Major 7,000 Public Sector Cost Electricity Generating Authority of Thailand Thailand Major 3,000 Public Sector Strong EnterpriseOther (Please specify) Training MIMOS Thailand Corporate 600 Public Sector Other (Please specify) closing digital divide positioning Bank of Ayudhaya Thailand Corporate 400 Financial Services Cost Safeway US LORG 23,000 Public Sector Cost Advant~st Healthcare US MORG 50,000 Public Sector Cost Goldman Sachs US MORG 1,000 Pubtic Sector Cost Eckerd US MORG 24,000 Public Sector Cost MS-CC-RN 000001381468 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






CSKAuto US 12,650 Public Sector Cost

General Motors US LORG 15,000 Public Sector Cost

CVS US MORG 12,300 Public Sector Anti-MS

Southern Methodist

Education

Univ. US Academic 200 Cost Anti-MS StarOffice deplo~/ed She[win-Williams US MORG 7,500 Retail & Hospitality Cost Unix Migration

BMC SOlhNare US Other 8,500 Services Other (Please specify) Think L~nux is cool

Dallas School Distdct US Academic 4,000 Education Cost SlarOf~ce deployed Total: 2,285,275

MS-CC-RN 000001381469 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






WW Education Revenue Report - Revenue Shown in As Billed View

YTD J ~ =: % of Total WW Sales ~: Growth Edu % of Total Region Location Y-rD Apr 01 YTD Apr 02 % Revenue Sub Revenue Japan Japan 81,749,088 97,143,650 19% 12.1% 6% Japan Total 81,749,088 97,143,660 t9% 12.1% 6% Asia Pacific Australia 15,106,731 21,204,6!3 40% 2.6% 9% Hong Kong 10,527,979 8,267,253 -21% 1.0% 10% Korea 14,238,717 16,372,635 15% 2.0% 10% Taiwan 8,502,050 7,571,206 -11% 0.9% 9% China y y y 1,217,014 2,416,230 99% 0.3% 3% New Zealand 3,341,284 4,346,072 30% 0.5% 10% India SC y y y 4,329,125 3,853,311 -11% 0.5% 4% Malaysia y 4,728,483 3,334,464 -29% 0.4% 8% Philippines y y 1,088,315 1,729,083 69% 0.2% 10% Singapore 5,039,823 5,734,554 14% 0.7% 11% Thailand y y 382,519 524,414 37% 0.1% 2% Indonesia y y 126,715 177,300 40% 0.0% 1% Vietnam y y 22,013 46,631 tt2% 0.0% 1% Asia Pacific Total 68,650,769 75,577,766 10% 9.4% 8% EMEA United Kingdom 66,054,918 76,142,986 15% 9.5% 8% Germany 23,965,508 30,600,645 28% 3.8% 4% France 23,247,045 22,970,375 -1% 2.9% 5% Italy 10,470,680 10,466,659 0% 1.3% 4% Sweden 9,042,520 9,167,473 1% 1.1 % 5% Spa~n 7,518,684 7,591,318 1% 0.9% 6% Denmark 6,387,096 6,670,505 4% 0.8% 5% Belgium 5,845,661 4,620,865 -21% 0.6% 4% Finland 5,821,034 6,659,865 14% 0.8% 8% Norway 4,080,113 5,049,246 24% 0.6% 6% Russia y y y 1,608,526 5,755,319 258% 0.7% 14% Poland y 4,929,483 2,456,965 -50% 0.3% 3%

MS-CC-RN 000001381470 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






Switzerland 3,772,464 4,634,758 23% 0.6% 2% Israel 3,312,443 2,956,033 -1 t % 0.4% 5% Turkey y y 2,266,102 3,261,813 44% 0.4% 6% South Africa y 2,238,501 2,629,929 17% 0.3% 3% Ireland 2,207,607 3,579,558 62% 0.4% 9% Portugal 2,241,635 3,209,184 43% 0.4% 6% Austria 2,548,052 3,954,086 55% 0.5% 3% Saudi Arabia 1,541,516 3,028,268 96% 0.4% 10% Greece 2,510,254 3,343,376 ;33% 0.4% 13% Netherlands 2,668,312 7,420,838 178% 0.9% 3% Czech Republic 1,686,670 2,119,862 26% 0.3% 5% Egypt y y t ,300,962 1,653,856 27% 0.2% 9% Lebanon y 2,610,719 704,729 -73% 0.1% 4% Hungary y 1,442,131 3,975,372 176% 0.5% 11 Morocco y 857,446 1,676,623 96% 0.2% 14% UAE ? 947,867 1,286,666 ;36% 0 2% 7% Baltics y 816,027 721 ,I 70 -12% 0.1% 6% Kuwait 837,731 1,187,363 42% 0.1% 8% Indian Ocean Islands y 382,296 408,958 7% 0.1% 9% Romania y 282,830 577,173 104% 0.1% 5% Oman ? 252,142 385,674 53% 0.0% 4% Slovakia y 115,896 287,282 148% 0.0% 3% Ivory Coast y 196,234 118,970 -39% 0.0% 3% Croatia y 194,339 85,053 -56 % 0.0% 1% Tunisia y 240,338 227,192 -5 % 0.0% 16% Namib~a y 133,899 84,614 -52% 0.0% 2% Slovenia 111,060 190,060 71% 0.0% 1 Kenya y 50,990 277,228 444% 0.0% 9% Bulgaria y 37,504 24,051 -36% 0.0% 1% Zimbabwe y 63,692 121,242 90% 0.0% 4% EMEA Nigeda y y 2,046 16,909 726% 0.0% 0% Total 206,1]40,97t 242,280,t10 17% 30.2% Americas United States HQ 259,9~,023 328,841,591 27% 41.0% 6% Canada 17,782,467 22,137,247 24% 2.8% 5% Mexico y y y 11,763,053 13,089,464 11% 1.6% 11

MS-CC-RN 000001381471 HIGHLY CONFIDENTIAL




EDGI - Microsoft - inventory






Brazil y y y 8,099,938 8,414,211 4% 1.0% Colombia y 3,209,920 3,406,378 6% 0.4% 11% Caribbean y 3,677,975 3,170,374 -14% 0.4% 7% Chile y 1,1 41,984 907,500 -21% 0.1% 5% Central America y 1,468,5I 8 1,979,634 36% 0.2% 6% Peru y 1,227,054 1,249,111 2% 0.2% 10% Uruguay y 556,675 791,212 42% 0.1% 7% Argentina y 1,463,612 892,338 -39% 0 1% 3% Venezuela y 791,735 992,855 26% 0.1% 4% Ecuador Caribbean & CA HQ y 240,186 513,335 114% N/A 0 1% 0.0% 8% 0% Americas Total Grand Total Updated 5/2/2002 311,369,141 386,385,266 668,609,969 801,386,795 Small Developing Subs Large Developing Subs (low) Large Developing Subs (high) Total from Developing Subs 24% 20% 48.2% 100.0% 3.9% 0.9% 4.2% 9.1% 6%

MS-CC-RN 000001381472 HIGHLY CONFIDENTIAL


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