Bonum Certa Men Certa

OEM Tactics: Lessons to Learn from BeOS About GNU/Linux

"I once preached peaceful coexistence with Windows. You may laugh at my expense -- I deserve it."

--Be's CEO Jean-Louis Gassée


NU/Linux laptops continue to arrive, but Microsoft is working hard to end this. It ought to be emphasised that ASUS has already said that it is now "tied up" with Microsoft [1, 2, 3]. ASUS is not the only one to have come under such imprisonment a relationship, but it incidentally spoke out about it. It's the usual pressure tactics, whose goal is to have distribution of Linux curtailed or neglected.

There's lots more to to speculate about. ASUS picked Xandros, which has some iffy past with Microsoft, never mind under the Corel flag.

More worryingly, have people forgotten that Xandros is a patent ally of Microsoft? In simple terms, despite the claims from the CEO of the company, ASUS is carrying a liability which can then be passed to users in the form of burden/cost that's brought as incentives to Microsoft. This is extortion. Software patents are void in this case as nothing was ever shown.

OEM pressure tactics were covered quite extensively before, but a reader has sent us a pointer to the following strong message from 1999. We reproduce it below. The anonymous reader added: "Here's an interesting comment with first hand experience about how hard it is to overcome Microsoft."

Jean-Louis Gassée on why PC manufacturers don't sell non MS products

* To: info-policy-notes <> * Subject: Jean-Louis Gassée on why PC manufacturers don't sell non MS products * From: James Love <> * Date: Fri, 26 Feb 1999 12:05:55 -0500 * Organization: * Sender:

This important essay by Jean-Louis Gassée is a devastating critique of the 1995 DOJ/Microsoft consent agreement and a clear explanation to the barriers facing MS competitors in the OS market. Jamie

Be Newsletter Volume III, Issue 8, February 24, 1999

Crack in the Wall By Jean-Louis Gassée

You're the CEO of a PC OEM, delivering some great news to Wall Street: "In an effort to offer greater variety and performance to the customer, our factory now installs three operating systems on the hard disk -- Windows, Linux, and the BeOS. The reaction has been spectacular. Customers love having a choice of OS, and the press -- from John Dvorak in PC Magazine to John Markoff in the New York Times to Walt Mossberg in the Wall Street Journal -- has heralded us for our bold move. This is a great step forward for the consumer and for the industry. Oh, and by the way, we lost $50 million since we no longer qualify for Windows rebates. But it's a sacrifice for the common good."

You're now the ex-CEO of a PC OEM.

We know that the Windows rebate scheme exists -- but what *is* it, exactly? And why are so many OEMs afraid of losing it? Windows pricing practices are closely guarded secrets, so we don't know exactly how the rebate is structured, but we can assume that it works something like this: The total cost of a Windows license consists of a base price offset by a rebate. The base price is set; the rebate is flexible, and contingent on the "dedication" of the licensee. That is, the more you "advertise" the product -- through prominent positioning, expanded shelf space, and so on -- the greater your rebate. This quid pro quo rebate looks innocent enough, and can be a useful tool in a competitive market.

But when you're running a monopoly -- and when it comes to out-of-the-box, consumer-grade PC clones, Microsoft *is* a monopoly -- "prominent positioning" and "expanded shelf space" have little meaning. Microsoft has no interest in getting "more" footage on the OS shelf, because they've already got it all. What interests them -- the only useful advantage they can "buy" (to be kind) with their rebate -- is to ensure that no one else will get any.

So how is "dedication" measured? A real-life example: We've been working with a PC OEM that graciously -- and bravely -- decided to load the BeOS on certain configurations in its product line. However, there's a twist in their definition of "loading." When the customer takes the machine home and starts it up for the first time, the Microsoft boot manager appears -- but the BeOS is nowhere in sight. It seems the OEM interpreted Microsoft's licensing provisions to mean that the boot manager could not be modified to display non-Microsoft systems. Furthermore, the icon for the BeOS launcher -- a program that lets the user shut down Windows and launch the BeOS -- doesn't appear on the Windows desktop; again, the license agreement prohibits the display of "unapproved" icons. To boot the "loaded" BeOS, the customer must read the documentation, fish a floppy from the box and finish the installation. Clever.

One suspects that Linux suffers from the same fealty to Microsoft's licensing strictures. Linux is the culmination of 30 years of development by the Unix community. Surely an OEM can't complain about Linux's quality or its price: It's good, and it's free. If Microsoft licensees are as free to choose as Microsoft claims they are, why isn't Linux factory installed on *any* PC? If you randomly purchase 1,000 PC clones, how many have any OS other than Windows loaded at the factory? Zero.

But what about all these announcements from companies such as IBM, Dell, and others? A few URLs are supplied here for your convenience:

<> <> <> <> <> <>

If you parse the statements, Linux is offered and supported on servers, not on PCs. Another IBM story is that installation is to be performed by the reseller on some PCs or laptops, not by IBM at the factory.

As an industry insider gently explained to me, Microsoft abides by a very simple principle: No cracks in the wall. Otherwise, water will seep in and sooner or later the masonry will crumble.

Guarding against even the smallest crack is important to Microsoft, because it prevents a competitor from taking advantage of a phenomenon that economists call the "network effect." The "network effect" manifests itself as an exponential increase in the value of a product or service when more people use it. Applied to a computer operating system, the effect works like this: As more people install and use an OS, the demand for applications increases. Developers respond to the demand, which attracts the attention of OEMs and resellers, who promote the OS in order to sell the apps, which attracts more customers... The key to all this is distribution and visibility -- in other words, "shelf space."

Bill Gates understands the network effect well -- he once quoted it to me, chapter and verse. In the Fall of 1983, when I was still running Apple France, I met with Bill in Paris and we got into a conversation regarding the market share limitations of DOS. No problem, he said, with the wide distribution we enjoy, we'll get the attention of third parties, and the marketplace will fix these shortcomings.

This puts statements by senior Microsoft executive Paul Maritz in perspective. In reaction to my claim that Be wants to co-exist with Microsoft, Mr. Maritz said (as quoted by Joseph Nocera in Fortune Magazine):

"[Gassee is] articulating his strategy for entry into the operating system marketplace. But on the other hand, I know that Be has built a full-featured operating system, so what I believe he's doing here is outlining his strategy about how he will initially co-exist with Windows and, over time, attract more applications to his platform."

Mr. Nocera interpreted Mr. Maritz's interpretation thus:

"In other words, Gassee's spiel is little more than a trick intended to lull Microsoft. But Microsoft isn't so easily fooled! Microsoft will never ignore a potential threat to its Windows fortress, no matter how slight. The software giant may be in the middle of an antitrust trial, but -- as Andy Grove says -- only the paranoid survive..."

[The entire article, part of a court house diary, can be found at <>.]

Industry sages such as T.J. Rodgers, the CEO of Cypress Semiconductors, as well as venture capitalists aligned with Microsoft, criticize the Department of Justice's intervention in the new Pax Romana we're supposed to enjoy under Microsoft's tutelage. Don't compete in court, compete in the marketplace, they say.

I'm a free marketer myself; I left a statist environment for the level playing field created by the rule of law in this, my adopted country. A free market is *exactly* what we want. One where a PC OEM isn't threatened by financial death for daring to offer operating systems that compete with the Windows monopoly.

We started with a thought experiment. We end with a real-life offer for any PC OEM that's willing to challenge the monopoly: Load the BeOS on the hard disk so the user can see it when the computer is first booted, and the license is free. Help us put a crack in the wall.

This is not a healthy state of trade, is it? Intel is constantly accused of using the same tricks and breaking the law.

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