Microsoft's Secret for Staying on Top

[Jason Dunn]

<div class='os_post_top_link'><a href='http://msn-cnet.com.com/2009-1069-976347.html?tag=lh' target='_blank'>http://msn-cnet.com.com/2009-1069-9...347.html?tag=lh</a><br /><br /></div>How does Microsoft do it? Now before you say anything, read this article - the answer isn't as simple as you might think.<br /><br /><img src="http://www.pocketpcthoughts.com/images/web/bnr-microsoft.gif" /> <br /><br />"Perhaps no tech company outside of IBM has been able to keep on top of the industry as much as Microsoft. What's more, Bill Gates &amp; Co. achieved this success during times of incredible technological transformation, usually the period when titans are vulnerable to getting knocked off by disruptive technologies. Critics often argue that Microsoft can't innovate its way out of a paper bag and that instead it has used its monopoly position to stamp out competition and force an industry to bend to its standards. <br /><br />But now comes a study on the inner workings of the company from Harvard Business School professors Marco Iansiti and Alan MacCormack. Their take: Microsoft actually wins through effective management of its intellectual property and an ability to spot and react to important trends before they take hold. In this e-mail interview with HBS Working Knowledge, Iansiti and MacCormack discuss their findings."

[SassKwatch]

But now comes a study on the inner workings of the company from Harvard Business School professors Marco Iansiti and Alan MacCormack. Their take: Microsoft actually wins through......"
Aw come on Jason...., we all know these 2 guys were paid by M$ to write this article!

I figure it better to post this now in jest before the "Bill Gates is the Anti-Christ" faction start posting it as 'fact'. :lol:

[ThomasC22]

I don't know that there was much that was new here. Microsoft exploits positive feedback cycles, there's no question about that.

I was glad to see that people are starting to realize that Microsoft simply tends to go overboard in their need to win. I strongly believe IE would have taken the market even if it had not been bundled with Windows (It was winning most comparisons by version 4.0). I don't think bundling it did that much.

[Foo Fighter]

Microsoft's recipe for success is simply based on the fact that it had, and continues to have, the superior business model, and the most successful strategic planning. Microsoft has a tenacious nature to be sure, but much of Microsoft's success has as much to do with the failure of its competitors. While the competition flailed about or sat idly by, Microsoft innovated, listened to its customers, and poured millions of dollars into R&D. Some were simply the victim of their own arrogance, as was the case with Palm. As Palm continued to preach the same tired rhetoric, Microsoft and Sony out-innovated and stole marketshare out from under the once mighty handheld titan. Hubris.

It never ceases to amaze me, the over-zealous Linux and Mac community (even though I am a Mac user) and the barrage of hateful comments and conspiracy theories of the EVIL EMPIRE AND ITS PLOT TO ENSLAVE HUMANITY. Even if you dislike Windows, you have to admire a company with such ferocity and stamina. Those of us that work in the computer field owe a great deal to Microsoft. Would I have been able to make a career out of working in PCs, servers, web design, and other interesting fields if the technology landscape had been shaped by other firms like Sun or Oracle? Or if UNIX had become the dominant OS?

Something to think about the next time you spell Microsoft with a $.

[Robotbeat]

Windows is why they won the market.

Why did Windows win? Because it is cheaper than Apple and Unix and is open to different types of hardware, unlike Apple. If Apple was open, it would have won. I am not a Mac fan, but Apple started off better than Windows and should've driven in into the ground, but it didn't. And that is why Microsoft is dominant. It is willing to drive the competition to the ground by out-spending in R&D. That is why Microsoft's only decent enemy left is Linux. Microsoft won't and CAN'T kill Linux, either, because Linux is free and has free and almost unlimited free R&D through open software. Microsoft pretty much knows this, and so it is going to (and does) try as hard as it can to battle Linux. For this reason, I don't blame Microsoft for trying to target Linux as their number one enemy.

One cannot out-spend a software "company" that gives away its software. Linux can exist without any corporations at all. The Open Source movement is like an immensely powerful guerilla army. Sure, it is strongest when supplied with guns & ammo from actual nations, but it is able to survive and even thrive completely independently and with its individual members acting seperately.

I like Microsoft's products, but I think that Linux will always be around. Once Palladium starts, more and more people are going to flock to Linux, hearing stories of freedom from censorship and uber-powerful software companies and hearing that the streets of Linux are paved with gold. I hate Palladium sooooo much. Thankfully, I think that the window of opportunity of the technology is non-existent. If the technology were around in the Windows 95 era, it was easier for smaller hardware manufacturers to compete, so others would have arisen. And don't forget Apple. Apple hates Microsoft, and so would have never agreed to do Palladium. Skip ahead to today, Apple is still around, but not nearly as much as before, and a bright, new player is around. His name is Linux. He is perhaps the best player around, and the best thing about it is that he plays for free: he just likes to play the game. (Has anyone else seen that IBM commercial?) Linux has now teamed up with Walmart and is even offering uber-cheap computers that run many Windows programs. If Palladium were to come right now, it would cause a very large portion of users to switch, either to Linux or to Apple. I don't think that Palladium can work in today's world. It's just not possible.

[Foo Fighter]

If Palladium were to come right now, it would cause a very large portion of users to switch, either to Linux or to Apple.

This is one reason why I have toyed with the notion of switching to a Mac as my primary workstation. I don't like where MS is going with Longhorn/Palladium/.NET. The PC has always been an open platform, but some of Microsoft's vision seems to be taking us to a more "closed" system. And Windows itself is slowly becoming a front-end for MSN services. That I don't like. My PC is a workstation...my workstation. XP is a great product, however, I can't help but wonder where this road to Longhorn is going to take me. :?

[Gen-M]

Never underestimate the power of architecture :D :D :D

[Janak Parekh]

My PC is a workstation...my workstation. XP is a great product, however, I can't help but wonder where this road to Longhorn is going to take me. :?
The thing is, we're no longer the primary audience: unlike 5 years ago, technologists are in the minority. MS is catering increasingly to those that treat the computer as a set-top box, and for them it matters less. Audiencewise (for the home), I couldn't really argue that much with this strategy. While I detest the concepts of DRM, Processor ID, and Product Activation, amongst others, most people haven't heard of any of these.

The question remains how it will reflect on their business offerings. .NET Server, for example, has Product Activation! I don't want to have to worry when I'm reinstalling a server, or to have to set up an internet connection immediately so I can activate the darn thing. This is where Linux really has a chance to gain a foothold if enough sysadmin types are turned off by MS. However, this is nowhere near a foregone conclusion -- we're seeing a "commoditization" of the sysadmin position too.

BTW: Microsoft's component-based approach, especially OLE, was laudable due to allowing application integration the likes of which had never been seen in Unix before. However, MS's dominant marketshare was equally important in seeing that their frameworks (first DDE, then OLE, then ActiveX/COM, finally DCOM and .Net) be adopted so widely. Monopoly or near-monopoly enables them to drive the market... which has both good and bad effects.

--bdj

[JonnoB]

If the best OS would have won, we would all be running some form of AmigaOS...

Microsoft led by good management knew to invest in R&D much like the Japanese and had strategic vision. That is why I see them winning in the consumer space with future iterations of XP Media Edition and XBox 2.

[farnold]

"Microsoft actually wins through effective management of its intellectual property and an ability to spot and react to important trends before they take hold."
Yes, but what they don't mention is that Microsoft has to change dramatically over the next few years - even more than they did in the past. The future success of Microsoft will not so much be dominated by operating systems or desktop applications. They are pretty strong there already, but the are not growing like they did in the past. A company using tenth of thousands of PCs running Windows and Office is not easily to convince that they need XP. We maniacs get every new product knowing that it's just slightly better than the one we already have. But we do it for our own curiosity and satisfaction - a company would only do it for either more profit or cost reduction.

Therefore I would think the future of Microsoft depends pretty much on their ability to switch their attention in the business market to their server products. Honestly, I have no doubts they'll be successful there as well!

[normaldude]

1) Take stuff from Seattle Computer, Apple and Xerox Parc.

2) Use monopoly power to squeeze out competitors.

[rlobrecht]

The question remains how it will reflect on their business offerings. .NET Server, for example, has Product Activation! I don't want to have to worry when I'm reinstalling a server, or to have to set up an internet connection immediately so I can activate the darn thing.

Product Activation is only an issue for Consumer Purchases. If you have any type of Corporate License Agreement with MS, the version you get doesn't have to be activated (or at least that's the case today with Windows XP Pro.)

[Daniel]

If Palladium were to come right now, it would cause a very large portion of users to switch, either to Linux or to Apple.

This is one reason why I have toyed with the notion of switching to a Mac as my primary workstation.

I have "switched", It is the promised land, and yea they... what a load. ;)

I really like the mac, Apple make fine computers. OSX is an excellent OS it just needs more time to mature. I seem to have a lot lower stress levels running a mac than I do a PC. Just spend more time doing things as opposed to doing things in order to do things. I enjoy being able to run Microsoft software while running classic *nix software at the same time. PostgreSQL, PHP, JBoss, I could go on but won't. I also like having a GUI that doesn't look like a drunken teenager thought it up (so that rules most other nixes out). I will say that I'm not entierly happy with the Aqua UI, some of it is just plain silly.

I am running Rotor which is kind of amusing, it's a shame they don't have ASP.Net running on the Rotor platform. I guess I'll just have to get that from go-mono.com.

I would buy a PC again though, I would certainly buy another PPC which leads me to the next dilemma which is that there just isn't the support on the Mac platform for PPC. Imagine writing software on a platform for your competitors products but not your own! That's just weird. Microsoft make great software, I would like to be able to run more of it without having to get a Windows PC.

Daniel

[Jonathan1]

How did/does MS stay on top? With their Windows/Office monopoly of course. Guys get real. If Microsoft didn't own the desktop (What was it? 97% of the market?) They would be out of business in a heartbeat. Notice that nothing from MS really works with any other OS.
Pocket PC = No Activestink for any other OS.
Most if not all games = Only runs on Windows.
MS Office = Yes there is a MAC version but time and again I hear rumors of MS ditching it. They don't simply because there are so many MAC users and that if push comes to shove and they get in a scuffle over monopolies they can claim that they are supporting MAC.
Internet Explorer = There is a MAC version but it sucks so badly why bother. Heck I have the QT movie of Jobs showing off OSX and IE crashing the OS. That is a priceless video.
MapPoint = Windows only.
.NET = They are claiming support across the board but come one. MS has a vested interest in making things work BETTER on Windows. So where do you think .NET is going to work best?

Now I’ve had this discussion with others. Their point being that why should MS cater to other companies? My response has always been that if Microsoft didn’t have their hands in multiple cookie jars they would cater to multiple platforms. As it stands why in the world would MS make a product as good on the MAC as on a Windows PC??!?!!? They have a vested interest to push their own platform so screw Linux, screw MAC. Then my discussions generally lead into breaking up MS but that’s a different topic for a different day. ;)

Sorry if this comes off as just another MS bashing post but lets be brutally honest. Without Windows and Office MS would be dead. The only way Microsoft keeps their market share and the status quo is through embrace and extend, FUD campaigns against their competition (I know this is the case because during the negations with MS for our new software lease for Windows/Office/Servers our CIO had a nice discussion with the MS rep about Linux. She made sure to bullet point some of MS points and generally speaking of the stuff Microsoft was pushing was FUD.), and hidden API’s and techniques to keep programs such as WINE from running MS software.

I’m not saying Windows isn’t a good OS. It really is. But the way Microsoft stays on top is not the methods of a benevolent software company. They are underhanded, tricky, manipulative. Generally methods you’d expect to see from a company scared pissless of losing their only grip (Windows is one hand, Office is the other) they have before falling off of the cliff. Witness X-Box. Do you guys really think Microsoft wanted to get into the video game market?!?! Microsoft sees that there is a good possibility that in the future the home theater will be the center of the digital experience. So they are rushing to cut off Sony from taking that spear head of this revolution. Maybe it’s just me but I get this impression EVERYTHING scares MS. That is why they are in just about every market short of the automotive industry. ;) They are scared of that cliff I spoke of above and are doing ANYTHING they can to have alternative streams of revenue. God forbid the desktop monopoly crumbles in which case the Office monopoly wouldn't be far behind.

*shrugs* Just my 2 cents.

[numo]

Their take: Microsoft actually wins through effective management of its intellectual property and an ability to spot and react to important trends before they take hold.
Yup. Others call it "embrace and extend" :) CP/M and DOS, Mac GUI and Windows, Netscape and IE, CORBA and COM, Java and .NET, Palm and Windows CE... With a large development team (read money) it surely works...

[Janak Parekh]

Product Activation is only an issue for Consumer Purchases. If you have any type of Corporate License Agreement with MS, the version you get doesn't have to be activated (or at least that's the case today with Windows XP Pro.)
It's not that simple. We have the .NET Server RC2 installed here, and it really requires activation. While there may be a corporate version of .NET Server, I'd suspect it's not going to be cheap. At least for XP, to purchase the corporate version, you must buy an Open License with at least 5 copies. For a server, that wouldn't be nearly so nice for small businesses, since those copies must belong to one company.

We'll see how it evolves... competition from Linux and company is a good thing, as it forces MS to stay competitive.

--janak

[Foo Fighter]

I have "switched", It is the promised land, and yea they... what a load. ;)

Yeah, I'm a big Mac fan..but I am a much bigger fan of THE TRUTH. So I have little tolerance for the lies and FUD spread by the "Switcher" ads.

My PC caught fire and exploded, killing my whole family. That never happens with my Mac."

"My Mac never crashes, but my PC crashes whenever the cat walks by."

"There I was writing War and Peace on my PC when suddenly it went...BLEEP BLEEEEEEP and everything was gone. - My name is Leo Tolstoy, and I'm a switcher."

"My PC turned me into a wife-beating alcoholic. But since I switched to a Mac, I become a warm, loving person...promoting world peace."

Yada yada yada. :roll:

[peterawest]

Windows is why they won the market.

Why did Windows win? Because it is cheaper than Apple and Unix and is open to different types of hardware, unlike Apple.
I don't know. If you go back to the days before Windows, MS still had a larger installed base then any other OS provider.

Windows surely helped them to grow, but the dominance has been there from the early days.

Face it, they are good at what they do, and they always have been. Bill Gates didn't invent the OS, but he certainly knew how to take it to a new audience. That's what they always do.

Remeber when MS tried to buy Quicken? They were going to sell MS Money to another company so that they would be permitted to buy Quicken. The sale was never approved, so instead, they threw their energy into making their product equal or better than Quicken. Now they have a successful product that goes head-to-head with Quicken.

When they aren't experts at something that they want to do, they don't waste their time trying to reinvent the wheel. Instead, they go out and buy or hire the experts. You've seen this with their move into the gaming world with XBox. Over the last few years they've bought up some of the successful smaller companies that had the best skills. Then they flush them with cash and let them do their job. The result? Now they have a successful product with games that people want.

It just goes on and on. They have a good ability to see what the consumer wants and to make it happen. Not every company can do that.

Microsoft is going to be around for some time to come.

[Perry Reed]

Maybe it’s just me but I get this impression EVERYTHING scares MS. That is why they are in just about every market short of the automotive industry. ;) They are scared of that cliff I spoke of above and are doing ANYTHING they can to have alternative streams of revenue. God forbid the desktop monopoly crumbles in which case the Office monopoly wouldn't be far behind.

But that's a good thing! As a shareholder, I want any company I own to act like they're scared of losing any business.

A company that acts complacent will very soon be out of business.

[Perry Reed]

Yeah, I'm a big Mac fan..but I am a much bigger fan of THE TRUTH. So I have little tolerance for the lies and FUD spread by the "Switcher" ads.

Ha! Those were classic. Thanks! :)

[Robotbeat]

Linux is Microsoft's biggest enemy. It is Unix come back for revenge. Microsoft beat Unix because NT was cheaper. Linux is free, though. Linux is going to win most of the Server market. Why? Because it is like Unix, only better and faster growing and free. No matter what happens, SOMEONE, somewhere will be running Linux, whether it be in a set-top box or whatever, Linux will be around. Since Linux will be around, SOMEONE will be developing for it. The MS vs. Linux battle will never, ever end, until one or the other is dead. Since I just discussed why I think that Linux will never be destroyed, the battle will either rage on forever, or Microsoft will lose. I don't think that it will be soon, but I do think that either Microsoft will take over the world (improbable, but a curious and/or amusing possibility...), or Linux will win. I am not a Linux nut. I just don't see a way that Linux can lose, that's all.

Keep in mind that IBM is a big backer for Linux, as is Walmart, which is the biggest corporation in the world (at least it's the biggest in the US). Does anybody think that Microsoft will ultimately win? If so, tell your reasons. This is an exciting discussion (for myself, at least ;) ).

[Robotbeat]

I just found out about this interview (http://www.theinquirer.net/?article=6697) (The name "The Inquirer" scares people, but it is a reputable source.) which says basically what I have been saying (I find it remarkably similar in the details to what I have been saying!). It says that Linux is Microsoft's biggest competitor, according to Rick Belluzzo, formerly the third highest Microsoft executive and now is at Quantum. I think that I should write articles about this or something...

Don't you think that I am smart? ~
Ouch!
*hurts arm patting himself on back*

[Felix Torres]

Okay, I'll bite, robotbeat.
I just hope I don't get slashdotted to death for it...

1- LINUX is *good* for MS.
2- LINUX will never replace Microsoft.

That contrarian enough for you?

On point one:
a- LINUX is good for MS for a wide range of reasons, chief among them that it provides the *appearance* of competition in the microcomputer OS markets, while doing nothing to erode the cash cow of MS finances. (Anybody notice how, at a dire time in the computer industry, for all the bad-mouthing they get in the tech media, MS just keeps on growing their market share and raking in the cash?)

b- LINUX is a consolidation product that grows its market share out of existing markets rather than creating new markets. (As MS is doing with say, Tablet PCs and Multimedia PCs, and the Mira displays). In other words, instead of looking for customers amoung people who *don't* use computers, LINUX looks for customers among people who *already* use computers and for the most part get them from UNIX-fans and IT types. Now, I think most rational folks would agree that LINUX is an alternative to Windows but *not* a replacement for Windows. After all, if LINUX were a true replacement for Windows there would be not need for Windows emulators, multi-boot-LINUX, or virtual machines to run Windows on the same computer, no? Anyway, the fact is that LINUX is a product of techies, designed *for* techies. And techies, are a very small part of the market. How small? In the corporate world, the ratio of users to techies runs at 50 to 1 in a well-run organization; 100 to 1 in others. And that doesn't even begin to factor in the home or education markets where the ratios are far greater. Translation: LINUX's maximum market share, in real-world terms, is a maxium of 2%, and that only if *all* techies adopt LINUX. But then, we all know that the ratio on techies is at best a fifty-fifty split between the ABMers and the NBMers. So, when you next look at published reports that say only 0.25% of all internet users are running on LINUX, don't assume they're wrong. Chances are, they're *exactly* right. LINUX makes a lot of noise but very impact. Just the kind of competition MS needs in thse post-antitrust days.

c- Finally, LINUX itself is a replication technology born out of a culture of reverse-engineering rather than trailblazing. This is taking LINUX into some "interesting" directions that surely must make MS smile. (It will be a cold day in Brazil when patents and IP are abolished on *this* planet!)
Besides, the near-religious zealotry of the anti-IP crew gives credence to the worst legal interpretations of the GPL. All it takes is *one* GPL-based lawsuit to put the fear of God in corporations thinking of building their business on GPL'ed software. Or, consider this: what's the biggest schism between LINUX zealots? The split between the GNOMErs and K-crowd, no? And what are they arguing over? The best way to replicat the object-oriented environments of APPLE and Windows, an issue that with Windows was settled in 1996. Or, how about the LINUX response to Microsoft's vision of meta-computing, .NET? Did they conjure up a different, alternative vision? Did they think of a different, possibly better way to achieve the same functions? No, they devoted their full efforts to trying to copy .NET into MONO. In other words, we are talking of a community of followers, not trailblazers. Don't expect to see any new computing paradigms coming out of *that* crew.

Here's a true story from the late 80's for you:

Way back when, there were three dominant vendors of UNIX workstations; Apollo, HP, and, SUN, with DEC and IBM behind.
One day, Apollo got into trouble and they decided to sell out to HP.
Some bright reporter asked Scott McNeally what he though of the number 1 and number three workstation vendors merging to compete with him.
Mr MacNeally's answer went something like this:
"I like it. That's one less competitor to worry about. Within a year, *we* will be number one, while HP is still trying to digest Apollo."
And he was right.

Remember last year's HP/Compaq merger?
Has this year's HP market share added up to the sum of the two market shares they had last year? No.
Partly this is because Toshiba got into the game with some very interesting Pocket PCs.
But partly it is because every time you consolidate different markets, some of the users don't migrate to the "natural" heir.
When SGI IRIX died, their customers didn't all go to LLINUX; some took their ALIAS files and moved to a MAC. Or to a DELL NT box.
When Somebody ditches their old ALPHA TRU064 system, they're as likely to move to a Windows box as a LINUX box.
As LINUX undercuts commercial UNIXes, a portion of that customer base migrates, not to LINUX, but to Windows.
Let this go on long enough and you have a world divided between nothing but LINUX and Windows.
And, considering that LINUX generates no revenue that can be reinvested in R&D it means that MS wins, by default.

Personally, I don't think this is good.

But I do think it is an inevitable consequence of the LINUX "business" model, which is designed *on purpose* to prevent people from making money off their software. (That is what GPL is all about, remember?)
Well, it succeeds; to date nobody makes money directly off LINUX.
Oh, there is some money to be made off services or pushing LINUX hardware but the reinvestment there goes mostly into newer hardware and better staffing and very little into exploring new computing technologies.
The LINUX crew expects to wait until somebody else (most likely MS) invents something so they can then replicate it and give it away. But it takes time to replicate something someone else invented.
And while you wait to copy that development, the creator of the product gets to make money off their ideas.

So the answer to how does MS compete with a free product becomes obvious: you keep changing your product and enhancing it continually so the opposition, which started out 5 years behind your technology, is always 5 years or more behind you. That difference in technology then becomes the added value you bring to the table and allows you to survive or, if you're the only alternative to the free product, prosper.
Think again; what are Pocket PCs, Tablet PCs, and Media Center PCs? New kinds of PCs that take Windows into previously non-existent markets. And where is the Apple reply? The LINUX counter? Nowhere. Those are markets MS can own by default. (Well, maybe some token ristance from SONY, but Palm? Dead meat judging by the Tungsten boxes.) Right now those markets are tiny. But in time, they will be big. And they will more than make up for any sales MS might possibley lose to LINUX in the enterprise market which, BTW, has always been owned by IBM and UNIX, not MS. They are not losing anything they ever had, guys.

LINUX will not kill Windows. ONLY MS can do that.
But it can and likely will kill everything else off.

This is not good.
But try telling it to the Slashdotters.
All they see is "LINUX is free."

Now excuse me while I go hide in a bunker.

[Robotbeat]

I will not flame you, because you bring up some valid and interesting points.

I do, however, disagree that Linux will never replace Microsoft. Did you follow the link that I posted?

I think that Microsoft wants the server market very badly, and I think that the biggest competitor (and one that does, in fact, erode MS's marketshare in this market) in this area is Linux. Isn't Apache the most popular web server on the net? If I am wrong, someone please give some solid numbers (like I should have done).

I do see Linux bringing in new users who don't use computers (or who just aren't techies like us). Mandrake is pretty easy, and those behind it are trying to make it easy enough for most newbies to learn to use it at least as easily as a MS OS. As I said before, Linux is being pushed through Walmart in low-end PCs designed for low-end usage and newbies (although a lot of techies are buying them). This is only the beginning for Linux. You just wait and see.

[Robotbeat]

Also, I would like to point out that Linux has many, many different flavors, and that development is going very fast, as it is open-source. Many people make programs for free. This is freedom. GNU is a utopia of the digital sort. A sort that works. Think of it as a sort of software-socialism, a socialism that works, because the digital world is a world unlike our own. Computers aren't greedy. Anyways...

Yeah, Linux doesn't need to pour money into research and development. They are both free. You apparently don't quite understand how the open-source community works. People make programs because they love to program and they love the community. It is wonderful, it really is.

[Robotbeat]

There are Linux PDAs and such out, of course. As far as the media center, yes, there is a Linux answer. There is an Xbox hack that let's you do Media Enter type things. I think that either TIVO or some competitor uses embedded Linux to run the thing, so there is something there, too. Linux is spreading, just like MS is. Anyone who has newer IWILL motherboard drivers that come on CD has a small version of Linux. Linux is in a lot of places. Linux is fast. Linux is easy to use, and is getting easier. Linux is bigger than you think.

[Robotbeat]

Man, I feel a lot like a Linux commercial! :lol:

[Jonathan1]

Right now I’m mulling over taking a few Linux classes in January. Why? Because I firmly believe that Linux is going to overtake Windows.....In the enterprise environment. MS can fling as much monkey **** about Linux at its customers as it wants but at the end of the day any CIO who does their homework can add 1+1 and at the end of the day the potential TCO of Windows IS higher then Linux. I can’t tell you how many patches I’ve applied to Windows in the last 6 months. From OS patches to IE patches to Media Player patches to VM patches. Patching 100 PC’s and keeping track of all the patches MS puts out is almost a full time job.
I would say that ¼ of the time spent in my work week is spent testing patches to confirm that they don’t break the OS then rolling them out. The TCO for Windows is, and IMHO always will, be high. Heck I have yet to see a patch that can’t be applied to Linux where you need to reboot your system. My XP box at home can’t stay up for more then a week to a week and a half simply because whenever I install a patch I HAVE to reboot.
Now let’s look at the other reasons I believe that Linux will win the Enterprise. Unlike a home user who is constantly installing things. Has to maintain his/her own box. Is updating the hardware. Enterprise environments are generally static with an occasional app being released. Really for the most part what apps do most enterprise computers deal with? MS Office? Internet browser? E-Mail? Acrobat files? Zip files? Maybe multimedia? AS/400 apps? Network shares? Printers?
All of the above can be done on Linux. Heck with Crossover office http://www.codeweavers.com/products/office/
You can run office 2000. Internet Exploder 5.5 among other apps. Heck you can tweak the interface to closely emulate MS Windows.

For those dealing with custom apps. Well depending on the time and the original investment they could be converted over to Linux the problem is that I’m guessing that the developer, either in house or out side the company, is most likely ONLY fluent on the VB development platform so they would be clueless when it comes to creating Linux based apps. (I have to imagine cost of development IS higher on Linux then on Windows.)
There is no real need for the user to have to go in and edit system settings. No need for them to have to alter any settings on the system at all. Once set up the user should only need to access the apps installed on the system. Anything more they should be calling tech support. (Sorry but I don’t think the end user should be altering any system settings without letting me know. I’m anal that way :D )
And as for file servers. MS should be VERY worried. Simply put why should you spend $1000+ (5 user lic) for just an file server OS when Linux can be a perfectly acceptable file server that can integrate into existing Windows environments. Yes it takes some tweaking but with a little time, effort and pulling some of your hair out you can save thousands.
Don’t underestimate the power of the word FREE. People are getting sick of MS’s BS licensing practices. There is some seriously pissed off people that have been burned by MS’s licensing 6 scheme. My company just renewed our contract with MS. The amount that we have spent on it has not been disclosed but I’ve heard rumors of Linux testing being started. I have to imagine it’s because our company just spent an *** load on MS software. Felix you said the “LINUX will not kill Windows. ONLY MS can do that.” They are doing that with shoving product activation on the server down business’s throats and with licensing schemes that are pissing off companies.

Finally Felix you mentioned moving into new directions. Linux is in the PDA market. They are only starting but right now you can replace the OS on iPaq’s with Linux. You have the Sharp Zaurus SL-5600. It’s a very impressive device optimized for the 400Mhz X-Scale. Its only problem? Lack of software right now. And now you have this: http://synce.sourceforge.net/synce/ Syncing a pocket PC with Linux. Granted its in its initial stages but given enough time it will happen.

I liken the Linux community to a drip of water falling on a rock. It’s slow. WAY slow. But given enough time it will erode that rock down. There is very little MS can do against the Linux community. Their methods of embrace and extend can’t work on Linux since its open source and the Linux community would counter with a compatibility patch.

I don’t think MS windows is going anywhere but I do believe that if MS continues on its present course of alienating the Windows community with product activation, passport, DRM, major security issues, Palladium *spits the word* and the like I think you are going to see a steady decline in the number of people who will use Windows. Then again I’m hearing more and more rumors of the RIAA, MS, MPAA teaming up to push legislation through congress that would actually make ANY OS that doesn’t have copyright protection built in illegal in the US. Something like that would kill Linux. Let me see if I can find that article again.

[Robotbeat]

Oh yeah, I have built NAS (network-attached storage, basically a dedicated file-server) boxes before. One of them that I built has a dual-cpu Athlon MP motherboard with (most importantly) 64-bit PCI slots with a good 64-bit IDE RAID card in it. It is currently running embedded Linux. Free is the way to go. I mean, Linux is higher-performance (partially because it's just a console running, no Xwindow display thing, but other reasons, too) than any other MS solution, besides the software is open-source so the company that provides us with the special version of Linux can alter the OS itself if needed. Try getting MS to let you have access to their source code so that you can alter it! Anyways, Linux is definitely the way to go with NAS devices that you are building customized as an OEM.