Microsoft isn’t going to take it anymore: After years of watching free server operating system Linux win over clients – thus effectively removing them from the market altogether – the software giant is fighting back.
The weapon of choice, of course, is advertising, but Microsoft isn’t going to wield it like a broadsword. Instead it’s adopting a strategy of scalpel-like precision, with a tightly targeted, long-running informational campaign that uses facts and low-key arguments to persuade clients not to defect.
Meanwhile, open source server operating system Linux is getting a marketing push of its own – mainly via original equipment manufacturers (OEMs) like Hewlett-Packard, Dell and IBM. These efforts range from on-site, country-wide tours by HP to formal alliances with Linux providers such as between Dell and Red Hat.
Microsoft says it wants to clear the air and end what industry observers describe as a ‘holy war’ between those who support commercial, for-profit software and those who think no one should own it and insist Linux is the solution.
‘There’s been a lot of hype around Windows and Linux,’ explains Alec Taylor, senior platform strategist at Toronto-based Microsoft Canada. ‘What we wanted to do is make sure that we got the facts into the marketplace.’
In February Microsoft launched a campaign called ‘Get the Facts’ that targets IT decision makers and professionals as well as specific verticals, including the government, healthcare and telecommunications sectors. At the heart of the North America-wide campaign is a Web site at www.microsoft.ca/getthefacts which contains third-party reports on Windows performance and case studies from Canadian businesses, all dedicated to dealing with such issues as cost of system ownership, reliability and security.
The campaign features print ads created by MacLaren McCann San Francisco (with localization by the Toronto office) in various trade publications and national newspapers. No value was given for the ad spend in Canada but Microsoft is reportedly spending $20 million in the U.S.
Taylor says the print ads offer ‘facts-based information’ and also promote the URL.
Microsoft views Linux as a threat, not because of revenue the latter directly takes away from Microsoft, but because of the potential revenue that disappears entirely from the market when a Linux system displaces Windows or the Unix OS.
According to Toronto-based research firm IDC Canada, in 2002 Microsoft had a 53% market share of worldwide server OS software shipments (for hardware trends, see right), which translates into a 16.7% revenue share, representing money that comes from licensing and maintenance fees. By comparison, Linux shipments accounted for a very respectable 23% of shipments but only a 0.6% revenue share. That’s because Linux is either much less expensive to license or it’s free.
‘The main impact right now for Linux in the Canadian market has been a displacement of Unix sales,’ says Warren Shiau, software analyst at IDC. ‘All the Unix vendors [such as HP] have embraced Linux and sell it alongside their Unix offerings, [therefore] displacing what would have been a proprietary Unix stacks sale.
‘That impacts their server revenue but their hope is that it makes up for it in other ways, such as from a services drag [i.e. additional service contracts on installed equipment] or by generating sales in greater volume of the [server] boxes,’ says Shiau. ‘So what Microsoft sees is that Linux has the potential to take revenue out of the market. And if it can do that to Unix, there’s the potential it can do that to Microsoft as well.’
And Linux is growing. Toronto-based computer maker Hewlett-Packard recently announced a record $2.5 billion in worldwide Linux-related revenue for 2003 and is the number-one vendor of Linux servers. One out of every seven servers it sells annually worldwide runs Linux. While numbers for server sales in Canada are not broken down, Lynn Anderson, VP marketing, enterprise, says they are very similar here. ‘You’re going to see over the next five years that the number will significantly change, though it probably won’t double.’
HP, Dell and IBM offer Linux alongside Windows and their own proprietary Unix servers. The idea is to create enough mass at the operating system level to compete with Microsoft, keep the latter out of the equipment manufacturers’ existing Unix market with the lower-cost Linux solution, and raid each other’s installed Unix bases.
‘We’re not pushing the solution,’ explains Anderson. ‘Instead we’re sitting down with our customers and understanding what they need and then helping them pick the system that’s best suited for the role.’
In April HP is going on a seven-city tour, during which it will visit businesses to show them what Linux can do. HP also publishes several e-magazines such as IT e-Report, which contains content about Linux and is sent out to hundreds of customers. Finally, the company will host a Linux Webcast in the second quarter of this year.
The target is broader than just techies, says Anderson, who adds that mid-sized companies are currently Linux’s most frequent users.
Other OEMs are also preparing to support Linux.
Dell, for example, has entered into a formal partnership with Red Hat, the Raleigh, N.C.-based maker of a commercial Linux variant. Called the One Source Alliance, the partnership aims to hasten the commercial acceptance and adoption of Linux.
IBM, meanwhile, has been marketing Linux heavily in the U.S. and will be announcing a strategy for the Canadian market sometime this month.
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sokalow@brunico.com
