Craig Mundie’s infamous speech

I haven’t said anything about Microsoft Executive Craig Mundie’s speech yet. Everyone’s heard of it, of course, and the typical response has been something along the lines of “Now we know Microsoft’s stance on Open Source.”

No, we’ve always known Microsoft’s stance on that. They’re scared of it. Remember the stereotype of open-source programmers: college students and college dropouts writing software in their basements that a lot of people are using, with the goal of toppling an industry giant. Seem far-fetched? Friends, that’s the story of Microsoft itself. Microsoft became an underground sensation in the late 1970s with Microsoft Basic, a programming language for the Altair and other kit computers and later for CP/M. And while we’ll probably never know the entire story of how and why this happened, when IBM decided to outsource the operating system for the IBM PC, they went to Microsoft and got both an OS and the must-have Microsoft Basic. Ten years later, IBM was just another hardware maker–really big, but getting squeezed. Today, 20 years later, IBM’s still a huge force in the computing industry, but in the PC industry, aside from selling ThinkPads, IBM’s a nobody. There may be hardware enthusiasts out there who’d be surprised to hear IBM makes and sells more than just hard drives.

Ironically, Microsoft’s response to this new threat is to act more and more like the giant it toppled. Shared Source isn’t a new idea. IBM was doing that in the 1960s. If you were big enough, you could see the source code. DEC did it too. At work, we have the source code to most of the big VMS applications we depend on day-to-day. Most big operations insist on having that kind of access, so their programmers can add features and fix bugs quickly. If Windows 2000 is ever going to get beyond the small server space, they really have no choice. But they do it with strings attached and without going far enough. An operation the size of the one I work for can’t get the source and fix bugs or optimize the code for a particular application. You’re only permitted to use the source code to help you develop drivers or applications. Meet the new Microsoft: same as the old Microsoft.

Some people have read this speech and concluded that Microsoft believes open-source software killed the dot-com boom. That’s ludicrous, and I don’t see that in the text. OSS was very good for the dot-com boom. OSS lowered the cost of entry: Operating systems such as FreeBSD and Linux ran on cheap PCs, rather than proprietary hardware. The OSs themselves were free, and there was lots of great free software available, such as the Apache Web server, and scripting languages like Python and Perl. You could do all this cool stuff, the same cool stuff you could do with a Sun or SGI server, for the price of a PC. And not only was it cheaper than everybody else, it was also really reliable.

The way I read it, Microsoft didn’t blame OSS for the dot-com bust. Microsoft blamed the advertising model, valuing market share over revenue, and giving stuff away now and then trying to get people to pay later.

I agree. The dot-com boom died because companies couldn’t find ways to make money. But I’m not convinced the dot-com boom was a big mistake. It put the Internet on the map. Before 1995, when the first banner ad ran, there wasn’t much to the Internet. I remember those early days. As a college student in 1993, the Internet was a bonanza to me, even though I wasn’t using it to the extent a lot of my peers were. For me, the Internet was FTP and Gopher and e-mail. I mostly ignored Usenet and IRC. That was pretty much the extent of the Internet. You had to be really determined or really bored or really geeky to get much of anything out of it. The World Wide Web existed, but that was a great mystery to most of us. The SGI workstations on campus had Web browsers. We knew that Mosaic had been ported to Windows, but no one in the crowd I ran in knew how to get it working. When we finally got it running on some of our PCs in 1994, what we found was mostly personal homepages. “Hi, my name is Darren and this is my homepage. Here are some pictures of my cat. Here’s a listing of all the CDs I own. Here are links to all my friends who have homepages.” The running joke then was that there were only 12 pages on the Web, and the main attraction of the 12 was links to the other 11.

By 1995, we had the first signs of business. Banner ads appeared, and graduating students (or dropouts) started trying to build companies around their ideas. The big attraction of the Web was that there was all this information out there, and it was mostly free. Online newspapers and magazines sprung up. Then vendors sprung up, offering huge selections and low prices. You could go to Amazon.com and find any book in print, and you’d pay less for it than you would at Barnes & Noble. CDNow.com did the same thing for music. And their ads supported places that were giving information away. So people started buying computers so they could be part of the show. People flocked from closed services like CompuServe and Prodigy to plain-old Internet, which offered so much more and was cheaper.

Now the party’s ending as dot-coms close up shop, often with their content gone forever. To me, that’s a loss only slightly greater than the loss of the Great Library. There’s some comfort for me: Five years from now, most of that information would be obsolete anyway. But its historical value would remain. But setting sentiment aside, that bonanza of freebies was absolutely necessary. When I was selling computers in 1994, people frequently asked me what a computer was good for. In 1995, it was an easier sell. Some still asked that question, but a lot of people came in wanting “whatever I need to get to be able to get on the Internet.” Our best-selling software package, besides Myst, was Internet In A Box, which bundled dialup software, a Web browser, and access to some nationwide provider. I imagine sales were easier still in 1996 and beyond, but I was out of retail by then. Suddenly, you could buy this $2,000 computer and get all this stuff for free. A lot of companies made a lot of money off that business model. Microsoft made a killing. Dell and Gateway became behemoths. Compaq made enough to buy DEC. AOL made enough to buy Time Warner. Companies like Oracle and Cisco, who sold infrastructure, had licenses to print money. Now the party’s mostly over and these companies have massive hangovers, but what’s the answer to the Ronald Reagan question? Hangover or no hangover, yes, they’re a whole heck of a lot better off than they were four years ago.

I’m shocked that Microsoft thinks the dot-com phenomenon was a bad thing.

If, in 1995, the Web came into its own but every site had been subscription-based, this stuff wouldn’t have happened. It was hard enough to swallow $2,000 for a new PC, plus 20 bucks a month for Internet. Now I have to pay $9.95 a month to read a magazine? I could just subscribe to the paper edition and save $2,500!

The new Internet would have been the same as the old Internet, only you’d have to be more than just bored, determined, and geeky to make it happen. You’d also have to have a pretty big pile of cash.

The dot-com boom put the Internet on the map, made it the hot ticket. The dot-com bust hurt. Now that sites are dropping out of the sky or at least scaling operations way back, more than half of the Web sites I read regularly are Weblogs–today’s new and improved personal home page. People just like me. The biggest difference between 1994 and 2001? The personal home pages are better. Yeah, the pictures of the cat are still there sometimes, but at least there’s wit and wisdom and insight added. When I click on those links to the left, I usually learn something.

But there is another difference. Now we know why it would make sense to pay for a magazine on the Internet instead of paper. Information that takes a month to make it into print goes online in minutes. It’s much easier and faster to type a word into a search engine than to leaf through a magazine. We can hear any baseball game we want, whether a local radio station carries our favorite team or not. The world’s a lot smaller and faster now, and we’ve found we like it.

The pump is primed. Now we have to figure out how to make this profitable. The free ride is pretty much over. But now that we’ve seen what’s possible, we’re willing to start thinking about whipping out the credit cards again and signing up, provided the cost isn’t outrageous.

The only thing in Mundie’s speech that I can see that Linus Torvalds and Alan Cox and Dan Gillmor should take offense to is Microsoft’s suspicion of anyone giving something away for free. Sure, Microsoft gives lots of stuff away, but always with ulterior motives. Internet Explorer is free because Microsoft was afraid of Netscape. Outlook 98 was free for a while to hurt Lotus Notes. Microsoft Money was free for a while so Microsoft could get some share from Quicken. It stopped being free when Microsoft signed a deal with Intuit to bundle Internet Explorer with Quicken instead of Netscape. And there are other examples.

Microsoft knows that you can give stuff away with strings attached and make money off the residuals. What Microsoft hasn’t learned is that you can give stuff away without the strings attached and still make money off the residuals. The dot-com bust only proves that you can’t necessarily make as much as you may have thought, and that you’d better spend what you do make very wisely.

The Internet needs to be remade, yes, and it needs to find some sustainable business models (one size doesn’t fit all). But if Mundie thinks the world is chomping at the bit to have Microsoft remake the Internet their way, he’s in for a rude awakening.

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6 thoughts on “Craig Mundie’s infamous speech

  • May 7, 2001 at 8:41 am
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    Ah yes, I remember 1994. The first ISP I signed up with provided trumpet winsock for comms and a gopher client for windows 3.1.

    A couple of years later, win95 had improved the comms, but it was the netscape browser and eudora mail that impressed most.

    A couple of years later MS had improved IE and outlook express distributed them for free.

    But it was the content was the main driver, we weren’t installing IE and Outlook for fun. (only really bored techies do that). We were reading the paper, searching for trips, gathering information, chatting, exchanging files, communicating around the world.

    MS attempts to hijack the content have fairly much failed. Remember The Microsoft Network & MSN, embarrassing failures. People want freedom to get their own information, not controlled for them. Although AOL has seemed to capture the market for those that want their content controlled or at least easily delivered.

    I suspect XP and.NET are attempts by MS to get people to subscribe, not to content, but to the delivery of content.

    IMO, I think that .NET may achieve some penetration into the very large corporate market where the desktop is already ‘managed’ to some degree.

    Everyone else will either stay with NT/2000 or move to another platform.

    I have been a big fan of MS in the past but think they now may have stepped over the line.

    As always, these are my opinions, feel free to have your own.

    Regards,

    Tim.

  • May 7, 2001 at 9:56 am
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    Yes, controlling information delivery is an old, old dream of Gates’, dating back to the first time he saw a computer while still in high school.

    And you’re right, people don’t like having their information controlled, unless it’s controlled by someone with the same political agenda they have. That’s people’s biggest objection to TV news and newspapers and magazines. With a computer, which people are used to being able to customize, the masses won’t stand for one company controlling the flow of the news.

  • May 7, 2001 at 11:01 am
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    Yes, controlling information delivery is an old, old dream of Gates’, dating back to the first time he saw a computer while still in high school.

    And you’re right, people don’t like having their information controlled, unless it’s controlled by someone with the same political agenda they have. That’s people’s biggest objection to TV news and newspapers and magazines. With a computer, which people are used to being able to customize, the masses won’t stand for one company controlling the flow of the news.

  • May 7, 2001 at 12:29 pm
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    I think the majority of people who use AOL do so because it is simpler for them to use than other ISPs. They aren’t thinking one bit of who controls the content, they just want an easy way to get on the Internet.

    .NET and other subscription models have everything to do with cash flow and nothing else. If you put yourself in Microsoft’s shoes you realize that to sustain their current standard of existence they need to have more and more cash flowing into their accounts, but there is no way for them to be constantly cranking out new versions of their software at that rate. Thus the subscription model appears to them to be a viable alternative. I can understand their perspective, thought it remains to be seen whether it will be accepted. Paul Thurott reported last Friday that Microsoft appears to be backing off this subscription approach in the US — for now.

    I don’t disagree with Mundie’s comments about the dot-com bust. The real problem, IMHO, is the venture capitalists all looking for a quick buck. I agree that the dot-com "era" may have been good for the Internet, but it wasn’t as good for our economy.

    What bothers me about OSS is the associated perception that everything should be free, and that making money is bad.

  • May 7, 2001 at 2:17 pm
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    Good thoughts. Sure, simplicity sells too. And so long as more new people are coming in than now-savvy users are leaving, AOL will continue to propser. And AOL doesn’t really try to control the Internet–they give you a bunch of proprietary stuff, plus Internet access, so people think of AOL as an ISP even though they are more than just that.

    The VCs didn’t help, nor did the rampant waste at most of the dot-coms. Easy come, easy go, as they say, and these dot-coms all too often spent too much on perks when they should have been using that money to improve their business model. Let’s face it, now that AOL owns Time-Warner, the online service could tank tomorrow and they’ve still got a viable company.

    I think it’s too early to gauge the fallout’s effects on the economy. Unwise investing didn’t help any, but that wasn’t entirely the dot-coms’ fault. (They spent too much on perks and not enough on building up their business, but wise investors should have seen that and shied away. Frequent Caviar lunches and daily massages aren’t exactly a good investment.) Now the question remains, will this be more like 1987, where the market crashed but the economy only hiccupped, or is it going to be more like 1929?

    Bob Cringely (www.pbs.org/cringely) has talked at length about that stuff. I think he’s got a lot of well-reasoned things to say.

    As for OSS, it’s really only the takers who believe everything should be free. Even Stallman himself sells his software. The militant "everything should be free" people are generally people who don’t feel like paying for anything, usually can’t even write "Hello, World!" in C, and generally their only contribution (if you can call it that) to the movement is their time spent harrassing Pournelle and other journalists they disagree with. I know in the case of one of these people I’ve met, the guy had never even dropped to a command line. He didn’t know Linux *had* a character mode!

    There’s always been a lot of money to be made in service in the Unix field; the big question is how much can you make off selling service for Linux? You won’t make anything selling it to consumers. Now that there are clustering solutions and journaling filesystems for Linux, I think you’ll start seeing it in more and more mainstream roles, which will open the door to selling more service. But we’ve got too many Linux companies right now, and we’ll see some consolidation. Maybe a lot of consolidation, to the point where there are only two or three players left instead of the current nine.

    But Microsoft didn’t even talk about that, which is why I find the OSS reaction to this speech really curious.

  • May 7, 2001 at 10:47 pm
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    If OSS didn’t have Microsoft as the bad guy/enemy, they wouldn’t get any pub, and their existence would become nil.

    These days the surest way to get yourself on ZDNet or Newsweek is to say something negative about Microsoft.

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