The article summary “Microsoft vs. Open Source: Who Will Win?” from the Harvard Business School (HBS) Working Knowledge magazine bubbled up on the del.icio.us most popular list this morning. Being that this is one of the “classic debates”, I felt compelled to give it a read. As one might expect of an economic publication from HBS, the material is relatively academic in nature. Some of the suggestions for folks in Redmond to remain competitive with the open source community sound great in theory but are unlikely to ever cut it outside the ivory towers. Price discrimination on Windows software is one repeated suggestion. At first glance, this appears very logical, since the marginal costs of distributing additional copies of Windows are near nil. However, this would lead to a very rapid deterioration in pricing structure  leaving little or no pricing transparency. People are agreeable with paying $300 for an iPod because they know that everyone else is in the same boat. People hate contracting for packaged software and buying cars because they always feel like they are getting screwed by the salesman who uses some secret formula to determine the price of the goods. Is this a perception that would increase Microsoft’s ability to remain competitive? I highly doubt it.

Aside from the purely academic nature of the write up, what irked me more was the choice of protagonists in this story. Microsoft versus Linux, Java versus .NET, scale up or scale out. These debates are just so passé. Large organizations don’t care about Microsoft versus open source – they buy software to minimize switching costs; reduce staff retraining, retention, and hiring costs; and to have a vendor to hold their hands when times get tough. Average PC buyers like my parents don’t care about Microsoft versus open source either – they want something that is easy, that meets their simple needs, and that runs. If the cost of this is bundled into the cost of the PC itself, they are blissfully ignorant of this fact. Most importantly, perhaps, is that Microsoft and the open source community are increasingly ambivalent.

Microsoft, despite its insistence to the contrary, is spending money hand over fist to catch up to Google and Yahoo. Yeah, these two competitors might run on open source software but that’s not what’s worrying Microsoft. It’s their business services and advertising revenues that has Microsoft concerned enough to plow money (to the tune of $500 million in FY ’06) from its cash cows, Windows and Office, into the risky venture they refer to as Windows Live. Linux, and its open source brethren, are taking on lives of their own in a world where the PC is likely to be marginalized in the not so distant future. Internet appliances, consumer devices, dedicated control systems and other “embedded applications” is one area where Linux shines.

Apparently someone cares about Microsoft versus open source though – those who funded the research. I couldn’t derive who that might be from the brief interview with the study’s authors but I’d be interested in finding out.