Question

How is Microsoft combating the threat of open source software and other free tools that compete with its commercial products?

Answer 1

Open Source Software (OSS) makes for a multi-billion dollar industry. The value for the code of open-source software Linux alone amounts to $5 billion. The vendors of OSS often make money through the consulting and support services for these open-source software programs and tools. Firms including Oracle offer operating systems like Linux for free, which takes away customers from Microsoft. However, there are multiple ways through which Microsoft competes with free OSS, tools, and services.

By upgrading its products

Linux is a free platform but is still used in a very small fraction of computers. This is so because Linux may not be easily installed when compared to other operating systems including Windows or the Mac operating system, and there are other problems and inconveniences as well associated with its use. Microsoft improves its products and makes them more convenient to use and effective for the end consumers, thereby reducing the demand for the free operating systems and open-source software and programs.

Pricing its offering competitively

Microsoft is also offering its products including Windows operating system at low costs in certain markets. The Windows OS has been priced quite low, and in some cases, it may be offered at price as less as $7. These are essentially the low-cost versions that solve the needs of the users (especially individuals and small scale businesses) but may require an upgrade for access to higher and premium features. These windows versions are widely available in countries having low incomes for the majority of the population. The company may not get direct and huge profits for such pricing. However, the business strategy helps the company entrench and position itself better in the emerging markets. These developing nations and their consumers will soon be in a position to buy the more costly and premium windows versions when the development is complete and when income levels improve, and the generations will always have a good familiarity with the Windows OS and other products.

Pursuing legal action

Microsoft may also pursue legal action against companies for violating its patents and intellectual rights/properties. For instance, the company suggested that more than 230 of its patents have been infringed by open-source software like Linux. Microsoft also had a deal with Novell (a vendor of Linux) in this regard. Microsoft collected payments for companies including Samsung and Fuji among others that were using the Linux OS.