Protectionism may help local Microsoft competitors to dominate the software market in China.
A new policy by China's governing body the State Council will rule that all ministries have to buy only locally-produced software at the next upgrade cycle.
Strangely enough, rampant bootlegging in China may aid Microsoft by preventing local software companies from getting enough revenues to hire large staffs. If the Chinese government really cracked down on bootlegging of local developers' software while at the same time keeping Microsoft out of the market the revenues that the locals could eventually generate from serving the Chinese market may allow them to develop software that would eventually become a competitive threat to Microsoft in other countries as well.
What is the bigger threat to Microsoft, protectionist China or Linux? A couple of recent stories suggest that in the short to medium term Linux could be a growing threat.
SuSE CEO Richard Seibt talks about the significance of the price cut Microsoft offered the city of Munich in Germany.
From a customer perspective, the Munich deal has implications...that (Microsoft) will start to negotiate on a price point that's 90 percent below their list price. It's unbelievable. Cutting prices when you have offered high prices before means that all other customers will want the same thing too. Their other reaction will be: "What have I paid before?" And that causes disappointments, loss of trust and loss of relationship.
The Inquirer relays the most interesting details from a Wall Street Journal article that reported on how far Microsoft was willing to cut prices to win a deal with the government of Thailand against a Linux alternative.
According to the Journal, Microsoft said it would sell Windows XP and Office at a piffling $36 a PC.
Microsoft was even willing to remove product activation from the Thai version of their product. Of course, that doesn't open them up to much of a risk of bootlegging since people in other countries are not going to want to run the Thai versions of Windows and Office.
Every time a story comes out about how far Microsoft is willing to drop its prices in the face of Linux competition that will encourage more governments and companies to examine the possibility of switching to Linux or at least threatening to. If this becomes a major trend Microsoft will suffer a substantial decrease in sales.
Duncan Watts of Columbia and coworkers have repeated Stanley Migram's famous 6 degrees of separation study of 1967 by having people send email to someone they didn't know by sending it to someone who might know a person closer to the intended target. The internet has not decreased the number of degrees of separation between people.
When the researchers asked people why they did not participate, less than 1 percent replied that they could not think of anyone to send the e-mail message to, suggesting that most simply did not want to be bothered.
Thus, the researchers assumed that many more of the e-mail chains could have been completed. They calculated that half of them would have been finished in five steps or less if the first sender and the target lived in the same country, and seven steps otherwise.
Let me reword this: if only people were not so indifferent to requests they get from distant acquaintances we'd all be able to reach anyone in 6 steps. Well, news flash for the people who did this study: we are lucky that most people will not forward mail along in big chain mailings because spam junk mail is already a big enough problem as it is.
The original experiment by Milgram used physical mailing of packages.
The founding experiment in the science of social networks was performed in 1967. Stanley Milgram of Harvard University asked randomly selected people in Omaha, Nebraska, to send packages to a Boston stockbroker identified only by his name, occupation and rough location.
The first experiment required a far larger amount of effort on the part of those who were intermediaries.
Watts doesn't think the internet is generating a lot of new ties.
"In this experiment, the internet is simply the tool we use to transmit messages," Watts told New Scientist, in an email. "Compared with offline interactions like work, school, family, and community, I don't see email as being a particularly compelling medium for generating social ties."
I think that for some subpopulations the internet is creating many new bonds. There are people who are finding lovers and even future spouses on the internet. Also, some people are getting to know others virtually who wouldn't otherwise know each other. Plus, it is making it a lot easier to stay in contact with old friends or to find them again.
Melbourne travel agent Sally Stansmore, 32, was one of the 18 targets, which included a US university lecturer, an archival inspector in Estonia, an IT consultant in India, a Norwegian veterinarian and a Kalgoorlie policeman.
She said the 40 messages she received came mainly from people she knew well and "a few blasts from the past". She did not know where the email chains had originated. "Usually, I'd only know the last two (contacts)," she said.
But the connections that matter more are connections to powerful people.
Also, Watts said that people who were only remote acquaintances played an important role in the successful chains. That's because close friends tend to know the same people and have the same contacts, while more distant acquaintances are more apt to bring in new contacts unknown to the searcher.
One thing this study doesn't measure is whether or not people are more likely to be connected to others who share their own interests. Is the internet enabling relationship networks to be sorted more efficiently along the lines of common interests and beliefs?
Work acquaintances were more likely to pass along a message.
"Successful chains - in comparison with incomplete chains - disproportionately involved professional ties rather than friendship and familial relationships. Successful chains were also more likely to entail links that originated through work or higher education," the authors wrote.
Men passed messages more frequently to other men, and women to other women. This tendency to pass messages to a same-sex contacts was strengthened by about 3% if the target was the same gender as the sender and similarly weakened in the opposite case, the researchers found.
Another interesting result of the study was that highly social individuals who had large sets of acquaintances seem to be poor choices for sending messages to. It could be that they are too busy to send on messages. Or perhaps they are the center of an insular group.
Business Week has a relatively upbeat assessment of Silicon Valley's future.
Valley veterans also are quick to note that Silicon Valley is still where the venture-capital community is putting its money. In 2003's second quarter, 33.6% of the country's VC funds went to Valley startups, two points higher than its share in 1996. Venture capitalists, beaten and bruised though they may be, haven't gone away. "Silicon Valley occupies the same central place that it always has" with investors, says John Doerr, a partner at Kleiner, Perkins Caufield & Byers.
Silicon Valley faces problems in part due to a more general skepticism toward tech buying. Information technology buyers have become more reluctant to buy from new small companies which face poor odds of long term survival. They also have tired of buying buggy products that do not turn out to provide much return on investment.
But let's be clear: There will be no return to the frothy foolishness of the boom. With the weak economy, global unrest, and lingering skepticism by buyers, tech spending will probably recover to a modest 6% or so next year, and just shy of its 10% historical average in 2005. The biggest problem: Many IT buyers refuse to purchase anything that won't guarantee a return in six months. "There's a big backlash against technology and a lot of skepticism about what it can do," says technology consultant and author John Hagel III.
Another reason to be optimistic about the amount of future demand for technology is that past spending may turn out to provide bigger benefits than the skeptics have been claiming.
A recent study by Massachusetts Institute of Technology economist Erik Brynjolfsson and University of Pennsylvania's Lorin M. Hitt says the biggest gains come five to seven years later. If true, last year's 4.8% productivity surge traces to investments made in 1997 or before. And that would mean big gains from the late-'90s technology spendathon are still coming.
Moore's Law and similar patterns of advance with fiber optics and disk storage continually drive up the power of computers. Applications that previously were not feasible come into the realm of the economically possible. In a competitive environment companies have to continually try to develop new ways to cut costs and the steadily advancing power of computers make them the tool of choice for developing means to cut other costs. Therefore they have to invest in IT or be beat by other companies that will make the investments.
The real wild card for American and other Western IT industry workers at this point is just how much IT work can be outsourced to India and China? Also, as IT becomes such a large portion of total budgets it becomes inevitable that IT itself becomes a target for cost cutting and companies will look to automate the work that IT workers do.