Windows, Linux, ARM and Intel in a Zero Sum Game

Microsoft is talking about putting Windows 8 on ARM. Intel is trying to play this down, talking about how Linux is already on ARM, and how Intel even supports Linux itself. None of this makes sense unless you understand the position of Microsoft and Intel in the PC market.

People often speak of the "Wintel" duopoly, which of course is a misnomer. A duopoly is when two companies share a single market, at which point there is a risk of anti-competitive behaviour. However Microsoft and Intel are not a duopoly, they are two near-monopolies. Microsoft dominates the desktop operating system market, and Intel dominates the desktop CPU market. Although both OS and CPU are necessary components in a desktop computer, this doesn't make their manufacturers a duopoly because even in the best of worlds they don't compete: increased market share for Microsoft is not at the expense of Intel.

However this doesn't mean that everything can be all cozy between them, because in a broader sense they do compete. Microsoft and Intel are players in the desktop PC "value chain" (actually, its a value network, or even more precisely, a value directed acyclic graph, and if you look closely you find it isn't even really acyclic because chip-makers buy PCs, but term "chain" is more often used so that is what I'll stick to). This describes the way that money flows from PC buyers through vendors to manufacturers to parts makers to raw materials.

If you are a player in a value chain then its pretty much a zero sum game; every time someone buys a PC their money bubbles back up through the value chain and everyone grabs their bit. Your problem as a player is to get as much of this money as you can, which inevitably means that someone else gets less. Value chains are characterised by dysfunctional relationships between people who need each other but nevertheless hate each others guts.

There are two big strategic goals in a value chain. The first is obvious, the second less so:

1. Make your bit a monopoly, so the rest of the value chain has to come to you to produce the product. That way you can charge monopoly prices and hoover up all the money coming through the value chain.
   
2. Make everyone else's bits into generic commodities so that they can only compete by keeping prices low. That way they can't charge monopoly prices, which leaves more money for you. That's the consequence of the zero sum game thing.

Once you understand the second goal you understand everything about Microsoft and Intel.

• Microsoft makes very sure that Windows runs well on as wide a variety of hardware as possible in order to keep PC hardware a commodity business.
• Intel makes sure that Linux runs nicely on Intel processors in order to create a competitor for Microsoft, so Microsoft will have to reduce its prices, thereby leaving more money for Intel. I suspect Intel were also very supportive of Apple's move to Intel hardware for this reason, as well as the more obvious one of having a new channel.
  
• Microsoft made sure that Windows runs well on AMD. However AMD have never really recovered from Intel's "Intel Inside" marketing coup (where they paid box vendors to make it sound like "Intel Inside" was a big selling point, so lots of customers thought it was). So now Microsoft need to create a new competitor for Intel, and have decided that ARM will fulfil this role nicely. In the past they also did this with the DEC Alpha for the same reason.

ARM already plays nicely with Linux, which is quite a feat because ARM isn't a single processor; its an entire family. If ARM have any sense they will make sure that this continues. Microsoft are likely to try to pay ARM off to get it to remove support for Linux. If ARM have any sense they will resist this because it will enable Microsoft to entrench itself as a mobile monopoly, thereby decreasing the amount of money available for ARM to grab for itself.

Edit: "zero sum gain" -> "zero sum game". That's what happens when you let your fingers do the thinking.

Vote Windows, for No Tax On Sheep!

Once upon a time, so I have heard, there was an Australian politician who ran on a platform of "No Tax On Sheep". None of the other candidates would have dreamed of trying to tax sheep. Nevertheless, our hero won by a landslide.

Its a nice trick; claim a common virtue, not because it differentiates you, but because it casts a subtle doubt on whether your competition has the same virtue. It involves no actual lies, and you don't even need to name the competitors; they are all equally suspected, and must either ignore you or issue hasty and unconvincing claims to be just as good.

Advertisers love this one. In advertising "knocking copy" is the term for pointing out the defects in your competition. But blatant knocking copy is usually counter-productive: potential customers see it as mean, and it also carries an implicit message that the product you are knocking is a significant competitor (otherwise why spend money knocking it). But the "no tax on sheep" strategy neatly sidesteps this; you don't name your competitors and you don't say anything bad about them. You merely imply that they are not as good as you.

So its no surprise to see Microsoft using this strategy against Linux. The Microsoft page on Netbooks has this to say on why you want Windows on your Netbook:

For starters, you already know how to use it. Windows also works with more devices and applications, and offers security features to help keep your PC and personal information safe. Here's a whole list of other Windows benefits:

• Windows makes your life simpler. Windows is easy to set up and use. You already know your way around, which means you can get started right away and easily find everything you need.

• Windows just works with your stuff. With Windows, it's "plug and play"—meaning it works out-of-the-box with your PC applications and peripherals such as printers, digital still and video cameras, music players, and webcams.

• Windows gives you peace of mind. Windows comes with features and tools that help keep your family and personal information safe. When you install Internet Explorer 8 as your Internet browser, you get additional built-in security features that help protect against deceptive and malicious websites.

• Windows comes with more goodies. With Windows running on your netbook PC, you get access to additional software and services provided for free, like Windows Live services, which help with photo editing and organization, instant messaging, and family computing safety—all of which are just a download away.

I've highlighted the items which (in my opinion) apply to Linux as well. About the only thing I can't honestly claim is the "Windows is familiar" line. I can't deny that if you have only ever used Windows then Linux is going to be a bit different. Its not huge, but there is no point pretending its zero either.

So, I wonder, how could we turn this trick around? What can we say about Linux that casts doubt on Windows? To work, the implication has to be something that is truthy, regardless of how true it actually is. How about:

• Won't send your files to the US government. Linux has no stealth functionality, and it wasn't written by people with big Government contracts.
  
• No Blue Screen of Death! Linux was designed to be reliable.
  
• Puts you in charge. You decide what software to install, and if you don't like it you can always remove it.
• No extra fees just to get a feature you thought you had already bought.
  

But of course none of this will work in reality. Deceit of any kind and open source are fundamentally incompatible.

Disruptive Innovation and the Walmart Linux PC

The Everex TC2502 is being sold by Walmart for $200 (no monitor included), assuming it hasn't sold out a second time. Part of the reason its so cheap is that it runs Linux and OpenOffice.org instead of Windows and MS Office. The first run sold out within days, which is a strong clue that it was a lot more popular than expected. This doesn't mean popular in an absolute sense, just more than Walmart and Everex expected when they decided how many to get in stock. But its the relative popularity that counts: Walmart and Everex produced this box because they calculated they would turn a profit on whatever number they expected to sell. So the fact that they sold out fast means two things:

1. A bigger profit than expected, which is nice for Walmart and Everex.
   
2. Cheap Linux-based PCs have a market niche big enough to make them worth-while. Other manufacturers will have taken note. Expect imitators.

Anyone who has read The Innovator's Dilemma will recognise this pattern: a market incumbent listens to its best (i.e. richest and most profitable) customers, and in consequence makes its products bigger, better and progressively more expensive. The incumbent also finds it unprofitable to compete with narrow niche offerings at the bottom, because they are low quality and aimed at poor customers that can't afford the market leader. So it forgoes the bottom end of the market and concentrates on its nice profitable high-end models. However over time the bottom-end offerings improve, and so become a cost-effective choice for more and more customers. Eventually this starts to make serious inroads into the sales of the incumbent. But by then its too late. The incumbent must choose between cutting prices to compete with the newcomer or else continue to see its market share erode. Neither option will bring back the glory days, and historically many such companies went out of business surprisingly fast.

I'm quite sure that Bill Gates and Steve Ballmer have read The Innovator's Dilemma and seen this coming. There is a bit of MBA strategy theory that sums up their position nicely. Plot their product lines on a chart with two axes; market share and growth potential. The high-share-low-growth lines are "cash cows": they should be milked, and the profits put into high-growth lines. Eventually all cash-cows turn into dogs (low-share-low-growth) and these should be killed off. You just have to hope that by then you have some new cash cows to replace them.

Microsoft has two cash-cows (Windows and Office), and Microsoft has indeed been milking them for all they are worth. The money has been ploughed into a bunch of ventures over the years, but none of them look like becoming future cash cows.

Now we may be entering the final act. People have talked about Linux as a disruptive technology for the last decade, and for server operating systems it definitely has been. Its effectively killed off proprietary Unix, and put a serious dent in Windows. Microsoft continues to fight a rearguard action in this market, but its reliance on big corporate customers is becoming more and more obvious as it tries to separate its premium products (which rich big companies will still reliably pay for) from its lower end offerings. But on the desktop Windows and Office have continued to reign supreme.

Now for the first time in a decade a competing office suite is starting to nibble at the toes of the incumbent. Its not going to make a dent in Microsoft's quarterly numbers just yet, but the future can only go one way. Microsoft sells Windows and Office to PC builders for less than the retail prices, but it cannot let Windows and Office go onto a PC that sells for $200 because they would be giving it away: it would actually be cheaper to buy the PC with the software than to buy the software alone at retail prices. But as more people find that bottom-end hardware with Linux and OpenOffice.org makes a perfectly useful home PC at a fraction of the cost of the Microsoft alternative, so the market will grow. Microsoft may try to segment the market by offering a cut-down version of MS Office (maybe Word with a 20 page limit), but they are competing with a fully featured product. No matter what they do to Windows and Office, Linux and OpenOffice.org are going to look like better value to anyone who is on a tight budget.

Initially it will just be cash-strapped consumers who buy these boxes (students in particular are going to love them). But this is a one-way street. Every consumer who buys one of these boxes is a consumer who is never going to buy a Microsoft box again, even when they get rich. Why pay more to learn a different set of software? And they'll tell their friends about how well it works too. The flow of money into multiple vendors coffers will stimulate investment and competition. All the vendors will want a slicker, more fully featured Linux offering with a bigger repository of instantly downloadable free (in both senses) software. The resulting competition will be downright Darwinian, and the offerings are going to get very good very fast. Everybody is going to race up-market as fast as possible because thats where the real money is. At the moment that money is being taken by Microsoft, but not for long.

Add to this the famous network effects. Part of the reason MS Office dominates is that you need it to exchange documents with everyone else. But if that stops being true then another good reason to pay for MS Office disappears as well.

So I predict that Microsoft is going to be in serious trouble, probably within the next few years. Their existing cost base is tuned to making and selling ever bigger and better versions of their cash cows, and there is no way that they can cut this back to compete with Linux and OpenOffice.org on a cost basis. But if they can't compete then their cash cows are going to turn into dogs before they can be replaced. So Microsoft will be left with two dogs, a bunch of ventures that require investment, and no cash flow. Sure they have big cash reserves they can burn through, but thats not going to be enough even if their investors let them do it.

Windows Disaster Recovery with Bacula

A few days ago my wife asked me to look at her computer. Programs were taking ages to respond even to a simple mouse click, or just crashed. And the system box kept making odd clicking noises.

I confirmed her diagnosis of a failing hard drive and shut the computer down. The following lunchtime I drove to the nearest PC World and bought a replacement hard drive. I normally buy mail-order, but we wanted the computer back up as soon as possible. That evening I removed the faulty drive and installed the new one, and I also stuck in some extra RAM while I had the case open. Then it was time to find out if my rather sketchy disaster recovery plan was going to work.

I run Fedora on my own box, and both computers are backed up using Bacula. This is designed for backing up lots of computers to tape drives, but it also supports backup to disk drives. I have two USB drives, keep one plugged in, and swap them every month or so. I use the default Bacula backup schedule of a weekly full dump on both machines and nightly incremental dumps. Most of the Bacula components only run on Unix, but there is also a Windows client installed on my wife's computer (which runs Windows XP SP2). Bacula configuration is rather hairy, but if you have more than one computer its well worth the effort.

The big headache for restoring Windows is the Registry. After previous bad experiences with this horrible blob of data I had made sure the registry was backed up by using regedit to dump the registry contents to a file before each Windows backup, so I hoped it would be OK. There are also problems with other files in C:\Windows that are constantly in use and therefore unwritable during system restore.

The Bacula manual pointed me at Bart PE Builder, which generates a Live CD version of Windows XP. It suggested that you might be able to run Bacula in this environment to get around these problems. Bacula ran fine, but I couldn't get the drivers for the network card to install, so that wouldn't work.

Instead I re-installed Windows XP SP1 from the original CD and ran Bacula there. The restore duly dumped copies of C: and D: in C:/temp/restore/c and /d. (The computer has two partitions because it used to have two drives. My wife got used to having C: and D: drives and various programs had been configured to look for data on D:, so I kept the layout even when it went back to a single drive.). Then I booted under the Bart PE disk, deleted the existing contents of C: (except for /temp) and copied the restored contents into the root directories. Then for the big test: would it reboot?

Well, sort of. The login screen came up, but when I tried to log in the computer hung. I tried rebooting in safe mode, and then in "safe mode with console", which seemed to be the bare minimum. That at least got me a command line, so I ran regedit and imported the registry copy that had been created by the last backup. This warned me that some registry keys could not be modified and claimed that the changes had failed. I rebooted again, and this time found that I could log in, but pretty much all the settings had been forgotten. Office wanted to re-install itself, and every time I started Word it asked for my name and initials twice. This suggested that important parts of the registry were not only still not recovered, but also unwritable.

Windows also decided that it was running on new hardware, and badgered me to activate it. So I did. I then tried logging in as a different user and restoring the registry again in the hope that being a different user would lock different bits of registry. This merely overwrote the new activation data and Windows now point blank refused to let me log in at all until I activated it again. So I tried. This time it told me that I had exceeded my activation limit and would have to phone up for activation. So I did. Windows gave me a 36 digit number and a robot on the other end of the phone line told me to type in the number. Then a polite gentleman named "Fred" with an Indian accent asked me how many computers I had Windows installed on and why I needed to activate it. Then he gave me another 36 digit number to type into Windows to activate it. This worked. But when I logged in Windows wasn't behaving any better.

A bit of Googling reminded me of something I should have remembered much earlier: Windows occasionally checkpoints its critical state, including the Registry, and you can wind it back to a previous known good state using the System Restore function. So I located a checkpoint from before all the trouble started, restored Windows to that state and rebooted.

When I tried to log in I got immediate joy: the desktop background had been restored. This suggested that the registry was now intact. But this restore had also overwritten the registration data, and Windows once again demanded to be activated before I could log in. Back to the phone, this time to a polite woman named June with a much stronger Indian accent who asked me the same questions and gave me yet another 36 digit number to type in. This time everything worked. Disaster recovery was completed.

I'd like to thank the authors of Bacula for their excellent backup program. It saved both of us a lot of heartache. In the past I've found it too easy to neglect backups, and sometimes our computers have gone for months without being backed up. When I got it properly configured (not a trivial task) Bacula made backups automatically with minimal intervention by me (basically, swapping USB drives occasionally). That meant I had a good recent backup to work from.

I'd also like to thank Bart Lagerweij, author of Bart PE. I could probably have managed by booting Knoppix and using its NTFS driver capture facility, but having a native Windows environment made life much easier.