Linux Always a Bridesmaid?

September 12th, 2006: A new Harvard report is adding fuel to the fiery open source versus proprietary software debate, claiming that open source solutions such as Linux will always run second best to Microsoft Windows.

In their academic paper 'Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows' Harvard Business School professors Pankaj Ghemawat and Ramon Casadesus-Masanell have taken a long hard look at the open source industry and come to the conclusion that competitive Windows pricing would effectively give Microsoft the power to control Linux’s market share.

The results have surprised the professors themselves, both of whom expected Linux to come out as the clear champ at the end of their analysis.

“When we began the project, we thought that network effects and demand-side learning would result in Linux forcing Windows out,” said the professors in an interview with Sean Silverthorne on the Harvard Business School website. “After all, we reasoned, if Windows is sold at a positive price and Linux is free, there will always be Linux users, and if the strength of Linux's network effect is large, the value of Linux to prospective users should eventually become larger than that of Windows.”

Their model showed however, that due to its install base, and other factors such as piracy’s possibly positive contribution to higher profits by growing market share, Microsoft comes out on top.

“What we had missed is that Microsoft's initial advantage (larger installed base) together with its pricing power allow the company to price strategically to control Linux's market share going forward. By lowering the price of Windows, the demand for Linux shrinks to the point where Linux is not a threat to the survival of Windows.”

Neither professors believe that either solution will be forced out of competition entirely, as even if Microsoft gives Windows away for free it will still have to sell its other software packages to keep afloat. This will ensure open source systems will always have a user base.

See Harvard Business School’s website for the full interview.

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