Tuesday, May 19, 2009

Will Windows Become a Drain on Microsoft?

A friend just pointed me to the latest blog posting of Sun's CEO Jonathan Schwartz. Titled "Will the Java Platform Create the World's Largest App Store?", the post reveals a side of the Java platform I hadn't much thought about. I suspect not many people are aware of the revenue model that the Java runtime has created for Sun. Google and Yahoo! (I reckon they're the companies Schwartz refers to) obviously find it worthwhile to pay Sun for the opportunity to reach out to the billion users of the Java runtime.

Three observations I can make immediately:

1. Microsoft ironically did Sun a favour by trying to corrupt Java in the mid-nineties. This caused Sun to bypass Microsoft and go direct to the user's computer. That's what has now resulted in the happy situation of Sun being able to negotiate effectively with the search giants without having to cut Microsoft in on the deal.

2. Oracle probably has a financial reason to buy Sun after all :-).

3. I can now understand another motivation for Google to innovate Android. With Android, Google can be in the position that Sun now occupies as gatekeeper to a billion users' eyeballs. Like Sun cut Microsoft out of the negotiation, Google can cut Sun out with a simpler licensing deal (for the Java VM) and lock onto a growing revenue stream instead. But they may have to share their profits with the owners of the hardware platform.

This line of thinking leads me to a conclusion that is very bad news for Microsoft. If I was an executive at Nokia, I would be talking to Google about getting a share of the ad revenues that Google will surely get through widespread penetration of Android. Armed with a likely deal of that nature, I would then approach Microsoft to work out something similar. Microsoft will probably be in for a shock. Rather than be able to charge hardware vendors for the privilege of licensing Windows, they would be asked to pay rents to those vendors (and their telco partners) for the privilege of reaching millions of customer eyeballs. If Microsoft doesn't play ball, the phone vendors can simply switch to Android. It's not like the PC platform where users have been dog-trained to demand Windows. Even a zero-licence fee Windows won't be good enough in the mobile device market.

I read an article recently that speculated Microsoft was cutting Windows licence fees to the bone to make it viable on Netbooks, and the article then went on to say it was no wonder Microsoft was shedding staff. Now, if OEMs start expecting Microsoft to pay for them to use Windows, the job losses at Redmond will only mount.

All because of a little operating system called Linux, and an open platform called Java (that together go to make up the base platform for Android).

It's wonderful what a bit of competition will do.

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