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Currents #32
Wednesday, June 27, 2001 | Last Updated 11:19am
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First it was "un-American"; now it's a "virus", a "cancer" and--are you ready for this--"Pac-Man". Microsoft's high-profile, expensive and carefully planned attack on open-source software is swinging into high gear; so is speculation about exactly what the company hopes to achieve. Typical is the conclusion of an analyst quoted by CNET News.com: Linux has emerged as a "spoiler that will prevent Microsoft from achieving a dominant position" in the server operating system market. By means of an especially virulent FUD (fear, uncertainty, doubt) campaign, Microsoft hopes to scare companies away from Linux and toward Microsoft's newest offering, Windows XP.
So far as it goes, this analysis is surely correct. Viewed from the perspective of business history, however, this FUD campaign seems mysteriously out of proportion with the threat actually posed by its supposed object, Linux. Sure, Linux is a threat, and that's especially true now that Linux is being so strongly backed by Microsoft's remaining market opponents, including IBM. But the FUD campaign isn't directed against Linux. Aside from occasional digs at Linux, the campaign is directed against the licensing scheme, called the General Public License (GPL), that Linux uses. To be sure, the analysts have an explanation for this, too. The GPL is controversial even within the Open Source community, so you attack Linux by attacking the GPL. But I think there's more to it.
Here's my argument, in a nutshell:
Business history teaches the following lesson: When a market-dominating firm engages in a FUD campaign of this magnitude, it's not merely because they're scared of competition from a new market entrant. Often, it's because the new market entrant is seen to challenge the business model that has enabled the market-dominant firm to make huge gobs of money. I believe the GPL does pose a threat to Microsoft's business model, and that's why the free software licensing scheme is under such concerted attack. Specifically, the GPL threatens Microsoft's ability to preserve what economists and legal scholars (as well as the judge in the Microsoft antitrust case) call the "application barrier to entry"--the primary means by which Microsoft has been able to establish and preserve commanding dominance in its core markets.
I'll make this argument by recounting the story of the archetypical FUD campaign, IBM's 1970s-era effort to discredit the upstart Amdahl Corporation. I'll also examine some of the evidence that's come to light--some of it from the lips of none other than Gates himself--since Microsoft's FUD campaign started. Let me apologize in advance for the length of this essay; the issues are too important to be glossed over. But I've included lots of subheadings so you can skim around, if you like. To skip the historical stuff entirely, click here to jump to the section titled "Why the GPL Terrifies Microsoft".
When ex-IBM executive Gene Amdahl founded Amdahl Corporation in 1970, he reflected gloomily that the new company would soon become the target of an aggressive IBM marketing strategy, which Amdahl termed "fear, uncertainty, and doubt" (FUD). As subsequent events affirmed, Amdahl's prediction was right on the money, and IBM's FUD campaign nearly put Amdahl out of business.
IBM in the 1970s was huge profits with little incentive to innovate. Here's the background. IBM's mid-century executives, like those of other manufacturing firms, knew perfectly well that maximum profits follow from a "leasing-only, no-sales" policy; as economists have since theoretically demonstrated, such a policy maximizes revenues because it keeps secondary goods off the market. But US antitrust prosecution, culminating in a 1956 consent decree, forced IBM to sell as well as lease its computers.
For federal regulators, the consent decree was a hollow victory. IBM neatly side-stepped the regulatory framework by means of measures such as net pricing, in which the cost of IBM installation labor was bundled into the price of IBM computer systems; customers who wished to purchase non-IBM, third-party peripherals were thus forced to pay two installation fees--which meant that most of them chose to stay with IBM's equipment. And when IBM installed new equipment, the company generally required its customers to surrender the old equipment for "rehabilitation".
Measures such as net pricing were combined with a quiet, low-level FUD campaign, which was carried out by the firm's salespeople while they were in the field. IT managers were told, "Sure, you can switch to the competitor's product, but we can't guarantee your system any more, you'll have to pay the highest per-incident charges for repairs, and we can't guarantee that our components will function correctly in the future." In other words, you're taking a dive off a cliff into the unknown, and it's going to cost your company money, and later it may cost you your job. These well-honed tactics led more than a few computing managers to agree with the famous dictum, "You'll never lose your job by choosing IBM."
By means of net pricing and FUD, IBM managed to side-step antitrust regulation and retained control of the secondary market. With almost obscene profits and rapid growth, all was well at IBM, except there was little incentive to innovate.
As Amdahl watched IBM's processors fall behind the technical curve, he grew increasingly concerned. At the same time that IBM was encouraging companies to move more of their business operations to IBM mainframes, the company was failing to deliver the processing horsepower that would be needed to meet customer's needs. Amdahl proposed a series of new, higher performance processors, but failed to win approval from IBM executives to develop them. Intimately familiar with IBM's processor design, Amdahl knew that it was possible to create a new generation of processors that beat IBM's products in price as well as performance. So the young engineer quit IBM and started his own company--which still exists, incidentally, even though Amdahl is no longer associated with it.
Amdahl's plans must have terrified IBM executives. Unlike IBM's ineffective and increasingly marginalized competitors, Amdahl was intimately familiar with IBM technology and proposed to manufacture IBM-compatible CPUs. If Amdahl succeeded, IBM would be transformed, in effect, into a peripheral manufacturer -- and with the loss of its control over the central processing unit would come a concomitant destruction of its highly profitable business model.
What was wrong with IBM's processors? In case it has been a while since your last electrical engineering class, here's the background. A computer's central processing unit (CPU) is designed to perform a fixed number of computational operations; the list of such operations is called the CPU's instruction set. At the time, the fastest processors implemented their instruction sets by means of "hard-wired" circuits, that is, circuits built into the physical structure of the processor. When IBM designed the new series of System/360 computers, the first product line to include a range of compatible machines, the decision was made to implement the instruction set by means of microcode.
In brief, microcode uses software, typically encoded in a bank of read-only memory, to implement the lion's share of the CPU's instruction set. The use of microcode enabled IBM engineers to design a single processor that could be used in all the System/360 products, from small to large. The marketing potential was enormous. For example, one of the earliest System/360 computers was offered with a microcode adjustment that enabled the computer to emulate an earlier IBM machine, the 1401. However, the use of microcode came at a price: diminished processor efficiency. Amdahl knew that he could easily beat IBM's processor performance by creating processors hard-wired with the System/360's instruction set. Amdahl Corporation's processors, accordingly, did not use IBM's microcode architecture; instead, the firm created less expensive and more powerful processors that gained economy and efficiency from hard-wiring the instruction set into the CPU.
Employing an efficient, low-cost implementation of IBM's System/360 instruction set, Amdahl's first processors appeared in 1975; they undercut IBM's price-performance points yet they were fully compatible with IBM software, in which the firm's customers had made significant investments. The result was tremendous enthusiasm among Amdahl's potential customers who were quite ready to break with IBM--even to the extent of paying IBM for components and services that weren't actually received--if the result meant they had the processing power they needed. In 1976, Amdahl released the V/6 processor, which offered three times the performance of IBM's most powerful CPU.
Faced with a threat to its underlying business model, IBM took its FUD campaign to an unprecedented level, one that involved public statements, a host of new product announcements and technological changes that seem to have been aimed squarely at Amdahl's upstart processors.
In 1977, just as Amdahl Corporation seemed poised to take over a significant percentage of the processor market, IBM announced the 3033, a processor that--IBM claimed-- would go head-to-head with the best Amdahl could offer. But IBM did not merely announce a new processor. The firm also announced revisions to the System/360 instruction set. In attempting to address the Amdahl factor, IBM scientists discovered they could improve processor efficiency by adding fourteen instructions to the System/360 instruction set. (This is quite an interesting "discovery," since it has been proven time and again since then that reducing the instruction set, not expanding it, is the best way to improve processor performance.)
IBM executives and engineers vehemently denied that the microcode changes originated with Amdahl in mind, but the changes certainly had an anti-Amdahl effect. The planned changes meant that Amdahl's hard-wired processors would not continue to be compatible until Amdahl discovered the changes that IBM actually made and figured out a way to implement them. At the worst, Amdahl would have to go through the very expensive and time-consuming process of redesigning his processors. For its part, IBM made it abundantly clear to all concerned that the firm had no intention of disclosing the technical specifications of the fourteen new instructions. Amdahl would have to wait until the 3033 appeared, when he could legally obtain one of the processors and discover the nature of the new instructions through reverse engineering. From that point, it could be months or years before Amdahl would be able to release a new processor that would be compatible with the 3033. As if to pour salt in the wounds, IBM warned darkly, and publicly, that the firm felt quite free to implement additional microcode changes whenever doing so made sense for its customers.
The 3033's preannouncement took the wind out of Amdahl's sails. Orders plummeted, and the few remaining customers demanded contractual guarantees that Amdahl's processors would remain compatible with IBM's. Most customers decided to sit tight until the 3033 hit the market, one year later.
When the 3033 was released in 1978, the processor turned out to be inferior to Amdahl's V/6, but it did offer better performance than previous IBM processors, and it was an IBM processor. The pent-up demand for high-performance processors unleashed a deluge of orders, to the tune of $6 billion, and IBM was forced for the first time to develop a lottery program so that it could parcel out the scarce processors fairly. Although the new processor turned out to be technically inferior to Amdahl's products--in fact, IBM's processors did not equal Amdahl's price/performance points until five years later--Amdahl's sales declined sharply. By 1979, Amdahl was but a niche player in the mainframe industry, surviving only by means of a capital infusion from Fujitsu, Inc. Meanwhile IBM's System/370 mainframes had captured 97 percent of the market.
My analysis of the 1970s IBM campaign against Amdahl suggests the following: FUD campaigns step up in virulence when the FUD-perpetrating firm sees a threat to its core business model.
What's Microsoft's core business model, and how could the GPL, a mere licensing scheme, pose a meaningful threat to such a gigantic, powerful corporation?
My take on Microsoft's business model is, in brief:
To grasp this model's implications firmly, consider Judge Jackson's findings in the Microsoft antitrust case. Jackson did not rule against Microsoft--as so many people unfortunately think--because Microsoft made a better browser, gave it away for free and trounced Netscape in the marketplace. Sure, Microsoft wants the browser platform, for all kinds of reasons. But what really terrified Microsoft executives, I believe, were the all-but-forgotten, pie-in-the-sky plans that Andreesen & Co. once made to use Netscape as the foundation for a new, network-savvy, non-Microsoft operating system and application pool. (I'll bet you didn't know this, but Netscape came up with what amounts to the .NET idea long before it ever occurred to those master innovators in Redmond.) Equally terrifying to Microsoft executives was Java, and for the same reason--it could be used to create a non-Microsoft application pool. In both cases, noted Judge Jackson, Microsoft used "embrace and extend" not only to discourage a competitor but, more importantly, to prevent the formation of a competing application pool.
Still with me? Here's why Microsoft is attacking the GPL:
From the Microsoft perspective, GPL-licensed software is like those monsters from "The Night of the Living Dead": they just keep coming back at you.
Doubtful? Read this:
Mr. Gates made the following statement last week to a CNET News.com reporter: "The ecosystem where you have free software and commercial software--and customers always get to decide which they use--that's a very important and healthy ecosystem", Gates told the interviewer. But the GPL, Gates says, "breaks that cycle--that is, it makes it impossible for a commercial company to use any of that work or build on any of that work. So what you saw with TCP/IP or Sendmail or the browser could never happen. We believe there should be free software and commercial software; there should be a rich ecosystem that works around that."
If Mr. Gates can forgive me for putting words in his mouth, here's my translation: "There should be free software that we can appropriate and modify--we just love BSD stuff--as well as Microsoft software. That's very healthy (for us), because we can use this system and our embrace and extend tricks to keep competing application pools from forming. But we can't do that with GPL-licensed software. GPL-licensed software is not enriching for Microsoft; it scares the living daylights out of us, in fact."
In the coming weeks, you're likely to see Microsoft pressure to force the U.S. government to disallow the use of the GPL as a license for software created with public funds. If my analysis is correct, the decision should go the other way -- the government should require anyone developing software with government funds to release the software under the GPL. It's the only way to ensure there's a meaningful public commons of freely available software that can't be manipulated for predatory purposes.
Bryan Pfaffenberger is Associate Professor of Technology, Culture and Communication at the University of Virginia, in Charlottesville, VA. You can visit his web page, and you can browse previous Currents articles under the Currents heading here. Bryan cautions that his schedule rarely permits him to reply to all the e-mail he receives concerning his Linux Journal articles, but they're appreciated nonetheless.
Copyright 2001 Specialized Systems Consultants, Inc.
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