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Glyn Moody

Glyn Moody's look at all levels of the enterprise open source stack. The blog will look at the organisations that are embracing open source, old and new alike (start-ups welcome), and the communities of users and developers that have formed around them (or not, as the case may be).

Why Microsoft Costs the World $500 Billion a Year

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Here's another of those entertaining IDC reports commissioned by Microsoft:

Today, global research firm IDC issued a new white paper which estimates that members of the worldwide Microsoft ecosystem generated local revenues for themselves of $580 billion in 2010, up from $537 billion in 2009 and $475 billion in 2007.

As an IDC spokesperson puts it:

"Microsoft and its partners make a significant impact on the global economy

Well, that's certainly true, but probably not in the way this study was meant to prove. After all, if you accept its figures, what this IDC study shows is that Microsoft and its mates take out of the world economy well over half a trillion dollars.

But wait, you will say, it's not really "taken out" - it's just the cost of business. Which is true. People need software (or so we are told), and thus the $580 billion figure is simply a reflection of the size of Microsoft-based business.

But as I wrote in this blog last year, Red Hat's CEO Jim Whitehurst makes an interesting point about the cost of software:

He said that he did think that Red Hat could get to $5 billion in due course, but that this entailed "replacing $50 billion of revenue" currently enjoyed by other computer companies. What he meant was that to attain that $5 billion of revenue Red Hat would have to displace software that currently costs $50 billion.

That is, open source software typically costs only 10% of the equivalent proprietary products. This isn't about "destroying" wealth, though: customers are left with the other 90% to spend on other things. It is still in the economy, but spent elsewhere.

Applied to IDC's figures for Microsoft, this would imply that the $580 billion revenue might well be replaceable by a tenth of that – let's say $80 billion, to be on the safe side. Which means, of course, that the effective cost of the Microsoft ecosystem to the world in terms of money spent needlessly is around half a trillion dollars.

Now, of course, that figure is not to be taken too seriously. But the general point remains: the bigger the claimed size of the Microsoft ecosystem, the bigger the potential savings by switching to open source – and the more money available to be spent on stuff other than 0s and 1s.

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