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Why Microsoft Hates - No, *Really* Hates - ODF
June 12, 2009
Posted by: Glyn Moody
One of the interesting corollaries to the fact that Microsoft is making far less money from Windows than it used to – largely thanks to the popularity of netbooks – is that it must depend on other sectors of its portfolio that are still making money to keep the company ticking along. Here are some interesting figures, which – if correct – throw light on what's really making the chairs fly at Redmond Towers:
Microsoft’s ‘heart’ is business related software, which it uses to cross subsidise its consumer products. But it can’t continue to do this indefinitely. Its core Office franchise remains incredibly profitable, with an enviable 75% operating margin, and this has been bankrolling most everything else. Microsoft’s business applications division lost money for years but is now returning margins of 65%. Windows infrastructure software generates 37% margins and has formed a virtuous circle with Office.
But netbooks are driving down the Windows price point and boosting the use of Linux. I don’t think Microsoft has ever really made money on X-boxes, and its online services division is losing over $1b p.a.
What this means is that Microsoft is only making big money on its Office suite, for whose luxurious margins it must therefore fight tooth and nail. Which, judging by its behaviour at the ISO, and some more recent stories, is exactly what it is doing in the face of growing pressure from open ODF-based alternatives like OpenOffice.org.
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About the author
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).
Comments received
Victor said on Friday, 12 June 2009
No, really? Come on this isn't news. The fact that they are making money with any other divisions at all is news. I remember when Windows and Office were the only sources of profit the company had. That's why I am so very very happy that I don't have to add to those coffers. I work for a university that gets a site license to every version of office and windows that comes out. If I pay my 5 bucks per windows version, or download my copy of office for free MS doesn't get one more or less cent than if I don't. That said, I still do everything I can to not give them this money. I have up Office ages ago, windows while a harder proposition, is coming surprisingly close to being ditchable. Soon, hopefully very soon.
Glyn Moody said on Friday, 12 June 2009
@Victor: well, in a sense it's not news, since we knew that MS was increasingly under financial pressure, but the 75% figure is news to me - and pretty extraordinary. It also goes some way to explaining the renewed attacks on ODF.
Yonah said on Friday, 12 June 2009
Victor is right, this isn't news. This IS speculation based on very limited data.
David Gerard said on Friday, 12 June 2009
Oh goodness. I really really so want Larry Ellison to start TV advertising for OpenOffice. "Commoditise your complement" indeed.
Sum Yung Gai said on Saturday, 13 June 2009
Glyn,
This hasn't been news for many moons, ever since the Halloween Documents and the introduction of the (then new) MS Office 97 file formats. It has been well known for over a decade that the MS Office file formats are what keep most businesses on MS Windows. Thus most schools go to MS Windows/Office. Thus most parents buy it (it's already at office and at kid's schools, powerful incentive).
And the MS Office margin being that high? That too is ancient news. Seriously--you really didn't know that before now?
--SYG
Glyn Moody said on Saturday, 13 June 2009
@Sum Yung Gai: I'm not talking about file format lock-in - you're right, that's been obvious for a decade. What interests me are the precise figures for margins.
I've never seen the 75% figure before; Google doesn't seen to know about it. Can you please give me a reference?
Bill Chalmers said on Sunday, 14 June 2009
Actually this is worth reporting. Microsoft and their partners do depend on MSOffice which can explain the ferocity of actions against ODF.
If Wikipedia is a battleground for MS proponents, then it's really big.