Steve Ballmer has been talking about the need for an entry level $100 PC in developing countries. This is not because Mr. Ballmer wants to bridge the digital divide. He thinks a $100 PC would help stem software piracy because people would then have money to spend on Microsoft software.

Mike Ricciuti, from News.com, wrote an excellent story on this topic:

"ORLANDO, Fla.--What's one of Steve Ballmer's biggest headaches? It's not Linux or security breaches. It's piracy, the Microsoft CEO said Wednesday.

"The biggest problem we have right now is that people who should be paying for software aren't," Ballmer told an audience of technology executives at an industry conference here sponsored by market researcher Gartner."

Is Mr. Ballmer saying that the hardware producers should cut their margins so that Microsoft can reap the benefits of its dominant position in software markets? It seems that way. Yes, Microsoft has cut some of its software prices in developing countries--but the piracy of Microsoft and other software in those countries is not a threat to its future revenues. Microsoft should be looking closer to home.

I know lots of people using inexpensive word processors, free web browsers such as the excellent Firefox, using Linux on their PCs, etc. Whenever a viable alternative to using a Microsoft product comes around--it gets a lot of support. For example, I've been playing around with TextPad, which is an excellent shareware word processor, that does everything I will ever need to do.

And the server-side applications are getting better and better. For example, I wrote this entire piece not on Microsoft Word, or TextPad, but within Movable Type blogging software, which sits on a server located somewhere in the "cloud." All I need is a browser window and I can use any computer, even my Treo (another plug for the Geek Beacon!) to input text. The server that runs my Movable Type application uses Linux as the operating system--a choice made not by me, but by my hosting service.

These trends are not favorable to Microsoft. It seems dead in the water these days. Its pipeline of products has been reduced to a trickle. And it is battling huge security issues around its software--deploying many thousands of its programmers to patch security holes instead of developing new products. And it is bereft of any good investment ideas, which is signified by its announcement earlier this year that it would give away a large chunk of its cash mountain to investors.

Is it Microsoft's fault that it needs to deal with these security issues? It often portrays itself as an innocent victim, that its security issues are because of its success, that its dominant position in software markets has made it the number one target for malicious hackers.

But, if it hadn't used illegal means to develop that market dominance in the first place, it would not have been such a large target. There would have been many targets for hackers if other software companies had survived. It would have been too much work for hackers to port their viruses to other platforms and we would have a smaller problem.

Instead, Microsoft used illegal means to drive competitors out of business and now PC users are paying the price in lost productivity due to a plague of viruses, worms, and security exploits.

Mr. Gates and Mr. Ballmer should have taken a lesson from agriculture. If you have a monoculture--you are far more vulnerable to pests and diseases and you need to protect your crops with herbicides and pesticides. Microsoft wanted dominance but it wanted it without impregnating its software with the defenses needed for a monoculture of software products.

Isn't Mr. Gates the Chief Software Architect of Microsoft? Shouldn't he have foreseen many of these security problems? After all, viruses and worms have been around for a long time. The first computer virus spotted in the wild was in 1981--on an Apple II computer. This was when Apple dominated the PC market and its operating system was the largest target around. Shouldn't Mr. Gates have made sure that there were strong defenses against viruses and other security exploits in Microsoft software products from the very beginning?

But, Microsoft is cloistered in the soggy North-West and I strongly believe that this insulates it from critical thinking and the mish mash of ideas and challenges that being in Silicon Valley provides. Microsoft's partner in the PC business, Intel, for example has benefited tremendously from its presence in Silicon Valley. This makes it easier to make tough decisions, such as Intel's big change in its roadmap for future microprocessor designs. Intel, BTW, has done far more to force down the price of PCs than Microsoft. And its strong support for Linux is another indication that it understands the trends and undertows of computer markets far more than Microsoft.

Life in Silicon Valley is hard and often brutal. Companies have to compete in so many ways, for skilled engineers, for markets, for capital, and most do not make it--but this is where the innovative juice is, Bill. Move your HQ down to here; compete on level terms in global markets.

If you can't handle competition, that's fine--give away your ill gotten gains to your investors--but if you can compete you are golden. It is competition that drives you on. Intel knows it, everybody here knows it. Microsoft doesn't IMHO.

News.com story--Ballmer: We Need a $100 PC.

News.com story--Microsoft plans to return up to $75 billion to shareholders over the next four years.

The first computer virus in the wild.

The Geek Beacon