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Posted in Antitrust, GNU/Linux, Microsoft, Office Suites, OpenOffice, Windows at 10:34 am by Dr. Roy Schestowitz
Dumping overseas
THIS POST is the latest part of a series that includes:
Is Microsoft ‘Pulling an EDGI’ on Kerala? (Updated)Microsoft Vice President Teaches PR People How to Spin Anti-Linux ProgrammeMicrosoft Dumps on India, South Africa, MaltaAt Microsoft, “Fear Uncertainty Doubt (TALKING POINTS)” is Formal StrategyExtended Windows 98 EOL to Block Government Migrations to GNU/Linux and Free Software; More ‘Donations’
Today we turn our attention to exhibit px09683 from Comes vs Microsoft [PDF]. It’s all about EDGI and it contains more details that we did not divulge before.
=> ↺ exhibit px09683 from Comes vs Microsoft
This exhibit opens up with David Driftmier telling Orlando Ayala and Kevin Johnson, two chiefs who are closely involved in these GNU/Linux-hostile initiative, that:
A cross-group team has been working for the last two weeks on a proposal to have a more planned response process to defend against Linux and other low-cost/no-cost competitors in large education/government deals in both developed and developing subs.
According to this message, Jim Allchin wanted to focus on education first (ensuring children are made ‘addicted’ to Microsoft software), with the possibility of expanding to governments.
This is followed by a document which states that:
A common current scenario is one where a government wants to provide for a common technology platform across all schools in the country/province/state. They are either seriously considering open source due to cost and political pressures or are using Linux and StarOffice as levers to negotiate price with Microsoft.
Later on it mentions “two major issues that need to be solved.” The second among them is:
How to effectively win against the no-cost/low-cost competitor in large government deals (i.e. “Don’t lose to Linux”).
Yes, it says “Don’t lose to Linux.” We saw this before.
According to Microsoft, “A completely ’free’ model for education is not desirable” because:
Approx. $1B annual revenue stream currently being realized through sales to academic institutions
They also used the term “naked PCs” to daemonise whatever is not saddled with Windows.
Regarding price, writes Microsoft:
We cannot and will not compete with Linux/StarOffice solely on price, however the price allure of ’free’ must be addressed as part of competitive response.
Also:
Scenarios not limited to Linux/StarOffice, nor are they limited to developing subs, although these are our current primary areas of urgency
Another interesting bit:
- When local management determines that local empowerment will not provide the flexibility needed to win a deal, they will escalate to a regional response team. An example of potential members of the regional response team: Regional Education Director (or Government Director in the case of a non-Education deal) Regional Linux Competitive lead / Product Management
“Regional Linux Competitive lead…”
Here is Microsoft talking about “donations”:
- It is recognized that there will be times when software donations are part of the overall solution presented to a customer. In these instances we need to work closely with LCA to ensure these are managed and tracked in order to ensure that we receive the benefit and mitigate the impact on other deals. It may also be appropriate to institute a process whereby the product group funding provided through the special fund gets returned when donations are made, as it represents monies that do not end up flowing back through the product revenue stream.
Page 6 is telling. Microsoft says that stuff like these “donations” will “Increase our win percentage against competition” and at the same time:
Improve our partnership with governments Improve Microsoft image
It’s interesting to note that Microsoft refers to those which it donates to as “customers”. Maybe it’s long-term thinking (get a free sample to become a dependent customer later on). Maybe schools children too are just “customers”. Maybe it refers to governments though.
Microsoft gives some examples of “wins”. For instance:
Name: Girls Schools in Saudi Arabia Desktops: 20,000 (1200+ servers) Revenue: $4MM (50% OEM) Competitor Linux/StarOffice Product Mix: Windows2000 Server, Windows 2000/XP Pro, Office XP Pro, Front Page 2002, VB 6.0 Microsoft Investments to win: Create special package including media and guidance Highlight customer accomplishments (shared PR) Commitment to invest in E-Ministry ($450,000) SE and two admin for a year (Contingent Staff) Train 220 FTE’s on Office Tools Initial implementation services Minimal application developmentStory: The local team created a special 3 CD kit that included CD’s for Tools, Teachers, and Students with appropriate content and products They also agreed to fund a special ministry of education training pilot. This investment ($450k) was funded through the additional margin on the per desktop price.
We previously wrote about Microsoft corruption in Hungarian education [1, 2].
Check this out:
Name: Hungary Higher Education Desktops: 235,000 students, 18,000 teachers Revenue: $2.2M over 3 years Competitor. Linux/IBM Product Mix: Windows XP, Office XP, Front Page, Visual Studio, BackOffice CAL Microsoft Investments to win: 66% discount = $4 4MM off of normal Campus Agreement pricing Story: In this deal, the total amount of the deal represented the maximum amount of money that the customer had to spend. If we did not do the deal for this price, then IBM was ready to execute. As a higher ed customer, there was requisite technical knowledge to support a successful implementation, so additional services were not imperative. The sub also had a successful evangelism and knowledge transfer program in place with the technical universities.
What do they refer to by “evangelism”? This type of thing?
The document has many tables appended. These shed light on where Microsoft was dumping software. For the tables, view the original PDF.
The last page is rather fascinating too. It’s a presentation slide on the face of it. It says very explicitly that the goal of EDGI is:
- Ensure primarily education (and secondarily government) customers can experience the value of Windows, Office and other Microsoft products
So primary education must lead the children become dependent on “Windows, Office and other Microsoft products.” They always use perfumed words like “value” to hide the odor of their real motives. They perfume it only to themselves.
The “Opportunity” is to:
- Increase our win percentage against competition in education and govt accounts, especially in developing countries - Protect our product price points by removing discounts below empowerment guidelines
For the inquisitive, the full document is appended below as HTML. It took a long time to produce this. █
From: David DriftmierSent: Thursday, May 30, 2002 2:47 PMTo: Orlando Ayala; Kevin JohnsonCc: Sherri BealkowskiSubject: Education and Government Incentives (EDGI) proposalImportance: High
Orlando,
A cross-group team has been working for the last two weeks on a proposal to have a more planned response process to defend against Linux and other low-cost/no-cost competitors in large education/government deals in both developed and developing subs. Input has been provided by the Windows group, OEM, WWLP, LCA, EdSG, SLG, the international RVP’s and AlainC. Attached are the slides that will be included in the Windows BPR and the proposal itself is included for background. SherriB will be there for this pot[ion of the BPR to represent EdSG. Please let me know if you have any feedback or changes that you would like to see incorporated into the proposal or if you have any questions that we can address prior to the Friday meeting.
Also, I just received a call from Pat Fox in the Windows group and based on a conversation that he had with JimAll, Jim is going to recommend that we focus this initiative initially on the education market, with an eye towards expanding to the government sector if it makes sense later.
Thanks,
Dave
David Driftmier
Director, International Operations Microsoft Education Solutions Group +1 425-705-4113
NS-CC-Sun 000001130300 HIGHLY CONFIDENTIAL
“EDGI” (Education & Government Incentive) Program
MS-CC-Sun 000001130301 HIGHLY CONFIDENTIAL
In order to more effectively win in the large education/government deals where we compete against low/no-cost offerings, Microsoft will introduce a predictable and replicable process to engage in and win these deals. A common current scenario is one where a government wants to provide for a common technology platform across all schools in the country/province/state. They are either seriously considering open source due to cost and political pressures or are using Linux and StarOffice as levers to negotiate price with Microsoft. This scenario is closely tied to, but not limited to, the challenges seen in developing countries where economic pressures often force governments to seek low-cost/no-cost solutions (see Appendix for recent examples.)
Just as we are focused on delivering end-to-end solutions to our commercial customers, we will endeavor to approach these deals with an end-to-end approach at addressing the underlying needs of the community and/or educational institution. A plan similar to the Enterprise Agreement Services Incentive [EASI] will be put in place to help address these issues.
There are two major goals of the Education and Government Incentive program:
Ensure government and education customers can experience the value of Windows, Office and other Microsoft products Address affordability, application compatibility, teacher training and curriculum, additional software needs
It is important to note that there are two major issues that need to be solved.
How to best help developing countries jumpstart the establishment of an effective educational infrastructure that can leverage the benefits of technology How to effectively win against the no-cost/low-cost competitor in large government deals (i.e. “Don’t lose to Linux”).
This proposal is squarely aimed at the second issue, although there is considerable overlap between the two. There are deals (primarily large government deals in developed countries) that fall outside of the first issue but are still included in the second. However, the majority of instances where Microsoft finds itself addressing the first issue, it will be addressing the second at the same time. Consequently, providing assistance to developing subs is a subset of the larger problem of responding to the large deals.
This proposal is shaped by some underlying assumptions about the business environment:
A completely ’free’ model for education is not desirable for the following reasons:
MS-CC-Sun 000001130302 HIGHLY CONFIDENTIAL
Approx. $1B annual revenue stream currently being realized through sales to academic institutionsThe current pricing (deeply discounted) helps ensure that a healthy ecosystem exists where MS and its partners continue to innovate and deploy a sales force to work with customers to define and realize the full value of the software. Customer concessions cannot impact OEM royalties or rely on an OEM delivering “naked” PCs without an OS (i.e. no reduced price full OS offering or in academic space) Many subs do not have sufficient dedicated resources to drive the fully-integrated vertical ISS sales process needed to re-engineer the large customers’ vision of needsWe cannot and will not compete with Linux/StarOffice solely on price, however the price allure of ’free’ must be addressed as part of competitive response.Scenarios not limited to Linux/StarOffice, nor are they limited to developing subs, although these are our current primary areas of urgencyWe do not want to develop a standard ’offering’ as this becomes not only our new price point, but also invites large customers to create new tenders which we may not be competitive with on price.
In order to better analyze the opportunity, the following taxonomy is proposed:
Developed country (e.g. US, Japan, Belgium) These countries typically have per capita GDP’s greater than USD$3,500. Developing country [Large, High Potential] (e.g. Brazil, India, China, Russia) These countries typically have lower GDP’s ( /2009/01/10/edgi-continued-dumping-vs-gnu/ Permalink
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