How to make a profit
Here's a story about the financial losses of a company (SCO) who pegged its future on litigation, rather than product development. Making evidently dubious claims about the relationship of its Unix (it claims to own the rights to Unix intellectual property) and Linux, SCO unabashedly set up a litigation division with intent to become a profit center. The division started looking at every user of Linux who also happened to have money as a prospect for payment of licensing fees in lieu of becoming the target of litigation. It's not going so well right now.
Ironically, one of the prime targets is IBM. IBM is the company pointed to as the shining light of how to make money through licensing. Several years ago when Schneider Electric (then Schneider Automation, a business of Schneider Electric) went on a litigation spree, its president held up the example of IBM when I asked what this was all about. IBM makes millions from licensing fees. Some other companies decided to liberally interpret the impact of their patents and go after some of that easy money.
Thing is, it doesn't seem to work that well. After tarnishing a reputation in the industry, few court cases are settled, and companies must negotiate with tough attorneys for every dollar. Schneider settled out of court (after repeated prodding from the judge to do so) with Opto 22. Results are sealed, but both sides were grinning. My guess is that it cost Opto less than a protracted legal battle yet gave Schneider enough ammunition to go after others. Regardless, that whole sorry episode has gone quiet. Meanwhile a second set of patents were auctioned off to a Chicago law firm who seems to make its living in these waters. It went after end users of products deemed to violate these other Schneider patents. There has been little news on this front for well over a year.
My point is that I believe that IBM invents lots of things that other people want to use to develop their own new products. So, they license from IBM in order to do so. This can be a win-win. On the other hand, SCO calculated a logical extension of Unix, through out accusations, and in a legal form of extortion said that either pay us or face high legal fees as we battle it out. The cost to SCO seems to be higher than the cost to its intended victims, though, as this story points out. The company has lost the confidence of one investor. Now it appears that its main investor is shaky. Meanwhile, it's losing money.
I had lost contact with SCO (it's now a new company) after learning about it in the late 80s in order to sell and install the software. I thought it was pretty cool, and this was before Microsoft became so dominant. Evidently the company lost its way, got sold, and the new company decided that the best way to make money was to sue. Doesn't look like a good strtegy at this point. But then, my roots are product development, and I believe in developing good products that fill a customer need. I didn't think that was a revolutionary idea, but it seems to be to a lot of managers today.
SCO reports deeper loss, shrinking revenue. Firm engaged in litigation regarding Unix and Linux reports another quarter of financial losses. [CNET News.com]
6:16:27 AM 
|
