Wilson Ng started helping the family business since 9 years old. Since then, he had dreamt to be a successful entrepreneur, one who starts great businesses  ( he has started 7) from scratch with insight, guts and initiative. He keeps his focus on growing the business by creating value-- not on politics, or wasteful distractions. He brings the same focus to community service, teaching, life and family.

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	Monday, September 13, 2004

The Right Coopetition  ( on tech) I have been in business and have been involved in the IT industry for well almost 20 years, and started on with an IBM PC with an Intel 8088 processor, 64K of memory, 2 360K disk drives, with Microsoft DOS 2.0.  A lot have been said on the decision of IBM why instead of controlling the major components, they choose instead to get from outside suppliers.  Intel and Microsoft were allowed to work with other manufacturers, and it can be said that IBM lost its control over the marketing and technology of the personal computer, and now holds less than 10 percent of the world PC market now.  Of course, Microsoft and Intel now are multi-billion dollar corporations with the best margins in an industry where otherwise open standards and commodity margins reign. Apparently,  especially  in computer technology, corporations try to compete as well as cooperate with each other, and the decision on who to compete against really could well be one of the most important decisions a company can make.  Should you cooperate with a competitor in pushing a standard, or should you develop your own?  This question apparently makes quite strange bedfellows, as for instance, IBM and HP advertises Linux machines, and on other advertisements recommends Windows XP Professional.  Of course, they also have their Unix and other systems, and both also develop their own processors. In the software world it is no easier.  Microsoft sells business solutions in competition now with  partners who they are counting on to push their platforms and development tools. Oracle is directly competing with SAP on ERP systems, and SAP is almost their single biggest customer for their databases. Competition sometimes get a little bit strange.  For instance, Sun recently announced that their sales people will get commissions on the hardware that they sell, whether it is Sun, HP, IBM, or Intel machines as long as it is running Sun Solaris OS.  Sun was among the companies acknowledged to be hardest hit by Linux. These alliances and coopetitions are interesting case studies, and I am following this with interest if only that it will probably intensify, and learning the proper lessons would equip us to learn better in the future.  One of the defining moments was the announcement of IBM back that they were going to commit 1 billion dollars to develop Linux.  I am not sure whether that decision was to pull themselves up, or it is just to pull Microsoft down.   Their decision did put some credibility on Linux and allowed it to gain market share, but unfortunately, IBM does not own Linux, and it is starting to spin off IBM’s control.  For sure, IBM have been successful in stripping the market  off for Microsoft, but its own Unix , mainframe and OS/400 systems were also affected.  While short term, this has allowed them to gain traction in service offerings, it is still a difficult issue to gauge long term. Just like their plan to hand off the processor to Intel, this decision may be the wisest or not so wise decision that they made, and only history will judge. Red Hat Linux is now actively pushing its own application server, and Suse Linux also wants to promote its development tool and application Server.  Both are also working with database vendors like Pervasive and MySQL.  Obviously, this will now come in competition with Websphere, DB2, and the other middleware that IBM is also pushing.  The thing about Linux is that it is a double edged sword, and certainly Red Hat has been one of the beneficiaries of this -- something like being almost like Microsoft 20 years ago.  They are now also starting to act like Microsoft -- if you think Linux is free, you have to think again.  Maintenance support for Red Hat Enterprise per server now runs into thousands of dollars a year, and they are now starting to charge maintenance ( or fees, or  whatever you call it )  for every server that you install it into.   They need to grow their revenues because they are a public company, and it is almost inevitable they will charge more  from operating systems, and also branch into other applications.  Their market value suggests that investors expect them hit a billion dollar in sales within 10 years.  How do you think they will do that? Obviously, by getting customers to pay them more and more.  Other companies with similar vested interests will also be flexing their muscles.   IBM engineers will go around saying  Linux is great, but unfortunately Red Hat or most flavors of Linux will run just as fine on IBM servers, as well as those from HP, Dell, Sun or Intel Servers, and that will be putting pressure into everybody.  The fact is that Linux has moved from being a social movement to a technology where companies have to make money.  And they know historically, you  cannot  be making money selling things similar to everybody else.  So just like Basic, dBase,  Unix, SQL, and Java standards, every company will try to make their differentiation and extensions felt as their competitive edge.  This will pull the technology certainly to as a hodgepodge of flavor and perceived offerings with its commonalities being increasingly deemphasized and ignored. It will start to sound ( if it is not already) like" my Linux is better than theirs, and you should therefore pay us more "or that kind of message. Many hardware companies think that they made a mistake before of inviting a fox into the chicken house over 20 years ago, but unfortunately, it seems like they are rectifying this mistake by inviting a few more foxes in.  How it plays out, and who will be the winner will be everybody’s guess.   But most certainly, it will be a battle that will not be as simple or obvious as many people will make it to appear. 10:39:39 AM     comment []   trackback []

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