Once More unto the Breach

Microsoft Discusses Open Standards (versus Open Source Software)

Matt Asay discusses today's Wall Street Journal article on Microsoft's battles with State governments over ODF.  [Here's the link to the article source from Market Watch lest the WSJ archive go into pay mode.] 

I find this all sort of funny.  Five years ago as governments explored open source software preference legislation, Microsoft's rhetoric machine went into overdrive to lobby people to prefer technology based on open standards regardless of implementation methodology and licensing.  And this IS the right solution for governments.  But based on current rhetoric I thought it would be funny to see what Microsoft had to say for itself.  Unfortunately the Wayback Machine wasn't as helpful this time, and Google search results are jammed with the "Men in Black" story about Microsoft's hired bullies lobbyists. 

I was, however, able to find a document from that period on Microsoft.com.  [Microsoft.com is a sufficiently large site to have a life of its own.  While pages change, downloads often remain.]  A search on Microsoft.com for "standards open source" returned a huge number of links, but a download called "Key Messages" on the first page looked promising.   

So here are some "Key Messages" from Microsoft's standards team circa 2003 (doing battle with the Australian parliament no doubt) [Emphasis added]:

• An open standard is a publicly available specification which details certain technical functionality that may be implemented in different products and services.  It is adopted in an open, consensus-based process and must satisfy other criteria for transparency, ease of access, and broad implementation as described below.
• Open standards exist to facilitate interoperability and data exchange across various products and services in a marketplace of multiple, competing implementations, while ensuring that certain minimum requirements are met.
• Other types of standards (e.g., “proprietary standards”) and market-based mechanisms exist and are currently used to facilitate interoperability.  However, open standards ensure the highest level of interoperability across the widest range of competing products and services.

You can read the rest but you get the idea.  Sooooo ... ODF versus Microsoft Open XML.  I guess we should judge each based on the number of implementations of each.   

gapingvoid and Microsoft's Open Source Software Message

[Disclaimer: Microsoft is a client of mine.]

[Updated (25-April-2007, 12:17):  Interesting commentaries from Matt Asay, and Sam Ramji (Microsoft Open Source Lab), as well as more from Hugh (with good pointers to other comments/posts).]

I am a long time fan of Hugh MacLeod and gapingvoid, but when he began a discussion on open source software as part of some work he's doing for Microsoft, I must admit feeling more than a little uncomfortable. 

We've seen the "science experiment" meme before now.  (It was originated by one of Microsoft's best marketing directors almost three years ago.)  Look for the Somasegar quote well down the page.  Soma is one of the finest execs Microsoft has -- he kept me sane the first two years I worked at Microsoft -- but here he's merely saying the words he was given.  Seeing the meme resurface in Hugh's post along with other stale Microsoft messaging is not good.

You see Microsoft still thinks they compete with open source.  They still think there's a spectrum with commercial software at one end, and open source software at the other.  It's a lie they tell themselves, and by extension their customers, despite the evidence to the contrary.  It unfortunately hobbles their own ability to execute in this space.

Just as Hugh is the first to admit in his post that he knows little about the software business, I have to be the next to admit I know nothing about the "advertising" business.  But from his "science experiment" cartoon jab, to the ambiguous question in the title, to the naive question in his opening sentence about the original cartoon, it all feels WAY too contrived.  I deeply respect the blog related work he did for English Cut and Stormhoek, but in each of those cases he was creating affirmative stories forward.  Here he's regurgitating old Microsoft messaging under the guise of "starting a conversation" which perpetuates a theme they're too happy for their customers to believe. 

Sorry Hugh, but it's disquieting. 

Novell's Link to the Microsoft TCO Linux Message

Last week, Novell got caught in a press release with Microsoft in which an HSBC IT operations manager makes appropriate noises about TCO of Windows over Linux per the Microsoft messaging of the past 5 years.  This is too bad really.  It emphasizes the points Brent Williams made in his presentation with respect to Novell:

• Novell thinks the problem is catching Red Hat: They need to formulate a brand identity for SuSE other than "We're not Red Hat." (slide 14)
• Shows that even Novell believes it can't stop Red Hat alone. (slide 15)

Here's a slightly different way to look at the messaging:

Red Hat began messaging at least a year ago around the use of Red Hat linux in value creation.  Here's how the logic flows from a Michael Tiemann presentation at the 2006 Red Hat Summit:

• Companies spend on average 4-8% of income on IT (Financial companies 8-12%)
• So regardless of how you carve up the cost savings, you're messing around with something that will NOT move the stock price anytime soon.
• IT focusing on the value creation side of the bar can help by delivering better customer service (and retention), market growth, competitive advantage. 

This is actually backed up nicely by studies over the past couple of years around ROI and TCO, where executives are more interested in the ability of IT to improve customer satisfaction and business information access than ROI, and recognize that they can't measure TCO particularly well. 

So to bring it all home for Novell readers:  If you were a billion dollar financial services company, you're arguing over saving the customer some money on a $100M IT budget, BUT the sort of money you're really talking about is 10% (according to old IDC Windows vs. Linux numbers) over several years for particular workloads, so $10M, and the reality is it's smaller than that because they're running a heterogeneous environment and aren't about to swap it all out soon.  And that assumes you can accurately measure the cost savings.

Red Hat is pitching value creation on the other $900M in revenues.  Moving the ball by 10% there (i.e. $90M) is a whole lot more interesting than 10% on the cost side.  As the CIO, do you want to help save a bit of money, or grow the business?  Which one moves the stock?  Which one makes you a hero and grows your bonus? 

The message is all about the customer as hero.   

The Best Presentation on Software Business and Open Source I've Ever Seen

Brent Williams presented “Open Source Business Models: A Wall Street Look at a Wild 2006 and the Prospects for Even More Fun in 2007” at EclipseCon Tuesday.   Brent is a (temporarily) independent equity research analyst.  Unlike so many “Wall Street” types, he approaches the discussion from the economics of what people do, rather than what they say they do.  Similar to r0ml in content, there are always surprises along the along the way.

Brent has graciously allowed me to post the slides.  Brent's analysis and mine are congruent on many topics, but he brings clarity to the topic and a wealth of experience.  He starts with a tear down of the Oracle Linux debate and the Microsoft Novell deal.  I especially like his tear down of the commoditization myth and his observations around interface standards versus standards of implementation.  A couple of slides in the presentation don't quite stand alone, but for the most part the deck is brilliant. 

Enjoy!

Three Things Steve Ballmer (and Brad Smith) Get Wrong about Free and Open Source Software

Enough, Mr. Ballmer, please. 

There have been a rash of articles over the past week on Steve Ballmer's recent statements about open source software and intellectual property during the New York financial analysts presentation.  They follow on other recent related statements around the Novell-Microsoft deal by Brad Smith, and the Progress and Freedom Foundation.  Here's what Ballmer et al get wrong:

• Customers care about patents. (The corollary that vendors sue customers over patents, and that this is why customers need care is patently (sic) false.)
• Free and open source developers don't respect intellectual property.
• People think free and open source software is free.

Let's handle them in reverse order. 

Open Source Software is Free
Wrong.  And no one thinks this.  Mårten Mickos brilliantly observed two years ago that the early community is willing to trade time to save money, and the later community is willing to trade money to save time.  But neither the do-it-yourself users or the pay-as-you-play customers thought anything was "free".   They each made an economic decision based on their particular needs in context.  Anyone that ever paid for a Red Hat Advanced Server installation or a Novell SuSE desktop or MySQL Network knows that the solution isn't free, even if they didn't pay a software license fee.   

Microsoft continues to think that free and open source software sits at one end of a spectrum that has commercial software at the other end.  They apparently still don't realize these two ideas are orthogonal.  Really. 

Free and Open Source Software Developers Don't Respect IP
Wrong.  First, F/OSS licensing is completely dependent on strong IP (copyright) law.  Second, key projects generally have contributors license or assign the rights of their contributions to the project owner.  This is no different than Microsoft licensing third party code for inclusion in Windows or Office.  The terms and conditions bar might be higher for Microsoft because of the business and litigation risk they take, but the legal concept is the same.  Brad Smith suggesting otherwise is disingenuous at best for a lawyer.

Mr. Smith would obviously point out that the sort of licensing Microsoft does includes discussions around patents, something most (but not all) open source software licenses do not discuss.  This is because patents are a vendor-to-vendor discussion, and not all open source software projects are necessarily run by commercial vendors.  (This may explain why vendors with patents also make interesting patent grants to open source projects in which they participate.)

This discussion also flies in the face of the reality of vendors with more mature IP strategies than Microsoft's contributing heavily to free and open source software projects.  These other players seem to be extremely respectful of IP, yet they find their business strategy includes F/OSS.  Makes you wonder more at the lack of imaginative asset strategy at Microsoft. 

Customers (Should) Care about Patents
Wrong.  Patents are tickets to negotiations in vendor-to-vendor discussions.  Customers could care less.  I started this blog two years ago with a short essay titled "When are you going to sue your customers?"  In it I use the following example:

Legal IP tools are important for vendors and certainly relevant in vendor-to-vendor discussions.  The idea that customers care about patents, however, would seem counter-intuitive.  Consider the following: when you last bought an automobile, did you pick the “Honda” over the “Toyota” because the Honda had more patents in it, or more patents per ton of vehicle, or maybe because Honda's intellectual property practices were “better” some how?  Of course not.  You bought the product that met your needs.  It may well have even been the more innovative product by your own subjective measure, but whether or not the manufacturer chose any number of legal tools to protect the innovation wasn't part of your buying consideration.  How the vendor's business process works is of no interest to the customer beyond the actual customer-vendor interface so to speak.

Whether the vendor has a mature IP strategy, applying for patents, trademarks, and copyrights appropriately, choosing to keep some ideas trade secret protected, sharing selected IP with partners or competitors through patent pools and cross licenses, or aggressively publishing some ideas in the face of their competition is of little interest to the customer. The customer only cares that the product serves their needs and provides the value they paid for it.

Next scenario:  you are happily driving your Honda when you receive a letter from Toyota one day telling you that you're infringing their patents. They give you the choice to (a.) cease driving your Honda, or (b.) pay them a license to their patents.  You can essentially “pay twice” for the privilege of driving your car, and for some small sum you can feel free of any concerns that you are infringing Toyota's patent claims ever again.  On this vehicle.  Or for your household.  Or maybe it will be offered to you the customer as an annual license calculated by the number of drivers in the house and the number of Honda vehicles you own, pro-rated over certain uses, unless the patent applies to certain other manufacturers as well. What do you do?  Do you even waste time calling your lawyer to figure this one out?  Or do you call the Honda dealership and tell them quite simply to “fix this.”

Of course this assumes you don't also receive letters from General Motors for their patents (frustrated that North Americans are buying foreign vehicles), Daimler-Chrysler, and Hyundai, so you have the opportunity to “license” your Honda vehicle from many companies and pay for it numerous times. [srw -- this is WHY patents are a vendor-to-vendor discussion.]

The reality, however, is that Toyota is not going to threaten to sue Honda's customers.  They would like the opportunity to switch those Honda customers to Toyota's products, not upset them to the point that no Toyota dealership ever gets a chance at that Honda customer again. 

If anyone sued a customer company for patent infringement over its use of Linux, the company being sued would find a lot of "friends", starting with the Linux Foundation.  One might even imagine the company having a negotiation with IBM over opportunities for IBM to sell in other unrelated areas in return for help on the Linux litigation front.

Jeremy Allison recently mentioned in an interview that "I have had people come up to me and essentially off the record admit that they had been threatened by Microsoft and had got patent cross license and had essentially taken out a license for Microsoft patents on the free software that they were using, which they then cannot redistribute. ... But they’re not telling anyone about it. They’re completely doing it off the record."

This is hugely disturbing.  It means these companies are essentially giving into a market bully.  They certainly aren't serving their share holders.  If Microsoft is so gung-ho on the idea that this is a good thing, then THEY should come forward with the who and the how so we can all take a look.  The fact that this may be happening in secret does not put them in a good light at all. 

The Novell-Microsoft technical co-operation agreement around virtualization, web services, and document formats is no different than any other vendor-to-vendor tech co-op (marketing) agreement.  It's business as usual. 

The Novell-Microsoft "agreement to provide each other’s customers with patent coverage for their respective products" is no different than any other vendor-to-vendor cross license deal at the end of the day.  Microsoft wants to message it around open source software (Linux specifically) and IP and customers, but that's actually irrelevant. 

What other patents do these two companies have?  As much as Microsoft loves to maintain ambiguous IP messaging around Linux and patents or the Novell sponsored mono project and patents, the more interesting question is what historical patents Novell may have that might read on operating systems or file systems.  This scenario would be far more damaging for Microsoft than for Novell in a patent injunction shoot-out on revenue streams.  Cross licensing is just good business for two such vendors.  And customers could care less.

Culture comes from the top.  For all the good work that Bill Hilf's team may be trying to do, Ballmer's message is damning.  Ballmer's is the message that will be carried by the Microsoft field organization.   He's the CEO.  And it's doubly damning because Ballmer's message on this issue has no credibility anymore.

If Microsoft really wants to prove once and for all that customers should really care about paying for patents separate from their solutions, then Microsoft should go sue a customer over Linux systems that allegedly infringe their patents.  It would need to be a customer that clearly has a large installed base of roll-your-own-Linux systems.  They should go sue Google.  Or Bank of America.  Then we can all see how important this really is.

Of course Google may well have interesting patents on things like "search", so it would become a negotiation again.  And Bank of America probably spends a lot of money with Microsoft for other things, and it's unclear Microsoft would want to risk such a revenue stream (since they clearly wouldn't be worried about customer opinion at that point). 

At the end of the day Steve and Brad need a new strategy.  (Or a new PR firm.)  This message is growing old, and makes them look unimaginative (or worse, sneaky) in leading a modern high technology company.  Microsoft continues to stand alone in this space.  It's really too bad. 

Microsoft Whining for Sympathy about OOXML

So what's the real message with Microsoft's open letter whining about IBM and ISO and the Microsoft driven OOXML standard? 

• IBM is out performing us? 
• We need sympathy after our record quarter? 
• People should ignore our anti-ODF lobbying in Massachusetts because that was just business as usual? 

This is professionally embarrassing.  It is certainly not the company for which I used to work.  (CNet article is here.)

Vendor-Speak: Microsoft and OOXML

Peter Galli well covers the current news surrounding proposed ODF adoption in Texas and Minnesota, and the ISO vote on OOXML in its first phase in this article.  There are two quotes in particular that leap out, both from Tom Robertson, Microsoft General Manager of Standards.  Let's look at the latter one first:

But the company supports customer choice and interoperability and urges governments to also support these, he said.

"In that vein, we encourage them to adopt neutral technology procurement practices so that they have the greatest choice among available technologies, and so encourage competition in the marketplace and get the maximum value out of their IT investments," he said. "Mandating a specific document format for government use reduces a government's ability to communicate with its constituents, make the best use of available technology, and promote competition and innovation in the marketplace."

A lawyer's oeuvre, as is a journalist's, is defined by language.  Tom is a lawyer.  There is a wonderful shift in meaning of "a specific document format" as Tom slides through the paragraph.  He is a consummate linguistic professional.

Tom hopes that customers will confuse the standard for a format, a specification in its own right, but one that encourages multiple competing implementations per the customer's goal, with a format for which there is but one implementation, choking off competition.  The statement's irony is indeed rich.  Well done, Tom, but your government customers aren't so easily confused.   

The earlier quote is simply funny in its own right:

Tom Robertson, general manager for interoperability and standards at Microsoft, told eWEEK that there is a competitive situation in the marketplace, with ODF supporters actively trying to stop even the consideration of Open XML as a standard under the ISO's rules. "This is a pure competitive play on the part of ODF supporters like IBM," he said.

This one wins Obvious-Statement-of-the-Week.  Standards happen when a technology space matures to the point that customers are over-served and want choice to encourage competition.  Customers complaining about price is the market signal. Competitors know they can collectively chase the incumbent vendor with a standard at this point, if they pick the right level of collective abstraction to standardize.  This is how standards work in the marketplace.  (I would hope the GM for standards at Microsoft knew this.) 

A sympathy play isn't going to work here.  Customers WANT the standard that encourages multiple implementations.  True Microsoft support for ODF in their Office product suite would have been listening to customers.   Complaining that the marketplace is competitive while shoving your own product specification through a standards forum is naive at best and arrogant in the extreme at worst. 

 

OOXML and ISO: Round 1

Andy Updegrove covers the news (and it's significance) on this first phase of the fast track process for Ecma International's submission of Open Office XML (OOXML) to ISO. 

As Andy observes, there has been a lot of controversial discussion about defining "contradiction" and what might constitute such a thing.  This is what happens when we allow Microsoft lawyers to debate standards, rather than engineers who will need to implement them.  I hear echoes of, "It depends on what the meaning of the words 'is' is."  Not liking the rule, we'll attack the definitions.

With 19 countries offering contradictions to be resolved, it will indeed be fascinating to see how Ecma International handles it all.  The midnight oil will burn brightly in Redmond, which is only fair considering how many countries worked hard to get through the 6000+ page specification by the deadline.  The clock is counting down to 28 February.

I would offer, however, that a contradiction should not be defined as a simple overlap with another standard.  This is economically a poor yardstick to use.  We all saw this coming last Spring.  At the time I observed:

While ISO certainly doesn't like to encourage competing or overlapping standards, they will not necessarily prevent them.  They are a standards development organization in place to ensure that the rules of development are transparent and followed.  It is not their role (nor do you ever want it to be) to manage the marketplace through determining the economic viability of a standard.

By all means send the Ecma International specification back for some of the egregious internal conflicts, and ugly artifacts like date redefinitions.  But let the market decide which standard has the best value proposition to solve customer problems with the most implementations.  [We already know which will win.]  Consider the IEEE 802 standards family.  If they didn't allow standards that overlap in functionality, we would still be living on star LANs.

Copyright javabell, all rights reserved.  Used with permission.

Conformance and Certification: The ODF Standard and Microsoft's Office Open XML Specification

Excellent posts are appearing over the past 10 days on interesting and apparent contradictions in the Microsoft Office Open XML specification, their related patent promise, and the resulting effects on the ISO standards process.   (All are listed at the end of this post.)

Indeed, ECMA perhaps should be a little embarrassed that they passed the specification in ballot if such contradictions exist, but at 4000+ pages, one perhaps can be a little forgiving.  (Hopefully they evolve their process to adjust in the future for such outrageously large submissions from their members.)

I've pointed out elsewhere:

• Standards exist to enable and encourage multiple implementations, regardless of the forum in which they are created.  They benefit the consumer.  A vendor specification, regardless of whether it has gone through a formal standards process exists to encourage multiple add-ons to a single implementation, i.e. it benefits the vendor.
• Microsoft chose the most expensive worst possible way to deal with the ODF standard, and they will ultimately lose the battle because the standard with the most implementations historically wins in the marketplace. 

That said, huge concern and uncertainty exists for what's going to happen going forward with respect to ISO and Microsoft's ECMA specification, and the future of ODF. 

I'm going to take a slightly different view here.  ECMA has already approved the specification.  One can imagine that the Microsoft marketing and standards engines are in full gear, and Microsoft execs, Office spokespeople, and field account execs are faithfully espousing:

• "Microsoft Office 2007 is standards compliant.  ECMA International is a recognized international standards organization, with participation from IBM, HP, Intel, Adobe, and dozens of other companies."  [Subtext: It must be a good standard for all our partners and competitors to have passed it in a fair-minded international standards process.]
• "Indeed, ECMA International has submitted the standard to ISO for fast track approval as an international standard, and the process will complete in 2007."  [Subtext:  It's so good, that they have recommended it for FAST track at the world's premier standards body.]
  

I would be surprised if Microsoft's Massachusetts team isn't already lobbying to have the new "standard" included in the ITD reference architecture alongside ODF.   Regardless of the merit of ISO accepting the document, however, buyers will be staring the nasty rhetorical beast in the teeth.  So what is a procuring organization to do?

Historically at the federal level in the United States, the National Institute of Standards and Technology (NIST) developed Federal Information Procurement Standards (FIPS). These FIPS contained the description of a standard (perhaps developed elsewhere like ANSI or ISO), and what it would take to use that standard in federal government procurements.  The FIPS would also outline any certification testing requirements that NIST felt were warranted, and indeed for U.S. government procurement NIST [wisely] continued to put its money where its mouth was and developed the test suites that were used.  This was back in the days when the head of NIST was a civil servant instead of a presidential appointment, and the organization thereafter devolved into politics and destroyed many of these "boring" testing programs.

But it was an excellent example of a working model to solve concerns here. 

Standards organizations are best designed to develop specifications into consensus oriented standards.  They serve implementors directly.  They serve the marketplace indirectly by laying the specification foundation for producing lots of implementations. 

It is up to the parts of the marketplace that [economically] care about true conformance to define the certification process that fits the situation.   It could be the procuring side of the marketplace (as with the historical NIST programs), or the implementing side of the marketplace (as with the X/Open-Opengroup certification programs). 

So supporters of ODF (and by this I mean implementors) need to choose the organization that best represents their needs, and deliver a proper certification process.

The ODF Alliance is a likely candidate for at least defining the certification criteria and being the keeper of the certification "brand" so to speak.  Its recognized purpose is to promote the use of the standard, and document its use to support procurement.  Perhaps the Opengroup has a role to play because it has the pre-built infrastructure to support testing and certification on behalf of the ODF Alliance. 

OASIS is excused -- it's the standards development organization.  At best, it defines the conformance criteria for its specification.  Remember, the marketplace needs to take appropriate economic responsibility for certifying that conformance. 

As long as the certifying organization doesn't lose sight of the goal, i.e. as long as it doesn't think certification is a Big Revenue Generator, then the numerous products and online services supporting ODF will be able to quickly demonstrate conformance and certify.  This gives procurement agents their first tool: a recognized brand to specify in their requests for proposals (RFP).  The certification brand becomes an easy short-hand for "that document format standards thing with many implementations."

Microsoft can easily replicate this, and indeed will need so to do to even be perceived to be on a par with the ODF certification world.  It won't matter that there may be truck-sized defects in their rapidly created certification process.  It likewise won't matter if they actually fail to maintain their ability to certify. [They cut the specification into ECMA before they finished the product.  Trust me -- it will have drifted.]  It won't even matter if their certification process is superior!  There will only ever be one implementation that can certify.  It will also be difficult to create the same perceived arms length distance from their certification process that ECMA gave them from the specification.   And it still won't matter. 

Bidders can certainly offer Microsoft Office 2007 plus its conversion tools to meet the ODF certification requirements of the RFP.  But it will have to stand against all the other native solutions for price, performance, and ease of use. 

Likewise, Microsoft or their partners could lobby to get the MOOX "standard" and its needed certification process onto the RFP, BUT the procurement agents now have a second tool.  They have the ability to require that any document format standard on the RFP must support a certification process with at least N certified implementations available at the time of the RFP. 

That will become the industry norm to meet in this space. 

"Standards" with only one implementation aren't.  The buying side of the marketplace has always recognized this and chosen the standard with multiple implementations over the specification with only a single implementation.  The ODF world has the ability to demonstrate this message in a way that meets the needs of customers, and the demonstration through a branded certification is much more powerful than unaligned vendor rhetoric. 

Go get 'em.

Links:

• Andy Updegrove's excellent analysis of the contradictions and their effect on the ISO standards process. 
• Sam Hiser analysis and discussion on the contradictions in the Microsoft patent license. 
• Bob Sutor covers the technical specification contradictions with links to the relevant places.
• Groklaw has indepth coverage to set the context of Microsoft's promises.  It is tempting to take this as simple Microsoft bashing, but the deeper problem this post emphasizes is the problems a vendor faces in the marketplace once trust has been broken.  There are good links throughout. 
• Rob Weir really kicked it all off when he start going deep on the technical contradictions in the Microsoft specification. 

A New Microsoft Open Source Software Strategy: A Bigger Thought Experiment

[Update (17-Jan-2007, 21:22 PDT): Miguel de Icaza reminded me that the mono class libraries are licensed using the MIT X11 license, not the GPL, and that has allowed a lot of proprietary, embedded use that would not have otherwise happened.  Corrected.]

Last week I offered up a thought experiment around Microsoft SQL Server and where it might lead.  It has provoked fascinating discussions in the background, including this translation into Hebrew. 

I thought I'd lay out the "rest" of the Thought Experiment.  Here are other big ways Microsoft could use free and open source software as a business tool. 

Publish Sharepoint as Open Source Software
There are a huge number of content and document management systems in the open source world today.  Standards are beginning to show up.  This means several things:

• The market has reached a point where the tightly integrated product is no longer the best performing (economically speaking), and no longer capturing the integration premium.
• The big expensive systems are now exactly that -- big expensive systems. 
• The market has reached a point where customers expect prices to drop, so are calling for standards.

No amount of innovation will change this market.  Indeed trying to charge an innovation premium for such integrated innovation exacerbates the situation.  "Good enough" solutions that are cheaper open up a world of document/content sharing opportunities to customers that have never been able to enjoy such productivity before now.  So:

1. Publish Microsoft Sharepoint server as open source software.  It's a good document sharing system.  Make it a completely drop dead simple binary package to use.   It runs on Windows.  Recognize that Sharepoint is a complement to both the Windows core revenue stream AND the Office [other] core revenue stream, and both of those products have incredible challenges ahead of them. 
2. Publish it under the GPLv2.  This will cause all the historical closed source companies with product in the space to stay away. 
3. Create the Microsoft Sharepoint Server Network product, similar to the suggested SQL Server Network product.  Again -- experiment with the pricing on the license. 
4. MySQL talks about the fact that their historical conversion rate of customer from users was about 1:1000.  JBoss talked about a conversion rate closer to 3%.  (This is likely due to the difference in technology/customer base, or possibly the history of when JBoss came on stream in relation to MySQL.)  Regardless, you want every department, work group, not-for-profit, school group, hobbyist group, church, synagogue, mosque, etc. dropping down document shares for free.  There are 40 million installed MySQL databases in the world.  Ask yourself why there wouldn't be just as many document shares?  Do the conversion math AND recognize that every large organization IT shop will freak out when they realize the company is running on "unsupported" document shares installed everywhere.
5. Organizations in non-G8 economies now have the opportunity to install a "free" "professionally built" document share.  Let them.  Those economies are all coming on stream and they will have money to pay for the support network offering.  Better for future Microsoft revenue streams that they're learning Sharepoint on Windows than using the alternatives and then having to fight a migration problem in the sales cycle.
6. Someone is going to attempt to port it to Linux.  It may even be easy.  But with the efforts to make Windows servers more manageable for small business finally coming to fruition, ask yourself whether or not Sharepoint on Linux is going to be really a threat (performance, portability, Linux-manageability).  Remember how you run YOUR Sharepoint community is YOUR business. 
7. All previous points about trademark, alternative additional licensing, and hiring still apply.

Remember when Microsoft's slogan was simple and meaningful:  "A PC on every desk and in every Home. "  Home servers are coming on stream.  Recognize that consumers don't want "a home server."  But a riff on "A Document Share in every Work Group and in every Home" might be interesting considering all the photographs, music, and soon-to-be TV shows and movies that will need to be stored.   Start buying shares in disk technology companies again.   

Developers: Part 1 -- Engage with Eclipse
[For Microsoft readers -- please take a deep breath and put DOWN the chainsaw.]
There are several things that need to be considered here.  Not all of them are pretty.

• There are a growing number of users of Eclipse on Windows.  They aren't paying for Visual Studio.  They probably aren't programming in C# against the .NET run-time.
• Visual Studio is just an IDE.  The real technology value in Visual Studio is the core language technology (the compilers and CLR i.e. garbage collection, the JIT, etc.), not the configurable menu options.  How many coloured text editors does the world really need?  (Yes, I expect this to provoke the modern day equivalent of the ubiquitous and inescapable vi versus emacs flame war.  Get over it.)
• There's a reason the WORLD has moved to open source development tools.  All the proven ways of building better software faster involve ALL people on the development team regardless of title/role have access to ALL the tools.  Having expensive per seat tools where only certain people get access to certain tools isn't just false savings, but it's engineering inefficient.  Adequate tools for all beat best-of-breed tools for a few.  Once again, the innovation premium can't be easily sustained any more. 

The goal is to get more developers on C#/.NET and to provide a better solution for the running applications on Windows.  So:

1. Engage with the Eclipse Foundation.  Put the Visual Studio IDE in maintenance mode.  Contribute some of the IDE bits that are "better" than some of the Eclipse bits as the olive branch. 
2. Resurrect the Shared Source CLI (aka Rotor).  It is a simplified working C# environment for Windows (and historically Mac OS X and FreeBSD).  Integrate into Eclipse.
3. Release the interesting Visual Studio and Rotor 2.0 bits under the Eclipse Public License.  This license does NOT mix with the GPL under which the Mono project is distributed.  (The mono class libraries are released under the MIT X11 license.)
   
4. Maintain the core C#/CLR technology and all Windows extended class libraries as the value add licensed package.  Indeed, the agreements with Intel and AMD may prevent some of this technology ever being published in source code form because it is so close to the hardware.  Use that to your advantage. 
5. Re-purpose the academic/training materials (of which there is an abundance) to capture C# developer mind share. 
6. Re-purpose (initially) the engineering resources that will free up to developing all the OTHER necessary classes that the Java world have that enable so many applications to be created in the Java world.  Many Java programmers in the enterprise will admit that they like C# better, but are clear that they can work faster in Java because all the classes and frameworks already exist in the problem domain in which they're working, i.e., while C# may be actually faster in which to develop code, application development is faster in Java.  Recognize this is because IBM and Sun won their ISV population by giving them the resources to rewrite/migrate the historical C++ class libraries to Java.  You will need to do the same to gain C# acceptance. 

This is the first part of the developer program.  It's about winning C# programmers already on the platform, and about engineering efficiency at several levels.  Now for the next step. 

Developers: Part 2 -- Engage with Mono
You have just explained to the world that you're in a IP cross license with Novell.  Let's make it real in a way customers in the enterprise can understand.  Again, recognize a number of things:

• LAMP continues to gain ground.  So what you didn't lose to Java because of the perception of Java as a multi-platform environment, you ARE losing now to LAMP.  Customers want at least a belief in multi-platform programming environments even when they choose just one platform.  LAMP is also code for Ruby on Rails for the purposes of this discussion.  AJAX is NOT interesting when the first canonical example in every book is how to tell the difference between IE and every other browser on the planet. 
• Maintaining a PR strategy around Mono as a "science experiment" anchors the belief in customers' minds that if they're going to hedge their bets for the future, they had better choose Java for "heavy lifting" and LAMP otherwise.  You are currently drinking your own bath water. 

So again in the spirit of engaging with developers (i.e. customers developing platform complement value) to solve problems better in a C#/.NET world (and here .NET means Windows by definition):

1. Engage with the Mono community.  Offer the (Rotor) ECMA Base Class library code as an olive branch so there is one true library source base.  Do it on the following condition: that the Mono community has to maintain a rigorous rights assignment process similar to the Free Software Foundation process, such that you can still take back the code and know from whence it came. 
2. License the (Rotor) ECMA Base Class library code under the GPLv2 MIT X11 so it is compatible with the rest of the Mono Base Class Library.  This does NOT contradict the above licensing using the Eclipse Public License.  It's Microsoft property.  You can license it as many ways to as many people as many times as you like.  So just like the Perl/PHP/Python community, license this particular bit under both licenses. 
3. Contribute some amount of work to improving Mono on UNIX/Linux.  This is NOT anathema.  While Mono runs on Windows, you really want the ultimate Windows C#/CLI experience to be .NET.  But you need enterprise customers to understand that Mono is real. 
4. The web world is defined by a set of publicly developed publicly available standard network protocols.  Microsoft implements them (mostly).  For the underlying web service world that is just now coming on stream in SOA, there is likely still head room in the market where the tightly integrated solution outperforms the componentized solutions.  On Windows, the combination of .NET CLR+IIS may still offer a much better solution (technologically AND financially) to hosted web services than your competitors.

Franchise Windows into China
[For Microsoft readers -- please stop hyperventilating and rolling your eyes and think about this in real economic terms.]
This one is actually a little subtle.  It doesn't look like an open source play.  But it addresses a different aspect of the "competitive problem" with open source from the Microsoft perspective.  There are a couple of things to consider:

• Linux adoption is an easy decision as an interesting platform base for development in a developing economy.  It's free as in speech and free as in beer.  This means one isn't shipping hard capital out of a small company, and hard currency out of the local economy for the privilege of working on Windows.  It doesn't matter if Windows is "better".  It's an finance/economics problem, not a technology/innovation problem.  (That means it needs a financial solution.)
• The magnitude of the Chinese economy both in scope and in advancement make shipping that much hard currency out of the economy a non-starter.  It's a macro economic problem as well as a micro economic problem.  Most G8 marketeers see the scope and think they just need to localize the product and its advertising, because obviously their technology will be valued the same in China.  The middle class culture and business culture developing in China is NOT the same as their equivalents in a G8 country.  You can't assume the economics is the same. 
  

As a platform on which to innovate, (and I said that carefully,) Linux wins every time in China.  Microsoft needs to disrupt the economic problem it has created for itself.  There is no fine tuning here.  So:

1. Franchise Windows into China.
2. Structure the license to protect the Windows brand and the Windows app compatibility programs and brands.
3. Invest in a joint venture primarily owned in China.  Create it as a secondary Microsoft stock class.  (I do NOT actually know what I'm talking about here.  Better stock specialists than I can probably describe the real steps to accomplishing this here).  The intent is to create a class of Microsoft stock that is highly attractive to existing shareholders/investors, and also leaves substantial capital in the Chinese economy.  This will get the Chinese government on board.  This will give investors/shareholders choices in what mix of Microsoft stock to own. 
   
4. Structure the license with respect to regions/localization over a set of milestones and dates to not savage the Windows revenue stream too quickly when China starts exporting technology.
5. Get out of the way and let the Dragon go. The technology graduate rate is phenomenal.  They are open source friendly.  Ensure they're C#/.NET programmers that understand your platform. 
   

This of course presumes Microsoft is developing the "next" operating system.  They have a demonstrated ability to develop ubiquitous platform technology that is well tested, packaged, supported and maintained across an enormous breadth of hardware platforms.  This is actually where they shine when it comes to shear scope of software engineering delivery. 

Forget the Home Media Server as a "Windows" machine.  You've had a simpler home server in the living room for 5 years now, which is already zero administration with an arguably elegant design.  It just needed a wireless loop and a bigger disk.  Indeed, I've never seen a pop-up in the middle of an XBox game telling me I needed the latest security update, which apparently plagues Media Center Edition owners that spent more money for a "bigger PC" in their living room.  It doesn't matter how elegant the new "home server" looks -- that pop-up event is a deal breaker for a consumer. 

If Gates is serious about the coming robotics wave, then use all that pent-up R&D intellect and go build the next great embeddable platform.  Ensure it's wildly friendly to C#/CLR programmers.  By then you may even have the depth and breadth of open source software experience to involve the community. 

Conclusions
These are big programs with potentially big impact on Microsoft.  There are all manner of other programs that could be started, from Kim Cameron's work, to improving Microsoft Exchange firewall capabilities by integrating with many of the best of breed open source solutions out there.   There is an incredibly rich portfolio of software assets inside Microsoft, that will NEVER be released as multi-billion dollar revenue streams, that could be used to engage Microsoft customers and developers in open source communities.

Re-invention is necessary.  IBM did it.  Sun is doing it.  No point waiting until you hurt as badly as they did to begin. 

The cultural upheaval would be enormous, and require enormous training and education across engineering and marketing.  The PR and customer coup would also require enormous work to ensure the executive could explain it in simple sound bites to keep investors from panicking.  That would also require [consistent and coherent] executive sponsorship at the highest levels.  In the end it's just a thought experiment. But as I said last week, it's a GREAT thought experiment. 

Run wild; run free.