Microsoft admits the obvious but not the truth

A whole bunch of companies are identified as villains. Springsource. Canonical. RedHat. Google.

What Microsoft does not admit here is the truth. Look at that list of "competitors" again. Other than Google -- which gets is money from ads -- are any of them more than a a bug heading for the Microsoft windshield?

What threatens Microsoft is not an open source company, or a collection of open source companies, but the open source model.

Microsoft can maintain its share only by offering subsidized software as an alternative to free. But it can't maintain its margins. It's going to have a tough time maintaining profitability.

But Microsoft has an even bigger problem than the open source business model.

The big sea change over the last years, the force Microsoft can't keep up with, is the cheap client. A Netbook may sell with a $3 copy of Windows XP, but how much software will the owner of a $300 product buy?

Fact is, even when the support is online, Windows costs money to support. It costs money to create patches and updates, money for servers to push those patches out. It's money that has to be spent, because without it Microsoft clients get infected with malware and become useless.

By contrast Linux is modular. A Linux client, whether a netbook or an Android phone, needs to run only those modules necessary to the function it is performing at that moment. Over time open source is just cheaper to support. And by linking clients to the cloud you centralize that support load, even monetize it.

So you have competitors who can live on less food than you need, hardware evolving toward forms that must find a lower-cost form of support, and a possible breakthrough in business models that you can't seem to touch.

The truth is that Microsoft Windows, and Microsoft itself, have become dinosaurs in a mammalian world. To compete Microsoft must evolve.