Saturday, April 22, 2006

Two Standards of Fair Use of Intellectual Property

There are two standards of conduct in the IT industry: those of Microsoft and those of everyone else but Microsoft. Nearly every action that Microsoft takes in the industry is contested but when Microsoft's competitors take the same action, there is no vilification or acerbic attacks. When Microsoft buys functionality and wraps the new capability into Windows, they are accused of suppressing innovation. When Larry Ellison buys PeopleSoft or Sun Microsystems buys StorageTek, they are adding shareholder value by improving their competitive capabilities. Some will even say non-Microsoft companies are buying functionality to extend innovation into the marketplace.

It's a double standard that the industry exploits over and over again.

ZDNet has been publishing articles that have pushed my buttons lately. I don't consider ZDNet to be overtly biased toward open source or against MS, but in the past week or so, I have read stories -- usually "analyses" -- that have done a pretty good job getting me cranked up. As I write on Saturday, I'm a little wound up after reading this analysis of the implications of virtualization software.

The author, Charles Cooper, seems to have two components to his argument: a).virtualization implies that Microsoft ought to let the licensing of virtual servers slide a bit to the advantage of the IT department and b). Microsoft ought to do this because they were accused but not fully convicted of predatory antitrust business practices.

The business value of virtualization accrues to the wise IT shop that sees an economic, operational and administrative advantage to the virtualization of servers. Virtual technology is cool because, as my friend Mike so wisely pointed out in response to my article that ROI and TCO are gibberish calculations for most technology, virtualization software actually does allow the calculation of a meaningful ROI because you can measure real physical boxes that can be eliminated in favor of single, beefy boxes to house numerous virtual servers.

The author seems to be implying an argument that since virtualization software runs on an OS, the extent of license compliance ought to be solely for the host OS. This is an argument predicated on physical use. But virtualization is a logical use not a physical one: VMWare and MS' Virtual Server enable the creation of logical servers and each of those logical servers provides the same functionality of physical servers. Whether that functionality is provided on a physical server or a virtual one is irrelevant to the cost of licensing.

Cooper attempts to build a connotative case against Microsoft using the double-standard of fair use of IP. He refers to a largely meaningless DoJ case against Microsoft in the first part of this decade to imply that the notion of charging customers for a Windows Server license for every instance of Windows Server is evidence of Microsoft's predatory anticompetitive behavior. Cooper insinuates that such a requirement is an economic artifact belonging to misguided libertarians (me being one) and evil capitalists who haven't yet appreciated the economics implied by virtualization.

But here's the question to ask to penetrate the author's accusatory thesis: Would he be challenging Microsoft's requirement of 1 license per Windows Server prior to the existence of VMWare?
The answer is No because the absence of virtualization technology would mean the policy would not be questioned.

This allows you to conclude that the issue is not whether licensing ought to slide for a virtual server but whether an IT department derives value from both physical and virtualized boxes.

It's hard to imagine a more sophomoric closing statement than what Cooper says here: "Last time I checked Microsoft was not in the philanthropy racket. Any company that tries to get out of paying for the full costs of virtualization will find itself on the receiving end of a sweet lawsuit, courtesy of Bill Gates & Co. "

Lovely.IT shops are not charities and they should expect none of the absurd "philanthropy" Cooper implies Microsoft ought to graft to them. There is honor in being a profitable company. There is also honor in paying for the licenses a company uses. Cooper's thesis has no merit.