Taiwan: Open-source pressure won MS price cut

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The recent win by a Taiwanese pressure group that forced Microsoft to slash prices by over 50 percent is a strategy that works only up to a point, said an industry analyst. For the software giant to really feel the heat, a better strategy may be for governments to speak with their chequebooks, said Robin Simpson, Gartner Australasia's research director. He said that when governments give departments a free hand to try and buy open-source software -- such as the Linux operating system and OpenOffice suite -- the results are longer-lasting. "Their (Linux and OpenOffice) rapid rise will do more to encourage Microsoft to lower prices, un-bundle components and innovate than any legal decision or government mandate," he said. In addition, the transparency of open-source software means it's less of a security risk, he added. Various bodies in China have voiced support for the Linux operating system, as it is both cheaper to run and has source code -- the instructions that the OS is based on -- that is publicly available. "Microsoft has agreed to disclose its source code to a number of other governments around the world but this should be seen merely to address government concerns about possible security 'backdoors' which might allow US agencies to spy on them," he said. "It is not the same as open source software, where the license encourages modification and republishing of the code with fixes and enhancements." However, in the short term, the victory of the Taiwanese Fair Trade Commission (TFTC) sets a precedent, he said. "In the Internet economy, it does not take long for the details of any promotional pricing to circulate, so it would not be surprising if other governments include the Taiwan settlement in their future negotiating strategies," said Simpson. Microsoft last week announced a slew of initiatives such as product offers and the disclosure of its highly-guarded source code as part of an administrative settlement with the TFTC. The TFTC had launched investigations into Microsoft last May following consumer outcry over the software giant's exorbitant pricing scheme and inflexible product bundles. To put and end to this dispute, the company will introduce promotional discounts ranging from 13.2 percent to 54.5 percent for 13 products in its stable. Starting 15 March, Microsoft Windows XP and Office XP will see promotion markdowns in Taiwan of between 10 percent to 20 percent. Academic versions of both products will retail for significantly less, with discounts of up to 54.5 percent. The Redmond, Washington-based company also agreed to sell components of Office XP, such as Word and Excel, individually as opposed to a bundled package, which is the case in most other countries. The TFTC stressed however, these offers are limited to consumers and students, and do not apply to Microsoft's corporate customers. As part of the settlement, Microsoft also agreed to share its Windows source code with the Taiwanese government under its Government Security Program. "We are committed to the terms of the settlement and look forward to delivering on our promise. We have great respect for the decision of the TFTC and have taken concrete steps in response to government and community sentiment," said Emily Chiou, Microsoft Taiwan's general manager. CNET Taiwan's Mandy Chong contributed to this report.

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