According To Microsoft's Own Numbers, Microsoft Costs The World Economy $500 Billion

from the money-could-go-elsewhere dept

Thu, Mar 31st 2011 11:57am — Mike Masnick

It's always amusing when you see studies done by companies about how much money is "gained" or "lost" from certain activities -- as if the actual money wouldn't or doesn't go to other sources if diverted. So, when Microsoft hired IDC to write a report hyping up how Microsoft and its various partners "generated revenue of $580 billion in 2010," the idea was clearly to suggest that Microsoft was very good for the economy. Yet, that's only one way to view it. Glyn Moody, quite reasonably, points out the other side of the story, which is that if that money weren't spent on Microsoft products, it could have gone to much more productive uses. By his (somewhat tongue-in-cheek) back-of-the-envelope calculation, this study really seems to suggest that Microsoft cost the world economy somewhere in the range of $500 billion:

Red Hat's CEO Jim Whitehurst makes an interesting point about the cost of software:

He said that he did think that Red Hat could get to $5 billion in due course, but that this entailed "replacing $50 billion of revenue" currently enjoyed by other computer companies. What he meant was that to attain that $5 billion of revenue Red Hat would have to displace software that currently costs $50 billion.

That is, open source software typically costs only 10% of the equivalent proprietary products. This isn't about "destroying" wealth, though: customers are left with the other 90% to spend on other things. It is still in the economy, but spent elsewhere.

Applied to IDC's figures for Microsoft, this would imply that the $580 billion revenue might well be replaceable by a tenth of that - let's say $80 billion, to be on the safe side. Which means, of course, that the effective cost of the Microsoft ecosystem to the world in terms of money spent needlessly is around half a trillion dollars.

Seems only fair. If Microsoft and others are going to claim "ripple effects" for unauthorized copies, it seems reasonable to point out that there are ripple effects to people paying for Microsoft software, rather than spending it on other, potentially more productive, uses.

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Filed Under: economics, ripple effects
Companies: microsoft

38 Comments

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crade (profile), 31 Mar 2011 @ 11:33am

No one is going to believe you if you say it like that. What you have to do is just make a simple overarching statement like:
Microsoft's price gauging is costing the world economy 500 billion$
Then you have to reference a report you paid to get created that hides your highly questionable methodology as much as possible and in your article you have to assume the report is sacrosanct. Your article should only talk about what we should do about microsoft costing us this 500 billion and how bad it is that they are costing us that 500 billion.

Then you have to pay some politicians (lots of them, and from all sides, otherwise you will have neisayers) to treat your article as sacrosanct as well so they will pass laws against microsoft in the name of recovering this lost 500 billion.

Thats how stuff gets done!
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ethorad (profile), 31 Mar 2011 @ 12:01pm

Typo
Para before the quote ends $500 million, think it should be billion?
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Mike Masnick (profile), 31 Mar 2011 @ 12:03pm

Re: Typo
Oops. Fixed.
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Anonymous Coward, 31 Mar 2011 @ 12:08pm

Yes but when M$ post it, everyone reads it. When Glyn Moody posts on a random blog, no one "important" reads it. M$ still wins.
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Robb Topolski (profile), 31 Mar 2011 @ 12:12pm

For me it's not just about software cost but of time ...
... how about the amount of time juggling and tracking license numbers and staring numbly at "progress bars?" Microsoft software takes painfully long periods of time to update, compared to Linux, which also doesn't have the licensing administration problems.
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Greevar (profile), 31 Mar 2011 @ 12:31pm

Re: For me it's not just about software cost but of time ...
Agreed. I'd switch to Linux today if my games weren't tied to Windows.
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PRMan, 31 Mar 2011 @ 12:41pm

Re: For me it's not just about software cost but of time ...
Actually, my experience was the opposite. Yes, the Service Packs took a while. And a machine that hasn't been on the internet in over a year would take a half hour or so, but Ubuntu got to the point where it would take 15 minutes to update EVERY TIME I TRIED TO USE IT!

That was one of the reasons I quit using it.
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PRMan, 31 Mar 2011 @ 12:42pm

Re:
Strangely, I have heard of several companies that are actually paying MORE for Linux servers than for Microsoft. It doesn't seem possible, but it certainly happens.
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Anonymous Coward, 31 Mar 2011 @ 12:49pm

Ahh, playing the game the other way. Are you suggesting that the 500 billion disappears? Or would it just be spent in other ways, effectively costing the economy nothing?

After all, if they don't buy X but instead buy microsoft products, the same amount of money has moved, no? So net, the economy is still the same.

Unless of course you would care to admit the concept of "economic cost" when sales are lost. Which would you prefer?
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kyle clements (profile), 31 Mar 2011 @ 12:52pm

Re: Re: For me it's not just about software cost but of time ...
In Ubuntu's defence, auto updates can be turned off fairly easily, and having an up-to-date system is good, especially in open source software, where any vulnerability is out in the open.

Saying that, I also find the daily updates annoying.

I would rather have an "run system update before shut down" option in the shut down menu than be bothered by that window every day.

Switching to Free software has saved me well over $1000 over the past 4 years. That doesn't mean I have $1000 in my wallet, that money was definitely spent elsewhere.
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Anonymous Coward, 31 Mar 2011 @ 12:53pm

This is why I've never used Microsoft products
In 30+ years of working in this business, I've found that there's ALWAYS a better way -- even before Linux became reasonably usuable.

And given that not even Microsoft can secure Microsoft products, I think people have to be fair to moderately insane to even CONSIDER using them.
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ChurchHatesTucker (profile), 31 Mar 2011 @ 12:56pm

Re: Re:
Strangely, I have heard of several companies that are actually paying MORE for Linux servers than for Microsoft. It doesn't seem possible, but it certainly happens.

Because, like divorce, it's worth it.
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someone (profile), 31 Mar 2011 @ 12:58pm

Re: Re: For me it's not just about software cost but of time ...
Good point, we do need cross platform games.

We also need a better office suite, OpenOffice while good is not quite comparable to MS Office.

I decided to trade those two issues for stability and performance a couple of years ago and can not imagine ever switching back to windows.
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Anonymous Coward, 31 Mar 2011 @ 12:59pm

Re: Re: For me it's not just about software cost but of time ...
Have you played FreeDroidRPG?
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Steve, 31 Mar 2011 @ 1:13pm

Jobs
In concept its a great arguement, but I think its too focused on Microsoft. You could say this about anything...

If people were to only buy used video games, they'd have more money for other products, if people bought no-name food at the grocery store, they'd have that money saved to spend elsewhere...

You could even say people saved money on other products and used the money they saved to spend on Microsoft products. Initially it looks like a great story but when you think more about it, its nothing.
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Anonymous Coward, 31 Mar 2011 @ 1:20pm

Re:
Do you care to explain to everybody how wealth is created?

Hint:

Inflation, lending, fiat currency, beliefs, trust, jobs are all intertwined.

When sales are lost and not accompanied by loss of jobs, reduction in lending or trust there is no economic loss stupid.

On the other hand when you base you entire economy on lending as a primary drive to create wealth and that system fails that is real economic loss.
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cc (profile), 31 Mar 2011 @ 1:21pm

Re:
Can you please read TFA before you take a shit in the comments?

Moody is British. He argues that by paying stupid prices to a foreign company when alternatives exist at 10% the cost, money disappears needlessly from the British economy.
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Anonymous Coward, 31 Mar 2011 @ 1:29pm

Re: This is why I've never used Microsoft products
To be fair there is nobody on the planet or on the entire history of humanity that could possibly secure any system that has more than a hundred million lines of code, there is nobody capable of reviewing every single line of code or capable of predicting how those things will interact.

Which is also the answer to the problem of malware, you create standards like TXT files and have as much variety in the eco-system as possible, since that makes it very difficult to create one super virus that will infect every type of system out there.

In a sense we need Microsoft, as we need Linux, TRON, OSX, Plan9, FreeBSD, Haiku, Android, MeeGo and others.
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Berenerd (profile), 31 Mar 2011 @ 1:31pm

Re: Re:
I know with the redhat servers we have, we don't pay for the software, just for the support. Larger businesses, assuming like us, would pay more for support that the windows OS itself, but add in support and BAM
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Anonymous Coward, 31 Mar 2011 @ 1:42pm

Re: Jobs
It is focused on Microsoft because like you said they could say that about anything and the guy did it is meaningless, and he showed how meaningless it was, if you think his reasoning is meaningless then what Microsoft propaganda is meaningless too since they use the same rationale to do exactly the same thing.
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Paul (profile), 31 Mar 2011 @ 1:42pm

Re: Re: For me it's not just about software cost but of time ...
Just give up the games.

Honestly, you might find there are other things to do with your system besides playing computer games if you look around.

I have been going through this rather painful process over the last year. I started with one Linux server at the house. Then when I replaced my laptop, I made it dual boot Linux and Windows. Only when I just have to do something in Windows, I reboot into Windows, do that thing, then go back to Linux.

Over the last couple of months, I find myself in Windows less and less.

What is sad is that I had to give M$ the dollars for the OS even though I barely use the M$ OS. I moved to Open Office, and I am working to move our Web Apps off of the IBM application stack.

Open Software just makes more sense. I contribute to Open Software as well, but I do so because I want access to my work even if I switch jobs.
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Paul (profile), 31 Mar 2011 @ 1:47pm

Re: Re: For me it's not just about software cost but of time ...
I ignore the updates when I just need to keep working, and I start them when I leave the computer (like going to lunch, or getting coffee, or going to a meeting).

Other times I do the updates while I am working, but it is just something running off to the side. Mostly it isn't a problem; only when I am asked to reboot does it really matter.
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Paul (profile), 31 Mar 2011 @ 1:47pm

Re: Re: For me it's not just about software cost but of time ...
I should say that Windows is beginning to do updates about every time I touch it. But maybe it is because I avoid touching Windows more and more now days.
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Anonymous Coward, 31 Mar 2011 @ 2:07pm

it could have gone to much more productive uses
What the fuck does that mean... The only person that decides what productive means and thus if my money is spent on productive means is me. Not the article author, the poster, techdirt or anyone else.

You can also make the same case for any product. Oh... Coca Cola costs the world xxxx billion dollars last year, that could have been money spent on more productive uses....What??? Get the fuck out here with this childish OS and company bashing bullshit! Go take your nerdOS and go off back in the dark corners of the internet and me and my non-productive OS will go back to running the business world you fucking 'tards.
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cc (profile), 31 Mar 2011 @ 2:37pm

Re: it could have gone to much more productive uses
Nobody cares what home OS you use. That's totally your choice, your money and your problem.

I do care how my taxpayer money is spent, however, and I do mind if my cup of coffee (or whatever) costs 10% more because the producers, distributors, credit card companies (etc etc) are using super-overpriced software and are passing the costs down to me.
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The eejit (profile), 31 Mar 2011 @ 2:40pm

Re: it could have gone to much more productive uses
Wow, someone clearly overpaid for Windows Server 2003.
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Paul Hobbs (profile), 31 Mar 2011 @ 3:12pm

Re: it could have gone to much more productive uses
Wow! Take a chill pill!

I think the point is not that people spent all that money on MS products, but they could have spent one tenth on equivalent open source products, and been just as productive. The Coca Cola example doesn't quite work because there isn't an alternative to Coca Cola which tastes the same but which is one tenth the price (at least not that I know of).
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Anonymous Coward, 31 Mar 2011 @ 6:42pm

This is why the law has always tried to only allow people to claim actual damages, not imaginary or "ripple effect" or speculative damages. Damages must be on something real, lawsuits on something real, not what if's. Apparently this doesn't apply when big corps claim such damages though.
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Lawrence D'Oliveiro, 31 Mar 2011 @ 9:18pm

Re: For me it's not just about software cost but of time ...
PRMan wrote:

Ubuntu got to the point where it would take 15 minutes to update EVERY TIME I TRIED TO USE IT!

You do realize a Linux system is still usable while updates are downloading, and even while they�re installing?

You only need to reboot if the kernel is updated. Otherwise only the updated services need restarting; the rest of the system can keep running.
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Anonymous Coward, 31 Mar 2011 @ 10:00pm

Re: Re:
But what happens if the Americans who get the money all decide to holiday in the UK, or all buy buttered scones for tea?

The economy is a zero sum deal, I learned that from reading Mike putting away piracy as a no loss play.
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IanVisits, 1 Apr 2011 @ 2:17am

Migration costs
While it could be claimed that switching to open source saves the IT department money - there are other costs associated with it in other parts of the company that can often wipe out the cost benefits.

I use Windows at home, and have at every company since computers became common-place. If my employer switched to running Linux and Open-Office, there will be a transition phase where staff are trained in the new system, and a drop in productivity as people try to remember where the new menu options etc have moved to.

Lets all switch to Open Office I once cried as we looked at the cost of MS Office licenses. I still shudder in horror at the car-crash effect that caused on the company - because we didn't plan for the time and costs of migrating everyone to a different software platform.

Certainly, starting up a company on open-source and accounting for the OS transition as part of the cost of employing a new person is going to result in lower costs, but for existing companies, it can sometimes work out a false economy.
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Anonymous Coward, 1 Apr 2011 @ 3:18am

Re: Re: For me it's not just about software cost but of time ...
He was using Ubuntu, what do you expect?
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Anonymous Coward, 1 Apr 2011 @ 4:53am

Re: Re: Re:
No, bein the dumbtard you are you learned nothing at all. Not that it matters.
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okwhen (profile), 2 Apr 2011 @ 11:46am

People Screwing People
Economics is only difficult if you listen to the experts. Each country, organization, etc has an economy that controls a certain amount of dollars based on, what ever. How they are distributed depends only on end users. If we simply view it in this manner we can better understand the division of dollars. Everyone is competing for the dollars regardless.

Now for the economic lesson I learn early. Regardless of anything sold, manufactured, created, etc, the end purchaser carries the entire burden for any and all overhead. Meaning, the costs associated with; the idea / research & development, manufacturing / distribution, materials / labor cost, retail outlets, taxes, percentage profits, etc is what determines the final cost to the end user. You are saying to yourself right about now, hell we all know that, dummy. Have you ever thought of what the etc is in the cost associated with the products.

The final costs consist of the above mention however, does not include or exclude any and all other etc. Meaning, the costs of; lobbyist, political donations, bribes, payoffs, hiring ex government employees and politicians, and everything else you hear about or do not. Simply stating, the end user is the primary reason we all are taking in up the tail pipe.
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JAFD, 3 Apr 2011 @ 7:27pm

From one who switched back to Windows,
Linux is a great intellectual achievement, but it's still 'by hackers for hackers'. After 18 months using Hardy Heron, was glad to install Win XP, with better user interface, and available productivity software and utilities. Well worth what I've paid for it.
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Spudd86, 4 Apr 2011 @ 8:35am

Re: Re: For me it's not just about software cost but of time ...
Nobody is forcing you to update right away, nothing bad will happen if you put it off for a while...
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Spudd86, 4 Apr 2011 @ 8:38am

Re: Re: Re:
... How did you get zero sum out of anything Mike has argued? He generally relies on the fact that it isn't zero sum to make his argument work...
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Spudd86, 4 Apr 2011 @ 8:43am

Re: it could have gone to much more productive uses
You do know that most stock exchanges run on Linux right? Or does that not count as "running the business world"?

Most large scale transaction processing systems at banks run on either some mainframe OS or Linux (on a mainframe). Sure the business world doesn't run on Linux.
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