Paw Prints: Writings of the maddog

While I was working at Digital Equipment Corporation (DEC) in the early 1980s, an interesting business practice came to my attention: the concept of “bundling” an operating system.

Before this practice, a person could buy their hardware and software separately. For server systems, this is still the practice. For desktop, laptop, and other smaller systems, it became the practice of manufacturers to install a particular operating system. That operating system was Microsoft.

There are practical reasons for bundling. The retail stores didn’t have to install the operating system to show potential customers that the hardware worked, and the machine’s speed and capabilities could be compared to other systems on display. The customer could then take the system home with the operating system installed and working properly.

For Microsoft, it meant a captured market of all of the laptop and desktop systems. For this they charged a greatly reduced price for their operating system if installed on every hardware system. This is called “bundling.”

This made a vast cost savings for Microsoft. When you sell the operating system separately, you have to do more advertising. Your cost per sale goes up dramatically. The customer now has to make a choice between your operating system and some other operating system.

As a DEC product manager, I did a few bundling deals. The Ingres Corporation bundled their Ingres Database engine into our Ultrix (Unix-like) operating system. Ingres, Oracle, IBM Informix, Sybase, and a couple of other database systems ran on Unix systems. Yet the penetration rate of all database systems combined on Unix was about four percent. One reason was the price. An Ingres database engine cost about $100,000 on one VAX-11/​780 class of system at a time when the whole computer system might cost $250,000.

I negotiated a deal with Ingres that reduced the charge for the database engine to $840 on a server and $10 on a workstation. It was so inexpensive that DEC did not raise the price of the Ultrix operating system on any platform. With the delivery of a database engine on every Ultrix system, the application vendors could write software knowing the database engine could be available to hold the data.

The Ingres Corporation leveraged additional revenues from sales of software development tools and sophisticated products such as their Net software, which allowed client processes to extract data from Ingres Database engines and other vendors’ database engines operating on the same system or over the network. Many more developers bought these tools (and Ultrix) because the database engine was guaranteed to be there, in effect for free.

Unfortunately, another product manager did not see the value of this partnership and canceled the contract after I had left the project. The use of databases in developing sophisticated software moved backwards again until the advent of free databases such as MySQL, PostgreSQL, and others.

The Dollars and Sense

If you build your own system and want to install Microsoft Windows 11 on it, you might start off with the Home license, which costs $139. If you want the more powerful Pro edition, you can license that for $199 or upgrade Home to Pro for $99. If you purchase a laptop with Home installed, you may want to upgrade to Pro for $99.

Lenovo sells laptops with Microsoft Windows 11 Home on them by default. If you choose to buy Microsoft Windows Pro it is $60 more. If you choose Ubuntu, you save $140 off the Home version, and of course you do not need the Pro upgrade, so an Ubuntu Pro saves $200.

With Microsoft, you get the operating system and you have to pay more for virus protections, an office package, and other closed source applications.

However, this is only an estimate of how much the Original Equipment Manufacturer (OEM) pays to install any of these products onto that laptop or desktop system.

In 2023, Microsoft made about $22 billion in license fees from their operating system business, which installed Windows onto approximately 250 million laptop and desktop systems. This represented about 10 percent of their overall revenues. Reducing the revenue to $20 billion to take into account server operating system sales, that means the average cost of the Microsoft license to the PC manufacturer (the “Microsoft Tax”) is $80. This “average” may vary due to the number of licenses the vendor purchases, the power of the hardware, and other things.

Today there may be steep tariffs for products coming into the USA. At a 65-percent tariff rate on Chinese products (as announced by the US administration on April 2nd), the average price of the bundled software on a laptop or desktop is not $80, but $132. If your state charges even a five percent sales tax, that increases to $138 per system for an operating system you may not even use. If additional software is preinstalled, such as Microsoft Office, these tariffs and taxes will increase even more.

Using the illustration of the Lenovo laptop above, the price difference between a Microsoft Pro system and an Ubuntu system is $200. Adding a 65-percent tariff to that means the price dif- ference is now $330. Adding a reasonable sales tax of five percent to that brings it to a $346.50 price difference. If you’re buying these units for a 1,000-person employee unit, it’s a differ- ence in price of $346,500.

So far we have discussed the operating system as a single-user system. While Microsoft Windows is listed as a “multi-user system,” this means that multiple people can have a login name, password, and environment on the same system, but only one of those users can log in simultaneously. With GNU/​Linux, not only can you create multiple environments on the system, but another user can log in either from a separate keyboard, mouse, and screen or remotely over the network. This allows the hardware to be shared by multiple users at the same time, cutting the hardware cost in half or even more.

Speaking of cost savings, I am aware of many companies, educational institutions, and government organizations that have teams of people whose sole job is to make sure that every system is licensed properly and is only using software licensed for the proper number of users. Using free software reduces or eliminates the need for this staff entirely.

Going back to the given reasons why this pseudo monopoly for laptop and desktop systems started, at that time there was no feasible operating system to install on all of these laptops and desktops in order to demonstrate functionality and performance.

Today there is, and that’s why I’m proposing that hardware manufacturers only install GNU/​Linux on all of their new systems. It’s time to end the Microsoft tariff.

Channel partners or end-user customers can still install Microsoft Windows on all of their systems. This is what GNU/​Linux customers have done for 30 years. This proposal only means that the end-user customer will pay less for their hardware purchase and that hardware will ship with a fully functioning GNU/​Linux distribution for much less money and therefore fewer tariffs and taxes.

All of the retail stores will be able to display GNU/​Linux systems side by side, showing relative performance. In addition, the manufacturers will be able to ship fully installed and functioning office packages, sound systems, the latest WiFi, and graphics drivers without encountering any additional tariffs and taxes on their hardware.

Manufacturers will be able to guarantee to their customers in distant countries that there is no malware included in the binaries of their system, and if they wish they can publish or point to the source code for their hardware so the customer can verify their binaries or even build their own.

More importantly, governments will not be able to block the “shipment” of GNU/​Linux distributions due to economic sanctions, because there are mirrors and servers around the world to draw from. Cuba, as an example, has their own distribution of GNU/​Linux named Nova despite economic sanctions from the USA.

Other elements allowing this abrupt change to laptop and desktop business practices from the past is the growing acceptance of GNU/​Linux around the world; the number of trained and certified support people for GNU/​Linux; the wide use of GNU/​Linux on servers, embedded systems, and High Performance Computing (HPC) systems; and the dominance of the Linux kernel in Android-based tablets, e-readers, phones, and other appliances. If more support resources are needed, the large amount of self-training information and formal courses available with well-respected certifications available would more than meet the need in short order.

Many of the “must have” applications of old have been moved to cloud-based services, and even the main “stopping point” of the past 10 years (GAMES!) has been removed by companies such as Valve and technologies such as containers, simulators, and emulators.

I am sure that the companies and institutions (government and military) that purchase large numbers of laptop and desktop systems might appreciate a $200 or $300 reduction in costs per unit, or even the much higher savings made available by utilizing the simultaneous multi-user aspects of GNU/​Linux, particularly on desktop systems.

Of course, the makers and shippers of these laptops and desktops can take the same steps various companies such as Lenovo have done – ship both a GNU/​Linux system, fully loaded with free software applications and the same hardware with Microsoft Windows 11 on it (and set the Manufacturers Suggested Retail Price (MSRP) for both), or display them side-by-side in the retail store or on a retailer’s website, complete with a description of the software functionality for all to see.

And use different model numbers so the Microsoft-oriented units would not violate the companies’ contracts with Microsoft (assuming the same terms and conditions exist as they did in the 1990s).

Finally, this change in operating system strategy might also allow the hardware to be “operating system neutral” again, and repurpose those annoying “Microsoft” key-caps to something more useful for all users.
I have lived for the day to see the “GNU/Linux Inside” logo on laptops and desktops. 

Today is the day.

Carpe Diem