David A. Wheeler's Blog

Mon, 20 Apr 2009

Microsoft loses to Open Source Approaches (Encarta vs. Wikipedia)

The competition is over. On one side, we have Microsoft, a company with a market value of about $166 billion (according to a 2009-04-20 NASDAQ quote). On the other side, we have some volunteers who work together and share their results on the web using open source approaches.

And Microsoft lost.

As pointed out by Chris Dawson (ZDNet), Mike Jennings (PC Pro), Naomi Alderman (the Guardian), Noam Cohen (NY Times), Adam Ostrow (Mashable), and many others, Microsoft Encarta (Microsoft’s encyclopedia project) has folded, having failed to compete with Wikipedia. It’s not even hard to see why:

  1. Wikipedia is cheaper than Encarta (no-cost vs. cost)
  2. Wikipedia is easier to start using. If you have a web browser, you have Wikipedia. In contrast, you have to specially install Encarta, and it does not work on all platforms.
  3. Wikipedia is more up-to-date than Encarta. It often took years before Encarta entries got updated, even on trivially obvious issues such as death dates.
  4. Wikipedia has far more material. Wikipedia has far more articles, and generally it has far more material in each article.
  5. Wikpedia’s material has fewer legal restrictions, so users are allowed to do more with Wikipedia results. Creating mash-ups and reposting portions is part of today’s world.

One lesson to be learned here is that it sometimes doesn’t matter how large a company is; changes in technology may mean that they may abandon something in the future. Plan that the future will change, even if a company seems invincible. It’s easy to pick on Microsoft here, but the same can be said of IBM, or Oracle, or anyone else. Tying yourself completely to any one company is, in the long term, a mistake. Thus, you need to have a reasonable escape plan if a company folds or stops supporting a product that you depend on.

Another lesson to be learned here is that proprietary approaches can be beaten by open source approaches. That doesn’t mean it must happen every time, of course. But clearly open source approaches can, at least sometimes, dominate their proprietary competition.

In the long term, it simply doesn’t matter if a company has more money if an open-sourced competitor can produce a better product, make it available at a lower cost, and can sustain that process indefinitely. Given those three factors, proprietary vendors will lose to an open-sourced competitor unless there’s a key differentiator that is sufficiently valuable to users. In such cases, having more money is just an opportunity to lose more money; it gives no benefit of scale. Microsoft’s Encarta team tried to compete by adding special materials (like fancy graphics and sound). I’m sure that Encarta managers convinced themselves that because they were spending money to develop these materials, that users would pay for Encarta instead. They were wrong. In the end, users were more interested in good, timely information than in fancy graphics, and Encarta simply didn’t have a chance. Open source approaches were simply better at providing the encyclopedia people wanted than proprietary approaches were.

The obvious question to me is, are there any lessons that apply to software too? Wikipedia uses free / libre / open source software (FLOSS) principles, but Wikipedia is an encyclopedia not a FLOSS program. Indeed, software is different than encyclopedias in many ways, for example, people can easily switch encyclopedias (while the lock-in and network effects of software are well-known), and far more people can participate in encyclopedia development than in software development. But I still think there are lessons to be learned here. This Encarta vs. Wikipedia battle should make it clear that no proprietary company — no matter how well-resourced it is — is invulnerable to open source competition. Developers of products with FLOSS-like licenses give up some privileges that the law permits them to have, and in return, they can often drastically reduce their development costs and increase the breadth of the result (because the development efforts can be shared among many developers). At a certain point, FLOSS-like projects can end up like a snowball rolling down the hill; they gain so much momentum that even large sums of money — or being the first — aren’t enough to counter them. As a result, even proprietary companies with massive cash resources do not always win. In summary, it doesn’t matter if you have lots of money; if your product costs more and does less (from the user’s point of view), you must change that circumstance, eliminate all competition, or suffer failure of the product.

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