A Network Model for Prices
I hypothesize you can think of the market like a big mesh net. If the price of a house drops (Eg Bothell Countdown), it pulls down prices nearby, just like putting a bowling ball on a mattress compresses parts of mattress around the ball. If prices drop 20% in Bothell, it suggests they might need to drop at least 15% in Kirkland.
So, imagine a huge net covering King County. Imagine a pair of fingers grabbing at the net from above pulling prices up (these are usually job epicenters, like MSFT campus in Redmond). Now, imagine a thousand smaller sets of fingers pulling down. These are all the houses sitting on the market, going through priced drops. Just as the fingers pulling up have a localized effect, each price drop has a localized effect to pull prices down.
Today, we are seeing marketplace innovation empowering the downward pressures, just like they before to empower those upward pressures. The problem for sellers, is that even a powerhouse like MSFT can only lift so much dead weight. There are just too many houses pulling the market down a little piece at a time.
So, imagine a huge net covering King County. Imagine a pair of fingers grabbing at the net from above pulling prices up (these are usually job epicenters, like MSFT campus in Redmond). Now, imagine a thousand smaller sets of fingers pulling down. These are all the houses sitting on the market, going through priced drops. Just as the fingers pulling up have a localized effect, each price drop has a localized effect to pull prices down.
Today, we are seeing marketplace innovation empowering the downward pressures, just like they before to empower those upward pressures. The problem for sellers, is that even a powerhouse like MSFT can only lift so much dead weight. There are just too many houses pulling the market down a little piece at a time.
Comments
But regarding Microsoft. It could be interesting as well. I've finally bit the bullet and will be purchasind a laptop for my wifes business. The more I watch friends problems and talk to the tech people at work, the more consternation I had about Vista. Well, after a lot of research and experimentation, I will be dumping Vista (and getting a refund for it) and loading Linux Ubuntu.
Everyone knows the shine is wearing off Microsoft. It is looking more and more like a polished turd. And as the hands pulling up the dead weight loose their strength, The hands pushing can lower the net substantially further with no extra energy.
Their problem is the internet. MSFT is a PC company. They thrive on people buying software to run on their PCs. Now, think about your usage patterns. If you are like me, you use desktop applications (Word Processing, Compiler, etc) at work but at home nearly every thing you do is on the internet. There's a definite trend, and it's not going MSFTs way.
That's the main threat. There's something to be said that their cash-cows (Office specifically) are fairly static, meaning there is risk of competitors (commercial or free) stealing market share, but the internet is what's really changing the market.
I love to hear when someone does that. I have 2 partitions on my laptop (1 Ubuntu / 1 XP). I'm in XP most of time at work because my client uses it, gross, but at home, we run Linux exclusively. I thought my wife would hate it when we I switched everything up, but she absolutely loves it. That was 3 years ago and we haven't looked back. I will never again purchase a M$ product. Other distros just work.
I also will tell you I have personal experience with the "free stuff" threat. I used to be a sales engineer for Compuware. We sold a lot of mainframe tools that were very popular and VERY lucrative. Well, IBM offered, one by one, FREE replacements for our various products that simply came with the IBM hardware. Mind you, they were not quite as good, but a $2,000,000 annual license fee vs FREE is hard to justify.
There was a lawsuit because a lot of Compuware people had gone over to IBM and some of their copycat products had precicely the same code as some of Compuware's. In the end though, there was an out of court settlement where Compuware got a chunk of money and IBM got the right to continue offering the stuff. I don't expect Compuware to survive without a virtual complete change in product (think Commodore selling Cabbage patch dolls).
I think Microsoft is quickly finding themself in the same boat, only there is nobody to sue. I've tried open office. I like it. It will only get better. Microsoft may be finding themselves in the same position with software as the record industry is finding themselves with music - actually PAYING for pre-recorded music is sooooo 20th century.