PORTSMOUTH, N.H.—Management guru Clayton Christensen has a paradoxical answer for Microsoft to the challenge posed by open source: Invest in Linux applications for handheld devices.
Christensen, an associate professor at Harvard Business School, is the author of the 1997 "Innovator's Dilemma," a book that describes how good companies often fail because business managers don't embrace "disruptive" technologies.
Open source is a clear disruption to Microsoft and the software industry in general, Christensen told attendees at the Future Forward technology conference here Thursday.
The software company can respond to this market disruption by setting up a separate business that will "kill Microsoft," Christensen said. If it doesn't react to the rise of Linux desktops on handheld computers, it will miss a coming wave of new applications and market opportunities, he said.
Microsoft has already conceded that open-source software poses a significant challenge to its business. The company could not be immediately reached for comment on Christensen's remarks.
Christensen has observed that companies regularly stumble when they follow the well-established management practices of planning and listening to customers. To succeed, companies should not only cater to customers and continue improving their existing products, he argues. They should also set up separate business units to capitalize on new technologies, even though these may be poor-quality, low-margin products.
Digital Equipment, for example, grew rapidly in the late 1980s by selling mini computers, which were a simpler, lower-cost option to mainframes, he said. But when other PCs began to take hold, the company didn't pursue that market for economic reasons: PCs offered substantially lower profit margins and didn't meet the technical needs of existing mini-computer customers.
In Microsoft's case, Linux applications on handheld devices are a threat to its lucrative business of selling desktop PC applications for its Windows operating system.
"As computing becomes Internet-centric, rather than LAN (local-area network)-centric, their stuff runs on Linux, because it's all new," he said. He noted that people increasingly leave their laptop PCs at home when they travel and instead rely on handheld devices, such as Research In Motion's BlackBerry.
Linux also provides a cheap, commoditylike alternative to Windows—the basis of Microsoft's business. Although Linux didn't use to be as functional as Windows or Unix, adoption of the operating system grew rapidly because it met the needs of simple applications and is relatively cheap. A similar dynamic is now occurring in the database market with open-source products such as MySQL, Christensen said.
Christensen said that Microsoft should move progressively into Linux applications over the next six or seven years, because that sector will offer better opportunities for growth than operating systems or databases. He suggested that Microsoft acquire Research In Motion to accelerate the move, rather than continue to invest in making Windows run better on handheld devices.
"As the BlackBerry becomes more capable, applications will get sucked onto it. Those are kind of places where growth is," he said. "If Microsoft catches it, they'll be all right."