Jason Hiner at Tech Republic has written an article entitled “How Microsoft beat Linux in China and what it means for freedom, justice, and the price of software.” He contends that Microsoft’s ‘victory’ over Linux in China is total.

But what kind of a victory are we talking about here? Well, they gave away access to their crown jewels, the source code:

“In 2003, Microsoft began a program that allowed select partners to view the source code of Windows, and even make some modifications. China was one of 60 countries invited to join the program.”

They cut prices drastically:

“Microsoft got serious about competing on price by offering the Chinese government its Windows and Office software for an estimated $7-$10 per seat (in comparison to $100-$200 per seat in the U.S., Europe, and other countries).”

And they caved completely on piracy and so-called Intellectual Property enforcement:

“Microsoft’s initial strategy was to work to get intellectual property laws enforced in China, but that was an unmitigated disaster. Microsoft realized that it was powerless to stop widespread piracy in China, so it simply threw up the white flag.”

So what exactly did Microsoft win, again? This article is rife with untested assumptions. Let’s establish a bit of context here before going too far.

Microsoft beat Linux? That most certainly is how Microsoft sees the situation. But their entire ethos is of conquest, control and coercion. None of these apply to Linux. While it’s true that some have used Linux as a tool to gain leverage with Microsoft, Linux as an operating system has no goal, except to be good at what it does. Unlike Microsoft, Linux is not controlled by any single actor, or even by a like-minded group of actors.

Linux doesn’t fight Microsoft (though MS does fight Linux and FOSS in general). It just keeps improving for its own sake and for the sake of its users. If that has detrimental effects on Microsoft’s control of the operating systems market – and it does – well, that is nothing more than a collateral benefit.

So, from Microsoft’s perspective, maybe they did ‘beat’ Linux, but even that defeat isn’t complete or permanent. When China donates PCs to its development partners, what OS does it ship? Linux. Is Red Flag dead and buried? No. Is China dependant on Microsoft for its IT infrastructure? Hardly.

What price victory? A more honest evaluation of the circumstances of China’s decision to accept Microsoft at all shows that Microsoft’s ‘victory’ may be more pyrrhic than anything. With trademark deftness, China has largely de-fanged one of the most effective and brutal corporate negotiating teams in the world. This is the corporation that managed to buy off the US government and avoid any real punishment following its conviction for abuse of monopoly powers. It’s the company that has consistently and rather successfully thumbed its nose at the European Union, the largest economic entity in the world today. It has controlled standards processes, locked in countless corporations and ruthlessly dominated the supply chain world-wide.

Yet Chinese negotiators got everything they asked for. Price reductions? They pay about 10% of what other governments do per seat. Control? They not only have access to the source code, they have to right to alter it to suit their purposes.

Think about what that means to the Chinese. In economic, political and strategic terms, they’ve negotiated unprecedented access to an invaluable resource, and they’ve done it in a way that costs them next to nothing. Truth be told, Microsoft got almost nothing out of this deal. China still uses Linux whenever and wherever it wants.

A deal that would make Stallman laugh. If we think about the Four Freedoms that underlie the GPL, the same four freedoms for which Richard Stallman and the FSF have fought so desperately to support and preserve, the same freedoms that are so perfectly antithetical to everything that Microsoft stands for… these are exactly the freedoms that China has preserved in its deal with Microsoft.

Let’s be honest here: Microsoft may have won the battle, but only by utterly compromising itself and its future in China. They have placed themselves in a virtually abject position vis à vis China. Happily, the Chinese know enough about loss of face to ensure that they never rub this in Gates’.

Bottom line: This is not a Linux/Microsoft story. Linux is a bit player in this story, a Rosencrantz to Microsoft’s Hamlet. The real story is how China managed to pull a classic con on one of the toughest negotiating teams in the corporate world, and how they did it so well that Microsoft keeps coming back for more.