TL;DR version: CERN used Microsoft software under academic licencing terms, Microsoft revoked the terms and created a 10x cost increase (and budget hole). CERN is going to replace the software with something else.
This is such a beautiful, real life, example of the Piracy Paradox that I've kept a copy in my Evernote database.
The Piracy Paradox is this; Vendor A counts the number of copies of their software that are running in a region/venue/company, multiplies by the list price of that software, then subtracts the revenue received and comes up with a number they are "losing due to piracy."
The assumption, which the media often simply buys into, is that if the software were impossible to obtain without paying list price, the vendor would receive much more more money. However, the reality is that if you could make the software impossible to obtain, then the revenue received would simply be zero. It wouldn't be purchased because it is priced above the market value of its utility to the customer.
The result is that the "piracy numbers" that are bandied about, whether it is for CAD software, DVD movies, or Computer Games, is overstated by three or even four orders of magnitude.
Validation that this effect was a real effect has been proven multiple times, the two most famous examples have been the "99 cent single" price of iTunes and the watch all you want video subscription service of NetFlix. In both cases, the arrival of a pricing system that more accurately reflected the value perception of the consumer, whether it was that albums/CDs were too expensive to buy for the one or two songs you really cared about, or that DVDs were over priced for the occasional viewing, better pricing schemes reduced the amount of digital content that was used outside the terms of a use license dramatically.
The challenge for vendors is that the products they sell just aren't worth the same amount to every possible consumer. There are tools available to evaluate the elastic cost value of a fungible service but implementing them is challenging.
I am really surprised that Microsoft didn't negotiate something that would give them some revenue, as it stands the success of this effort will reduce revenue from CERN from what it was to nearly zero it seems. I'm guessing there was a cost increase between 2x and maybe 5x that would have not kicked off this effort. And of course a number of large laboratories will see the success of CERN and then they too will eliminate Microsoft as a cost item in their budget (ideally to spend more on the science, but sadly that isn't always the case).
This is such a beautiful, real life, example of the Piracy Paradox that I've kept a copy in my Evernote database.
The Piracy Paradox is this; Vendor A counts the number of copies of their software that are running in a region/venue/company, multiplies by the list price of that software, then subtracts the revenue received and comes up with a number they are "losing due to piracy."
The assumption, which the media often simply buys into, is that if the software were impossible to obtain without paying list price, the vendor would receive much more more money. However, the reality is that if you could make the software impossible to obtain, then the revenue received would simply be zero. It wouldn't be purchased because it is priced above the market value of its utility to the customer.
The result is that the "piracy numbers" that are bandied about, whether it is for CAD software, DVD movies, or Computer Games, is overstated by three or even four orders of magnitude.
Validation that this effect was a real effect has been proven multiple times, the two most famous examples have been the "99 cent single" price of iTunes and the watch all you want video subscription service of NetFlix. In both cases, the arrival of a pricing system that more accurately reflected the value perception of the consumer, whether it was that albums/CDs were too expensive to buy for the one or two songs you really cared about, or that DVDs were over priced for the occasional viewing, better pricing schemes reduced the amount of digital content that was used outside the terms of a use license dramatically.
The challenge for vendors is that the products they sell just aren't worth the same amount to every possible consumer. There are tools available to evaluate the elastic cost value of a fungible service but implementing them is challenging.
I am really surprised that Microsoft didn't negotiate something that would give them some revenue, as it stands the success of this effort will reduce revenue from CERN from what it was to nearly zero it seems. I'm guessing there was a cost increase between 2x and maybe 5x that would have not kicked off this effort. And of course a number of large laboratories will see the success of CERN and then they too will eliminate Microsoft as a cost item in their budget (ideally to spend more on the science, but sadly that isn't always the case).