SEATTLE POST-INTELLIGENCER
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Open source's threat to Microsoft is growing

Wednesday, November 19, 2003

By TODD BISHOP
SEATTLE POST-INTELLIGENCER REPORTER

LAS VEGAS -- Computer enthusiasts at a conference here this week are learning about the latest technologies and attending sessions about a software program that dominates an important segment of the market.

But contrary to what you might be thinking, the conference is not Comdex. And the software is not Microsoft Windows.

The event, ApacheCon, is a gathering of people involved in open-source software -- computer programs produced by international communities of volunteers. The conference is being staged down the road from Comdex by the Apache Software Foundation, a group best known for an open-source program used on nearly 70 percent of the computers that store and serve up Web pages.

The success of the Apache Web server underscores the growing influence of the open-source movement in the world of software development. The trend has deep implications for traditional software companies, which worry that users will abandon their products in favor of free or inexpensive open-source alternatives.

Microsoft Corp., in particular, has identified the open-source Linux operating system as a serious competitive threat, rallying employees around the cause and commissioning studies in an effort to prove to the computing public that Windows is superior.

A lawsuit over the origins of the software code used in Linux has caused some corporate users to reconsider using the operating system, but that hasn't stopped the open-source movement from making key advances.

Sun Microsystems announced this week that it reached a deal with a Chinese software consortium to put Sun's desktop software system, based on open-source programs including Linux, in 500,000 to 1 million computers in the country in the coming year. The government of Brazil, citing Microsoft's licensing fees, signed a deal with IBM to foster the use of Linux and other open-source programs in that country.

Massachusetts, concerned about Microsoft's dominance in the software market, recently decided to give preference to open-source products. And many schools and research institutions are embracing the open-source concept.

"If you spend a lot of time walking the halls of universities and national labs, which I do, it's astounding -- sometimes it seems like everything is Linux," said Patrick Ennis, managing director of Seattle-based venture capital firm Arch Venture Partners. "It's not even an issue. It's like, 'Oh, yeah, we'll do that on Linux.' "

Collaborative development

Open-source software gets its name from the fact that the underlying source code is made available for public use and modification. Advocates say the organized, collaborative nature of open-source projects tends to create better software.

"Clearly, having a large community with diverse opinions is one of the things that drives innovation," said Shane Curcuru, a member of the Apache Software Foundation in Las Vegas this week for ApacheCon. He said it's apparent that corporations are becoming more accepting of the open-source concept.

But Microsoft CEO Steve Ballmer, in a June memo to employees, wrote that the company believes strongly in the way it makes software.

"While the non-commercial model may lead to many flavors of software, getting broad, consistent innovation requires coordination across many technology components," Ballmer wrote. "In the event of needed enhancements or fixes, the Linux development community, no matter how well-intentioned, simply cannot advance Linux the way we can and must innovate in Windows."

The company also disputes the notion that using open-source software is substantially less expensive than using its programs, pointing out that companies using open-source products still need to pay someone else to install, maintain, update, and provide customer service for the software.

"The total cost of a system is much greater than the acquisition cost," said Harley Sitner, lead product manager for the Windows Server System.

Such contentions apparently haven't sunk in among computer users.

"Linux has a very interesting value proposition for customers, and they're taking advantage of it," said Efrain Rovira, hardware manufacturer Hewlett Packard's worldwide director of marketing for Linux. "They all talk about the different benefits, but at the end of the day, it is cost."

An open-source Microsoft?

Given the momentum of the open-source movement, traditional software companies such as Microsoft should consider embracing at least some elements of the open-source model, said Leonard Fuld, a competitive intelligence expert and president of Fuld & Co., a Massachusetts-based research and consulting firm. For example, they could turn some of their products into open-source projects, building a community around them, while keeping others proprietary.

"I think some accommodation like that might emerge from Microsoft over time," Fuld said. "I don't think they can totally hold that tidal wave back."

Open-source advocates agree that Microsoft should change its philosophy.

"They continue to disadvantage themselves, because ultimately in a connected world you need to use connected methods," said Simon Phipps, chief technology evangelist at Microsoft rival Sun Microsystems. "They have however many developers it is locked up in Redmond, who are undoubtedly brilliant people and undoubtedly doing great work, but they're not connected, and they're not leveraging all of the other smart people they could be using."

Phipps said open-source doesn't necessarily mean non-commercial. Many companies, including Sun, are building business models around open-source software -- charging not for the program but rather for services and support. Examples include the Sun Java Desktop System, the alternative to Microsoft Windows and Office adopted this week by the Chinese software consortium.

Microsoft could adopt the same model, Phipps said, although it would no longer realize the types of profit margins it does today. The company's desktop Windows division reported $8.4 billion in operating profit on slightly less than $10.4 billion in revenue during its most recent fiscal year.

Linux on the desktop

Linux has grabbed a significant amount of market share on computer servers, but it remains much further behind Windows on desktop computers. Experts point to various challenges inherent to open-source software that could hurt its chances of expanding its desktop market share.

One is the relative lack of support provided for many programs produced under the open-source model, said George Kondrach, an executive vice president with outsourcer Innodata Isogen. Unless there is a distributor such as Sun, RedHat or some other company acting as a middleman, end users have no commercial entity to turn to for help in the event of a problem, he said.

"From a logical standpoint, open source hasn't caught on in the way that it should have in a lot of ways," Kondrach said. "The reason is support."

That concern extends into the legal arena, as well. If something goes wrong with an open-source product, the practice of community software development leaves users with little recourse, said Michael Overly, a Los Angeles lawyer and the author of "The Open Source Handbook."

"Open-source applications will have their niche, and it will continue to grow, but in the long term commercial products will still rule because people want to have real remedies and real protections in their contracts," Overly said.

Legal pitfalls

Complicating matters for Linux is a lawsuit in which The SCO Group alleges that IBM is selling Linux containing misappropriated elements of SCO's proprietary Unix technology. The dispute could have implications for Linux users, with SCO seeking compensation from those it believes to be using its technology without permission.

The nature of open-source development makes it tough for a user to determine with reasonable certainty whether an open-source product violates someone else's intellectual-property rights, Overly said. As a result, he said, companies need to be careful about using open-source software for critical functions, especially if there's no commercial vendor standing behind the product.

"You have to assume that you may have to pull that application from use within your organization with almost no notice if someone claims infringement," he said.

Hewlett Packard, attempting to address such concerns, has offered its Linux customers indemnity, promising to shield them from any legal fallout that might arise from their use of the technology. Others are expected to follow suit.

Microsoft agreed this year to license the source code for the Unix produced by SCO, avoiding litigation over its own use of the technology in a product called Windows Services for Unix. The deal raised speculation in the open-source community that Microsoft was seeking to give financial support to the fight against Linux, albeit in a roundabout way.

"Obviously Microsoft would be pleased as punch if something happened to the open-source movement to cause it to slow down dramatically," Overly said. "They clearly have a competitor out there, and it's in the operating system market, which is certainly frightening for them."

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