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The Open Source Threat

By Cynthia L. Webb
washingtonpost.com Staff Writer
Tuesday, September 7, 2004; 9:54 AM

Open-source software, namely Linux, is nipping more sharply at the heels of Microsoft, leading the software giant to defend itself more fiercely than ever against the insurgent rise of freely distributed, collaboratively coded programs.

The Redmond, Wash.-based software giant acknowledged Linux is a growing challenge to its business in its 10-K filing with the Securities and Exchange Commission. Microsoft "is facing growing pressure from open-source software across every segment of its business -- a competitive threat that could have significant consequences for its financial future going forward," eWeek reported. "While Microsoft often mentions Linux and open-source software as a potential threat to its business, it seems to be treating the threat far more seriously and describing it as more pervasive than in previous official filings."

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Linux "is making inroads in servers and PCs," Australian IT said in its coverage of the filing. Here's what Microsoft had to say: "To the extent open source software products gain increasing market acceptance, sales of our products may decline, which could result in a reduction in our revenue and operating margins." More from the filing: "We continue to watch the evolution of open-source software development and distribution and continue to differentiate our products from competitive products, including those based on open-source software. We believe that Microsoft's share of server units grew modestly in fiscal 2004, while Linux distributions rose slightly faster on an absolute basis." And Microsoft's filing also offers this survey of its competitors: "IBM's endorsement of Linux has accelerated its acceptance as an alternative. ... Linux's competitive position has also benefited from the large number of compatible applications now produced by many leading commercial software developers as well as non-commercial software developers," Microsoft said.
EWeek: Microsoft Sees Open-Source Threat Looming Ever Larger
Australian IT: Microsoft Sales Down

EWeek reported on some recent Linux wins, which have chipped away at Microsoft's bottom line (though a lot more chipping would be needed to even dent the coffers of a company whose operating system drives more than 90 percent of the world's computers): decisions by the cities of Munich and Bergen, Norway, to use Linux instead of Windows.

Microsoft doesn't take contract losses like this lightly. "Microsoft has not been sitting idly by as the Linux and open-source software threat has grown, It has started reaching out further to the open-source community with offers of joint development and testing," eWeek reported. "It has been actively lobbying governments around the world to shun open-source applications and Linux. To that end, Microsoft in January 2003 announced a new global initiative to provide governmental agencies with access to Windows source code under its Government Security Program, designed to "address the unique security requirements of governments and international organizations throughout the world.' And this January, Microsoft also launched a new advertising campaign, referred to as 'Get the Facts,' that aims to give customers information about the advantages of using its Windows operating system versus Linux."

Microsoft's filing acknowledged the importance of winning government contracts. "While we believe our products provide customers with significant advantages in security and productivity, and generally have a lower total cost of ownership than open source software, the popularization of the non-commercial software model continues to pose a significant challenge to our business model, including recent efforts ... to convince governments worldwide to mandate the use of open source software in their purchase and deployment of software products. To the extent [that this continues], we may have to reduce the prices we charge for our products, and revenue and operating margins may consequently decline," Microsoft said.

Warnings like these are why Microsoft is surely breathing easier over recent news that Australia won't require its federal government to use open source software. ZDNet Australia reported the details, saying officials said "such a move would stretch the industry's resources to the point that the risk of a high-profile project failure would be 'unacceptably high.' Christopher Pearce, the Liberal member of Parliament for Aston, "said there was no discrimination between open source and proprietary software in the government on ideological or philosophical grounds, with its stance on the issue best described as 'informed neutrality.' 'It would be a risky move if government were to mandate open source software,' he said," ZDNet reported. Techworld said this stance "reverses the Aussie government's 2002 statement about open standards and open source as 'critical for the efficient application of technology.'"
ZDNet Australia: Mandating Open Source 'Too Risky': Government
Techworld: Open Source 'Too Risky' for Aussie Government

But here's a reminder that government offices abroad continue to eye open source as a way to save cash: "The European Union is hoping to give the European open-source software industry a competitive boost through a [$1.8 million] research project kicking off next week," Techworld reported. "The focus of the two-year Calibre (Co-ordination Action for Libre Software) project is to improve the way open-source projects work, through organised research and collaboration with industry, and to bring open source more into the mainstream. Ultimately this will put Europe a step ahead of the rest of the U.S.-dominated software industry, the project's leaders hope," the article said.
Techworld via Computerweekly.com: EU Gives Open Source Software a Boost

Golden State's Openness

The San Jose Mercury News yesterday editorialized in support of the state's consideration of open source software to cut costs, noting that "Gov. Arnold Schwarzenegger's blueprint for saving money in government recommends that officials consider open source software alternatives. ... It's not that Microsoft's products, or other proprietary software, are bad. In many situations, proprietary software not only is the safe bet, but also the best bet. But government officials should be encouraged to consider open source alternatives, especially when those alternatives could save taxpayers tens of thousands of dollars. ... In California, the Franchise Tax Board and [state Transportation Department] have saved more than $600,000 by using open source software. ... The final [California Performance Review] recommendations should simply ensure that government bureaucrats give open source products a serious look. If open source is good enough for Amazon and Google, it's certainly good enough for the state of California."
The San Jose Mercury News: Open Source Software Deserves a State Look (Registration required)

Open Sesame

A group of eight Minnesota companies, including electronics retailer Best Buy Co. and class ring company Jostens Inc., are sharing code from nearly three dozen software projects online at the Avalanche.coop site, Information Week reported. The effort, called the Avalanche Technology Cooperative, is "in hopes of lowering costs and improving quality," the article said.
InformationWeek: Co-Op Puts a New Twist on Open Source

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