The Market Shift From Microsoft to Open Source and the Microsoft Response

February 4, 2005
On January 25th, 2005, Sun Microsystems released 1,600 patents associated with the Solaris OS, the largest single release of patent innovations into the open source community by any organization to date. The next day, IBM released 500 patents including some related to web services. "As the largest business contributor to the open source community, Sun has always been an ardent believer in open standards and the open source process going back to the inception of this company," said Scott McNealy, Chairman and CEO, Sun Microsystems, Inc. "The release of more than 1,600 patents associated with the Solaris OS far eclipses any other vendor's contribution. Today represents a huge milestone for Sun, for the community, for developers and for customers."

Speculators have suggested Sun has released the patents in bit of a desperation move to create interest in their Solaris 10 OS and there is healthy skepticism that a community of open source developers will move to work with the code. Despite Sun’s motivation or the outcome of the move, it highlights a growing strategy on how to attack Microsoft in the market. Competitors are realizing they can use Redmond’s revulsion of open source against them by doing what Microsoft cannot, giving away software. Microsoft has turned-off if not angered many customers by asking for money to upgrade to the latest additions of products they’ve already purchased and some are beginning to switch to open source solutions.

It’s not only the smaller players who are beginning to switch as well. CNET News has reported that in the past year, Verizon Communications and Air New Zealand have all switched to Linux to cut costs and that in a survey of 225 CIOs 25% of them were considering a switch to Linux. In Europe, it is far more culturally appealing to use a free open source OS than pay a large American company and that trend could be spreading to other areas of the world, especially as America and thereby American companies are increasingly seen with distrust internationally. Most recently in Brazil, John Barrow the former Grateful Dead lyricist called for impoverished nations to move to free software to help solve their economic problems at the World Social Forum as the Brazilian government prepares to switch over 300,000 machines to Linux. "Already, Brazil spends more in licensing fees on proprietary software than it spends on hunger," Barrow said at the forum. This trend won’t spell the end for Microsoft but it may, in the long term, seriously erode their market penetration. Will .NET and Longhorn innovations really be enough to keep CIOs buying from the software industry giant when they can get a free open source solution that is often seen as more reliable and secure?

With $40 billion cash in hand, the lion’s share of the desktop market and massive profits it’s unlikely that Microsoft will go the way of the dinosaur or the GPL just yet. Microsoft reported its Server and Tools business grew 18% this quarter vs. last year which made $2.8 billion. The division which sells Office reeled in $2.8 billion and the up until now unprofitable Home and Entertainment division brought in $1.4 billion. John Connors, CFO had this to say of Microsoft’s $10.82 billion quarter, “Our record revenue came from across-the-board strength in both our business and consumer segments and our long-term approach to growing new businesses is paying off. Home and Entertainment delivered its first profitable quarter and all three of the company’s emerging businesses combined generated a nearly $700 million improvement in operating results compared to the second quarter of last fiscal year.”

Microsoft will hold a strong share of the OS market for some time to come despite increasing defections to Linux and backed by breadwinners like Office will likely continue to expand and do well in other markets like their Home and Entertainment division as well. It should be obvious that Redmond isn’t about to open source their OS, but nonetheless, Microsoft is starting to delve into open source in response to pressure from Linux. While CNET recently questioned if Microsoft’s moves towards open source come too little too late the attitude inside the company at least has changed dramatically.

The Seattle Post-Intelligencer Reporter announced that Microsoft has released two software-development tools to the open-source community. "There's more of that on the way," said Microsoft's platform manager Stephen Walli, "And it's not just about developer tools. There's other things that we can be looking at when you actually look at the breadth of source code that we have, the breadth of software that we have that isn't actually core (to Microsoft's) revenue stream." Contrast this with exec Brian Valentine in a chat posted on MSDN from a couple of years ago:

“Q: Michaelg: Many have speculated on Microsoft support for other OSes (like Linux). Any comments?

A: Brian: Are you kidding?????? Windows Windows Windows baby!!!!!! We will focus our resources on making Windows the OS of choice by providing the highest value and solutions. Anytime you drop to least common denominator that's exactly what you get.”

Still, that’s a big step for Redmond towards the open source community. In the future Microsoft may open up even more just as China is increasingly opening towards the internet. As much as Bill Gates or China might love to hold on to their now almost omnipotent control the market is dictating a greater openness for both. The latest example, unthinkable even a few years ago, is Microsoft loosening licensing around its Office document formats. The state of Massachusetts passed a law that all new software must be open to prevent vendor lock-in and with other states soon to follow Microsoft will lose hundreds of millions if it loses all its government contracts. Therefore, because XML allows them to do it and because they stand to keep their share of the market Microsoft has embraced the masses with their sacred Office suite.

Gary Wolf recently wrote a satirical article for in which he posts an open letter, dated 2008, from Linux guru Linus Torvald(now Microsoft employee) to Bill Gates asking for help in getting Steve Ballmer onboard with his WinX project. A Windows desktop and application framework around a Linux operating system. The factitious letter is worth a read for both a laugh and possibly a look at how Microsoft might (eventually) work with open source. See ‘The Microsoft Memo’ at

In the end the argument and fuss over open source vs. proprietary licensing may be much ado about nothing. The difference to each approach boils down to having a powerful corporation or relying on public knowledge as the base support for a product. Each method has its advantages and disadvantages and the competition between them serves to make each system better if not at the very least serving to keep Microsoft ‘honest’ and the Linux open source community motivated. The problem is 2 Microsoft ideals; its “first to market” approach and refusal to allow interoperability with Linux. ‘Ship it now and fix it later’ is an extremely frustrating philosophy for end users to deal with. It’s unfortunate that Microsoft propagates this software development model that places ease of use at the top of the list and reliability and security at the bottom. As technology integrates computers more closely with our lives and the way we spend our money each day and consumers, whether private individuals or corporations will have increasingly more at stake when they pick a software solution they will pick the one that gaurantees their security over bells and whistles every time. In the same vein logic dictates that Microsoft will guarantee their own financial future by increasing their focus on security just as they’ve opened up their Office file formats. The question is how long will it take Microsoft to feel the financial effect of isolating their operating systems? Bill Gates recently wrote an email to Microsoft customers extolling the need for interoperability among software components and he would do well to follow his own words. Gates doesn’t need to open source his OSes to make them compatible but he does need to cooperate and open up technological avenues for interoperability to exist.

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