E-Business Commentary -- The Attack Of The Giant Penguins

Microsoft Corp. is fighting an army of penguins. The penguin, of course, is the icon for Linux, an open-source software operating system. More and more companies are adopting Linux. The reason is that it costs less -- as in free -- than the ever-rising cost of Microsoft systems to run servers, the midrange computers that businesses use. But as far as Bill Gates is concerned, Linux might as well have Godzilla as its mascot. Speaking of Godzilla, if you remember the Saturday matinees of the 1950s, then you remember the grade-B horror films featuring giant praying mantises, huge pterodactyls, monster ants and other scary creatures. These on-screen beasts terrorized humans and wreaked havoc on major cities, succumbing in the end to fighter jets, flame-throwers and high-tension power lines. No such luck for Microsoft. Sure, Linux may be scary to Big Redmond, but it's anything but a large, hulking target. In fact, one of the advantages of Linux is its democratization, that is, its ultimate dispersal among thousands of creative programmers around the world. Microsoft is used to beating the stuffing out of stationary targets -- e.g., the Netscapes and Novells that had a product and an address. By contrast, Linux has no address. Linux is not a software company. It's not even a product. It is the sheer antithesis of proprietary software such as Microsoft Windows XP. Companies pay not to use the software, but for its installation and associated services. So-called open source software such as Linux differs from proprietary software in that the source code that runs the system is available for free over the Internet. Anyone who wants to modify it and improve it can do so. Microsoft takes the view that open-source software both threatens intellectual property and stifles innovation by removing the incentive to invest in R&D. In a careless blunder, Microsoft played right into the clever flippers of the penguin in July when it launched a new software licensing program that has businesses grumbling. The License 6.0 Software Assurance program amounts to a huge price increase for many if not most companies, which must pay an annual fee of 25% to 29% of the cost of desktop or server software in order to receive upgrades. Basically, companies that don't upgrade often pay more. As a result, many corporations are looking to kick the expensive Microsoft habit. All you have to do is the math. One company that in the past paid an average of $200,000 each for powerful servers running a proprietary operating system recently got away with spending an average of just $4,000 for machines running Linux. Multiply those numbers by 50 or more machines for a big data center, and the savings are a lot more than penguin-feed. Some companies using Linux report that it is just as powerful, often faster, and more reliable. On the software applications side, cheaper alternatives that run on Linux abound. Sun Microsystems offers the StarOffice suite of programs including word processing, a spreadsheet, and graphics package. It runs on Windows, Linux, and Sun's own operating system, Solaris. Some big manufacturers either have adopted Linux or are planning to, including Boeing Co. and General Motors Corp. In the latest fiscal year ended June 30, sales of servers loaded with the Linux system were up 18%, versus a 3% rise for sales of Windows-based machines. According to one estimate, the penguins will have taken over one-fourth of the server market by 2006. To fight back, Microsoft is supporting an industry group named, ironically, the Initiative for Software Choice. Except for Microsoft and Intel Corp., most of the members are small companies. Microsoft has taken this tack many times before, seeking to enlist large numbers of companies to align with it in efforts to crush the competition. Even so, Microsoft had better hurry with the boiling oil. Sure, the penguins are still outside the walls. But you can hear the heavy drumbeat of their flippers on the gates of Big Redmond. Doug Bartholomew is a former IW senior technology editor. He is based in San Francisco.