Why Open Sources Poses A Threat To Microsoft

It's ironic that one of the fastest growing threats to Microsoft's financial strength is free. But then again, that's the whole point behind the Linux operating system and other open source software.

"Open source code" is the fancy turn of phrase for software and its underlying code base that is available free to anyone to read, redistribute and modify. Anyone can download open source code from the World Wide Web. If a developer finds a bug and wants to devise a fix, or wants to introduce new features into the public domain, he does so by participating in on-line forums and news groups.

Open source software theoretically evolves more quickly than its commercial counterparts because more engineers are working on the code than any vendor could afford to employ.

A handful of hard-core Silicon Valley software engineers hatched the term "open source" last February after Netscape made a high-profile announcement to publicly release the source code for its browser.

The browser code was not the first software to be opened up to programmers without a hefty licensing fee. Unix source code has been on the freeware circuit for decades. And the long-standing Apache Web server - also a freely distributed program with corresponding source code - hosts more Internet sites than competing commercial programs.

The Open Source Initiative was formed last year to make sure that all wares that carry the open source label comply with the underlying definition. What has pushed the group into the limelight of late is the growing interest in Linux as a formidable replacement for NT on workstations and servers.

Open source code threatens the way Microsoft sells its operating systems and how it maintains control over the Windows developer community.

Microsoft has admitted as much. In the now infamous "Halloween Papers" - an internal Microsoft memo made public last October - a company employee wrote that open source software in general, and Linux more specifically, "poses a direct, short-term revenue and platform threat."

According to Summit Strategies' analyst Dwight Davis, open source code is going to make a difference to Microsoft on three fronts. It will make a dent in NT sales in the low end of the server market, in server operating system sales to ISPs, and in the server appliance market. The open source model "challenges Microsoft's death grip on the developer community," says Tom Ferris, a systems consultant with an international financial institution in Washington, D.C.

Microsoft fears that the free exchange of ideas among open source participants can't be replicated under Microsoft's current software licensing model. The company has always kept a tight rein on which software components it exposes to developers and under what terms they can be used. Microsoft rarely permits its licensees to change the Windows source code.

It's still unclear what moves Microsoft will make to stave off the open source challenge. There are rumors that Microsoft may devise a hybrid open source model under which some Windows source code would be publicly exposed.

"That's what would be ironic, Microsoft having to give up some control [over Windows] in order to keep control over its traditional market," Davis says.