Microsoft Corp. Chairman and chief software architect Bill Gates on Tuesday weighed in on the threat the Linux operating system poses to his companys business, saying he is taking the threat seriously as Linux is "out there and very pervasive."
Addressing more than 600 of Microsofts Most Valuable Professionals (MVPs) from around the globe at the Redmond, Wash., campus, Gates said that during other points in Microsofts history there had been technologies that people said were going to kill the company.
"OS/2 for about six years was that. And it wasnt a joke; it was all of IBM that was 10 times the size of Microsoft putting all their energy, their leverage on ISVs, bundling it with their systems, everything they could do to beat Windows, and we as a company had to learn new things, do new things to respond to that competition," he said.
But Linux is an "unusual kind of competition because in a way its out there and very pervasive. In a way, theres more incompatible versions of Linux than there are of all other operating systems put together. That is, as people do innovations on top of Linux, they dont all get tested together and theyre not all consistent with each other," Gates told the MVPs.
As a result, there are things that the free model is never going to do well, whether it is testing or support or innovations where a risk has to be taken across all the boundaries of the different modules. That kind of testing, that uniformity, is done well by commercial software companies. As an example, Gates cited the development of the Tablet PC, where there had to be a handwriting group, an Office group and a user interface group, all coordinated into one step.
"Its almost like a 747 where, yes, its easy to do a wing, its easy to do a tail, but to produce a wing and a tail that work together under all conditions, thats tough, and thats the position were in," he said.
Linux today is basically Unix, what Unix has always been, Gates said, adding that Microsoft has been competing with Unix for a long time. One of the things Microsoft has done in response to that was to build a Unix compatibility layer, in its Services for Unix product. "Its really quite amazing because it actually emulates different flavors of Unix, and its getting richer and richer," he said.
As people move off proprietary Unix systems and onto X86 hardware, they must decide whether to run Windows or Linux. Microsoft shows those customers what its value proposition is, such as the rich layers and support Windows has, like Active Directory, and management.
The real comparison is between Linux with WebSphere and Windows: compare the price, compare the architectural coherence, the richness of the development tools and/or performance, Gates said. "That will be a very dramatic contrast; our price is still way lower than what youre going to have to do with those others.
"So its great. Theres always been people who thought the Macintosh would take over, that Netscape would take over. Network computers, remember all those ads and those poor customers who bought those things? So we take it seriously. Im not trying to make light of it. I never made light of OS/2," Gates said.
His comments follow the companys recent 10-Q quarterly filing with the Securities and Exchange Commission, where Microsoft cautioned investors that it may in the future be forced to lower its software prices as a result of the growth of open source.
Microsoft said in the filing that the popularization of the open-source movement continues to pose a significant challenge to its business model. This threat includes "recent efforts by proponents of the open source model to convince governments worldwide to mandate the use of open source software in their purchase and deployment of software products. To the extent the open source model gains increasing market acceptance, sales of the companys products may decline, the company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline," it said.
But Gates on Tuesday said Microsoft is "driving the frontiers of software, driving quality-type work and new scenarios," adding that its software could actually save customers more than the 2 percent or 3 percent cost to their IT budgets that Microsoft software represents.
Microsofts software now administers those systems and keeps them up to date and tracks them. "So, the net cost effect, as I said, has got to be this dual thing of more capability and a net savings in terms of overall IT spending," Gates told the MVPs.