The Open-Source Challenge

Microsoft, Oracle and other conventional vendors must reinvent themselves to vie in the global marketplace where open source contends.

In August 1991, a 21-year-old student posted a newsgroup message introducing a "free operating system" that he described as "just a hobby, wont be big and professional like gnu." Barely into its adolescence, Linux has changed the software industry—to the point that we must ask how much longer traditional software vendors can compete against "free" without substantially changing their business models, tactics and tone.

Competitive pressure intensifies when whole countries move toward open-source platforms and applications. Brazil is following the example of China in embracing Linux both for government workers and citizens. This year, Brazil plans to subsidize the purchase by lower-income individuals of PCs running Linux and 25 other open-source programs. Last year, Microsoft sued Sergio Amadeu, the head of Brazilian President Luiz Inácio Lula da Silvas National Institute of Technology, when he compared Microsoft to a drug pusher; in 2003, the Brazilian government signed a letter of intent with IBM to boost Brazils use of Linux. Microsoft Chairman Bill Gates reportedly was seeking a meeting with President da Silva at the World Economic Forum last week in Davos, Switzerland.

We agree with Gates argument that the case for "free" should not be oversimplified. Software costs only begin with the acquisition of a license, free or otherwise. Software configuration, the linchpin of both security and performance, is not an off-the-shelf product; it is a site-specific process, requiring a lengthening list of skills that is only partially offset by continuing improvements in management tools. Application development, the gateway to IT value, is a laborious process on platforms lacking rich and mature APIs or portfolios of code libraries and development aids.

While taking up the legal and rhetorical gauntlets might be tactically necessary for Microsoft, the company will have to go much further strategically or risk facing "facts on the ground" in the developing world: Open source everywhere as a fait accompli. This could lead to a future in which the developing nations leapfrog the developed countries because theyre able to deploy better software at lower cost right from the start, instead of having to undergo a costly transition to it. Even in the developed world, the Internet applications that define the futures of the marketplace of products and the marketplace of ideas are the Linux-based platforms of Amazon.coms storefronts and Googles indexing farms and search services.

Microsoft, Oracle and other conventional vendors must do more than conduct angels-on-pinheads debates and self-interested studies of total cost of ownership. They must deliver tools that can develop better applications in less time, and they must deliver application suites that streamline business processes, not merely tie users into an endless locked-in upgrade cycle. Ultimately, they must reinvent themselves to vie in the global marketplace where open source contends, demonstrating tangible and superior return on investment.

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