Linux- Gaining Ground

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Threatened by the Penguin Contd...

However, this move of Microsoft was not well received in the industry, and many questioned the credibility of the report as the company itself had commissioned it. This view was vindicated when one of the IDC researchers - Dan Kusnetzky (Kusnetzky) stated that Microsoft had selected scenarios where the use of Linux would be more costly. He also added that Windows was cheaper only because Microsoft had been developing software to manage its o/s for a very long time.

Kusnetzky, said, "Microsoft has had a lot more time to work on this. I wonder why the win wasn't bigger."19 However, Microsoft refuted Kusnetzky's views and stated that it had not manipulated the study. After its unsuccessful attempts to counter Linux, Microsoft announced a major shift in its strategy in late 2002, and adopted an 'embrace and extend' strategy towards Linux. In late 2002, Microsoft announced that it would open the source code of Windows 2000 to its largest customers on condition that they would not change the code. However, analysts termed this a one-way sharing as customers would see the source code and help Microsoft to debug and improve the o/s but would still be required to pay for the next version. Reflecting its changed stand on Linux, Microsoft even participated in the LinuxWorld conference in New York in January 2003. It opened a small booth where its employees were seen wearing black t-shirts with the words 'Let's Talk' printed on them.

Microsoft was confident that with the opening up of the Windows source code to some of its customers, it would be able to maintain its advantage over Linux. However, Linux remained a strong threat to Microsoft in the server market. The server market emerged as the most important segment in the industry as growth in PCs was declining.

By 2003, it was reported that around 39% of corporations had shifted to Linux in the server market. According to IDC reports, it was estimated that by 2006 Linux would increase its market share to 25.2% in the server market, threatening Microsoft's leadership.

The Future of Linux and the Open Source Movement

Analysts felt that there were two areas of the software industry that open-source would have trouble penetrating. One was enterprise software that related to a company's core activities. Companies would hesitate to bet their business on free software, at least until it was backed by heavyweights such as IBM, as Linux was. Enterprise software was also usually built by a tightly knit group of developers within a single company and would be difficult to develop in a decentralized way.

Also in the long term, the open source movement would threaten the software industry as volunteer programmers who worked on open source due to interest were not specialized and business applications might be beyond their range. Due to lack of specialized solutions, corporates would face too many risks in shifting to open source programs.

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19] Pecked By Penguins, Business Week, March 3, 2003.