Microsoft's Getting FLOSSED - The Growing Spector of Open Source Software in the Third World

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What do the following events have in common? First, Microsoft's shares traded down sharply this week, despite the fact that its quarterly earnings report, released after the bell on October 23, generally exceeded analysts' expectations.

Second, Lula (Luis Ignacio da Silva), Brazil's feisty left-leaning President, suddenly got invited this month by Bill Gates to visit him in Seattle. And on October 10, 2003, the Government of Brazil released a letter of intent that it had recently signed with IBM, declaring "a common interest in concentrating their efforts and resources to develop technology based on open standards, such as Linux."

The fact is that a new spector is stalking Microsoft. This is not some Halloween ghoul, or even First World antitrust laws, though these continue to provide a few scary moments and hefty legal bills for Redmond. Rather, it is "FLOSS" -- the European Commission's acronym for for "Free/Libre Open Source Software," especially the freeware operating system Linux -- that has lately been giving Microsoft nightmares. (See the EC-sponsored report on FLOSS. See also the June 2003 study of the benefits of FLOSS for developing countries published by the Foreign Ministry of Finland, the original home of Linux kernal developer Linus Torvalds.).

Indeed, as Microsoft's top managers admitted this week - spooking investors, and causing a sell-off in the whole US technology sector -- they face a growing markeplace threat from such "Open Source" alternatives, especially Linux.

Of course Linux was originally the 1990s invention of independent, not-for-private-profit software developers like Torwalds and MIT's Richard Stallings, plus a global army of unpaid coders around the globe. But in the last five years it has gained momentum in the "real business" world, winning support from First World IT vendors like IBM, HP, and (begrudgingly) Sun Microsystems, and also making inroads among First World business and government customers. For them, the value proposition was not just cost but security. Microsoft's proprietary operating systems like Windows 98, NT, and XP, developed behind closed doors with no public access to the "source code," have all turned out to be full of glaring security bugs, as anyone who uses them and is inundated with MS "security fix updates" can testify. Indeed, several US government agencies that are most concerned about security, like the National Security Agency, have adopted Linux as their de facto standard. And many financially-strapped states, like Massachusetts, California, Texas, and Oregon, have lately also been debating whether or not FLOSS software might not only enhance security but save them money.

However, the real news is in the developing world, especially in leading "mid-level" like South Korea, Taiwan, and Malaysia, and emerging "markets of the future" (knock wood) like Brazil, China, South Africa, and India, and more troubled markets like Peru, Colombia, and Argentina. Here there is a growing movement, not only to adopt Linux for government applications, but also to use it for commercial services as well, and even to develop home-grown software applications that run on top of Linux and substitute for Microsoft's suite of Office applications.

Of course, as this post indicates, Bill Gates is not taking this lying down. Indeed, one of his many tactics has apparently to use his foundations to offer donations to schools projects in countries like Peru and South Africa, on the condition -- of course -- that they play ball. This is not a story that we expect to see covered in Slate Magazine , but we will continue to follow it here with great interest.

(c) James S. Henry, 2003. Not for reproduction or other use with express consent of the author.