Open Source presents Microsoft with its biggest challenge

The article leads with: "...Steve Ballmer has identified a roadblock to increased sales growth at the world's largest software maker: Linux, and other programs available for free over the Internet."

It goes on to quote investors suggesting that Microsoft will have a hard time convincing corporate users to install Windows on their servers if customers have a less expensive alternative. This is very important to Microsoft, the theory goes, because Microsoft is seeking to offset the slump in PC sales by increasing their market penetration in servers.

But the strategy is in doubt, Bloomberg implies. After noting that Microsoft's server sales increased 5.8 per cent in the last 12 months, the wire also observes that this is Microsoft's smallest server sales increase in three years. It blames this slower growth on customers cutting back on IT spending... and evaluating Open Source alternatives such as Linux.

Bloomberg points out that Windows can cost 40 per cent less than Unix, but fails to mention that Linux is now a viable alternative to Unix too. And Linux is much less expensive than comparable Microsoft's products.

But since Bloomberg is focused on the US stock market and Microsoft is one of the weightiest components in the bellwether US S&P 500 index, it's not too surprising that their treatment is more than just a little sympathetic to Microsoft.

Steve Ballmer now talks less about Oracle and Sun, and more about Linux and WebSphere (a proprietary extended IBM clone of the Open Source Apache webserver): "We have told our sales force to really understand that this is kind of job one; establishing Windows and .Net versus Linux and WebSphere."

In an interview last week, Ballmer said: "People are saying by and large, 'It might be easier for me to move my Unix apps to Linux than to Windows,' although we're pretty close to making that untrue." Ballmer, we note is always nothing if not optimistic.

Bloomberg happily toes the Redmond line with claims of lower costs, more compatibility, better support. Users aren't replacing Voleish software, it says, quoting unnamed analysts. Security, we note, doesn't get a mention.

Still, Bloomberg does also find some fund managers prepared to acknowledge that Open Source presents a real challenge to Microsoft, with a value proposition that even whirling hard-driving Steve Ballmer will find tough to beat. µ

L'Inq
Newsforge has comments and a link to the Bloomberg article here.