The growing popularity of Linux and other so-called open source software poses a direct threat to Microsoft's revenue stream, according to an internal company memo posted on the Web.
Independent programmer Eric Raymond posted the so-called "Halloween memo" to the Web over the weekend.
Windows NT Server, an operating system for server computers that accounts for a growing share of Redmond's revenues, is most vulnerable, according to the memo. Linux, which is freely available, also poses a serious threat to Santa Cruz Operation and other makers of Unix operating systems.
Microsoft's Internet Explorer browser, by contrast, faces little threat from Netscape Communications' recent open source initiative for its Communicator Web browsing and email software, according to the memo. The document was originally written by Microsoft's Vinod Valloppillil, an engineer who analyzes industry trends, said Edmund Muth, the company's enterprise marketing group manager.
"Clearly, there is real and tangible competition in the operating systems market and as a company that makes operating systems, Microsoft is clearly paying attention," spokesman Adam Sohn said. "We're examining competitive issues all the time."
One quote from the document spells out the potential seriousness of the threat with particular clarity: "The ability of the OSS process to collect and harness the collective IQ of thousands of individuals across the Internet is simply amazing. More importantly, OSS evangelization scales with the size of the Internet much faster than our own evangelization efforts appear to scale."
OSS refers to Open Source Software, which describes software whose code is freely available to anyone. This includes Linux, Apache Web Server code, and Netscape's open source initiative for Communicator.
"OSS poses a direct, short-term revenue and platform threat to Microsoft, particularly in server space," the document reads. "Additionally, the intrinsic parallelism and free idea exchange in OSS has benefits that are not replicable with our current licensing model and therefore present a long-term developer mindshare threat."
Valloppillil discusses ways to "deny OSS projects entry into the market," concluding that the best method would be to expand on the protocols that make the software so popular and distributing them to customers. Because Linux is not made by any single entity, the memo states, "we must target a process rather than a company."
Linux is a Unix-based operating system developed by Finnish programmer Linus Torvalds eight years ago. Like most other open source types of software, Linux benefits from thousands of other programmers jointly working on upgrades and bug fixes.
Despite its being available for free, companies such as Red Hat and Caldera have built businesses around supporting Linux, which has about 7 million users. Netscape and Intel recently invested in Red Hat.
Besides posing a threat to Microsoft, Linux poses an even bigger threat to Unix providers. "Linux is on track to eventually own the x86 [Intel-compatible] Unix market and has been the only Unix version to gain net server OS market share in recent years," the document states. "I believe that Linux...more so [sic] than NT will be the biggest threat to [Santa Cruz Operation] in the near future."
Netscape's open source initiative, shepherded by the company's Mozilla.org organization, may help bring together independent programmers who share anti-Microsoft sentiment, the memo says. But the long-term effects on the hard-fought browser war between the two companies are expected to be minimal.
"Relative to other OSS projects, Mozilla is considered to be one of the most direct, near-term attacks on the Microsoft establishment. This factor alone is probably a key galvanizing factor in motivating developers towards the Mozilla code base," the memo says. "The availability of Mozilla source code has renewed Netscape's credibility in the browser space to a small degree."
But few major features remain to be added to the standalone browser, the memo concludes, and programmers aren't likely to devote their energies to helping Netscape reinvent the Web browsing wheel.
"There are no longer any large, high-profile segments of the standalone browser which must be developed," the memo says. "Netscape has already solved the interesting 80 percent of the problem. There is little/no ego gratification in debugging/fixing the remaining 20% of Netscape's code."
While Mozilla will "produce the dominant browser on Linux and some UNIXs," the memo concludes, it will "continue to slip behind IE in the long run."