Although Microsoft is an immensely profitable institution, the company will find it difficult to adapt to Internet computing because of the way it is structured, Young said during speeches and interviews at the 2000 World Congress on Information Technology here. Red Hat, which Young co-founded, sells a version of the open-source Linux operating system, a competitor to Microsoft's Windows operating system.
Young and other insiders argue that Microsoft's industry dominance is more likely to be undone by market forces and technological changes than by the recent antitrust ruling. Last week, U.S. District Judge Thomas Penfield Jackson ruled that Microsoft should be broken into two companies and adhere to strict behavioral remedies to curb its anti-competitive practices.
Customers already have seen the benefits open-source software, which allows people to freely modify and redistribute underlying code, and they will begin to recoil against how Microsoft maintains control over the source code for Windows, Young said.
Because of Microsoft's control, developers are subject to sudden, and often expensive, changes in Microsoft's strategic plans, he said. Computer buyers, Young said, will also tire of paying royalties to the company.
"Microsoft has this huge revenue stream based on their heroin addiction to selling royalty-based software. Their customers are forced to send money to Microsoft for every machine they install," Young said.
The company could retool to become a services company, but the effort would require "a massive re-engineering of their company. They would have to walk away from all of their royalties first and then build a services company. I am not sure their stockholders would tolerate that," Young added.
The Red Hat chairman turned out to be one of the more popular speakers at the three-day conference here. Unlike other speakers, he drew applause from the audience of approximately 1,700 computer professionals and government officials for his speech, which included healthy doses of spontaneity. After a subsequent press conference, some attendees crowded the podium to get his autograph.
Later in the afternoon, Microsoft chairman Bill Gates countered Young's comments. "Any year you pick from 1975 to today, there has been competition in the operating system business," Gates said, adding that "there are many incompatibilities between different versions" of Linux.
Not surprisingly, Young predicted that open-source software, such as Linux-based operating systems, will begin to overtake the computing landscape because it gives computer makers, software developers and customers the freedom to tweak applications or operating systems for specific purposes.
Young said buying proprietary software is like buying a car with the hood sealed shut. Repairs have to be done by the original dealer. By leaving the hood open, as he argues that open-source software does, buyers get the freedom to choose who will fix it.
"The benefit we deliver is control to the customer," he said. "I've seen three great shifts in this industry. The first was the mini-computer revolution. The second was the PC revolution. Then came the Internet. The open-source movement is the fourth great shift."
The shift, he added, is already under way. Oracle, SAP, Hewlett-Packard, IBM and others have already ported their development tools and software to Linux, Young said.
Later, corporate buyers will begin to shift from buying PCs to finally adopting the "network computer" model. Network computers, a concept popularized by Oracle chief executive Larry Ellison, rely on network connections and servers to handle processing and simplify support and software development, proponents say.
"The breakup of Microsoft may end up causing Microsoft applications to get ported to other OSes," he said.
Red Hat is also working with several Taiwanese device makers, including cell phone manufacturers, to use Linux. He did not indicate when these devices would emerge but said most projects take two to three years to complete, and most projects already under way are in the first or second year of development.
Although it eschews royalties, Red Hat will earn profits by providing services on server and networking projects. Many of the company's services will be automated, Young said.
"If we are successful, Red Hat may become the Wal-Mart of the Linux business," he said. "We have every intention of making this a high-margin services business."
Young, whose speech was sandwiched between talks by Gates and Cisco CEO John Chambers, said he deliberately avoids giving a set speech or using slide presentations at such events.
"I can't compete with these guys using the rules. It is a very conscious decision not to do a formal presentation," he said. "Even when I flub, people remember me because I was able to take a chance and demonstrate a personal commitment."