June 11, 2004 10:05 AM PDT

Microsoft: Linux threat is rising

More companies are using the threat of Linux when negotiating deals with Microsoft, one of the company's senior executives has admitted.

A year after a letter from Microsoft CEO Steve Ballmer to his employees acknowledged the Linux threat looming on the horizon, Microsoft remains adamant that open-source software isn't a serious

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competitor on the desktop today. However, it may well be forcing Microsoft's prices down.

"It's definitely more of a threat than it was," said Nick Barley, director of marketing at Microsoft, when asked whether more businesses are telling Microsoft that they're planning to migrate to Linux rather than to one of its own operating systems or applications in the hope of getting a better deal.

Barley wouldn't say how successful this tactic has been.

"It shouldn't be successful if we have built appropriate value-based relationships with our customers, so that they appreciate the extra value that we offer," Barley said, speaking at a Microsoft event in London. The '20:20 Seminar Series: Microsoft Windows and Linux' event was billed as an "open and honest technology discussion" and included speeches from Microsoft executives and independent parties.

According to Philip Dawson, senior program director at Meta Group, Linux poses just as significant a threat to Unix vendors as it does to Microsoft. He pointed out that it's simply good business sense in negotiations with a potential supplier to make clear that you're seriously considering using their rivals instead, even if you're not.

"It's true to say that Linux is a tool for trying to beat Microsoft up," Dawson said.

Microsoft used Thursday's event to try to dispel "the myths" surrounding Linux. A key plank in its argument is that open-source software isn't cheaper in the long run because companies need to spend more on retraining IT staff who may be experienced in Windows software but not in the open-source arena.

"We asked an audience of 250 or 300 businesspeople today if they thought that Linux was a free option, and no hands went up," said Nicholas McGrath, head of platform strategy at Microsoft.

McGrath also cited a series of recent customer wins, including the London borough of Newham's decision to go with Microsoft rather than open-source options. McGrath claimed that Newham can look forward to potentially twice the productivity-associated cost savings than if they had gone down the open-source road.

Those familiar with the Newham case, though, say it is actually a prime example of Microsoft cutting its prices when facing the threat of Linux.

Last year, a consultancy firm called netproject presented Newham with an open-source alternative to using Microsoft, and it is thought that this forced Microsoft to put a much more attractive offer on the table.

Speaking in January after Newham had made its decision, netproject's director, Eddie Bleasdale, said that "whenever netproject demonstrates an open-source solution to a Microsoft customer, they suddenly find Microsoft's approach much more amenable."

"Microsoft's reaction to Newham's decision to use netproject's Secure Open Desktop Architecture proves that it is a credible and viable alternative," Bleasdale added.

Netproject is now running an 'incubator club' for companies that want to learn about the potential benefits of open source.

McGrath declined to disclose further details about Microsoft's deal with Newham, but said more information would soon be released.

Paul Hartigan, chief executive of PharmiWeb Solutions--who attended the event as an example of a satisfied Microsoft customer--said he would welcome more visibility regarding Microsoft's pricing structure.

PharmiWeb recently chose to use Visual Studio .Net rather than J2EE or Eclipse, the Linux-based open-source tool, as the development environment for a portal it has built for the health-care sector. Hartigan said the top reason for making this decision was that Microsoft was a "one stop shop" for PharmiWeb's various needs.

Graeme Wearden of ZDNet UK reported from London.


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"A key plank in its argument is that open-source software isn't cheaper in the long run because companies need to spend more on retraining IT staff who may be experienced in Windows software but not in the open-source arena."

yeah, don't you mean in the SHORT run? Once you're "retrained" your staff, your costs are significantly less than the M$ "solutions"
Posted by (54 comments )
Reply Link Flag
Staffing costs
>> Once you're "retrained" your staff, your
>> costs are significantly less than the M$
>> "solutions"

The staff costs aspect cuts both ways. The research I've seen (and my educated guesswork) suggests that - in general - Windows shops tend to employ more staff, but pay them less.

So, if a company retrains its existing staff, there's both a cost to do that and the need to raise their salaries. Otherwise the now-multiskilled employees will find someone else who'll pay better. The idea too is that the Linux systems will break (much) less often and be easier to fix, so a percentage of the staff will likely be redundant. The long term impact on costs depends on whether the reduction in numbers balances the increase in average salaries.

Staff turnover needs to be considered too. High staff turnover already means high recruitment costs. And there's little point hiring people with Windows skills - who are easy to find - training them in Linux, and watching them leave again. It would be interesting to see some research on whether companies who've depolyed Linux ended up with happier IT staff who stayed in their jobs longer.
Posted by duncangibb (7 comments )
Link Flag
Retrained? You mean you need specialized training before you can send & receive an email?

Perhaps it's the fact that GNU/Linux is 95% command line based and most of Microsoft's so called technicians have never used a command prompt before!
Posted by gh0st2010 (2 comments )
Link Flag
London Event Review
I was at that event, and wrote a review with pictures here: <a class="jive-link-external" href="http://www.softwarefreedomday.org/article.php?story=20040611051449640" target="_newWindow">http://www.softwarefreedomday.org/article.php?story=20040611051449640</a>

There was actually a good Open Source crowd present, who asked some good questions.
Posted by (1 comment )
Reply Link Flag
Anything that makes Microsoft lower prices is good..
the fact that companies are using Linux as a bargaining chip is proof their is competition.
Posted by unknown unknown (1951 comments )
Reply Link Flag
Saying that retraining of IT staff is a reason to avoid the
switch from Microsoft to Linux is like saying that medical
personnel should avoid learning about CAT scans and
radiation therapy because they already know how to help
patients with terminal illnesses die.

We already know what Microsoft's strategies and objectives
are: Locking customers into proprietary solutions that
require constant upgrades, service packs, virus protection,
and armies of IT staff. The only reason a business owner
would NOT switch to Linux is because they for some reason
have a vested interest in the status quo and WANT to see
Microsoft prosper.

I was thinking this week, watching the Reagan coverage, of
how the Soviet Union looked all-powerful and
indestructible before one man came along and said, "The
Evil Empire is morally bankrupt, and if we are strong and
united, it will fall from within." People laughed at him, but
he was right. There's a lesson here for all who despise
Microsoft's hegemony and know that there must be some
way of breaking its iron grip on the throats of American
business and consumers. Do not let the fear, uncertainty,
and doubt they are sowing dissuade you from switching to
Posted by Tom CyBold (30 comments )
Reply Link Flag
Consumers are starting to take a long hard look at there options, no one wants Windows7 & the Microsoft Palladium trusted computing platform complete with _NSAKEY. A Trusted Third Party is a third party that can break your security policy & as such I mark M$ as untrusted, they have too many government share holders interested in improving & endorsing there crap product with there own modifications. DRM was not a requirement of Windows 7 but M$ went ahead and installed it anyway, leading many consumers to ask the inevitable, who's in control of there computer, them or Microsoft?
Posted by gh0st2010 (2 comments )
Reply Link Flag

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