Having spent near on a decade railing against the software, calling it everything from anti-competitive to downright "communist", Microsoft, long the bastion of proprietary principles, came out in its most recent quarterly report to the US Securities and Exchange commission and claimed the open source movement posed a serious challenge to the its business.
"[The] open source movement continues to pose a significant challenge to the company's business model, including recent efforts by proponents of the open source model to convince governments worldwide to mandate the use of open source software in their purchase and deployment of software products," the statement claimed. "To the extent the open source model gains increasing market acceptance, sales of the company's products may decline, the company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline."
A quick look accross the market reveals ample cause for Microsoft to be concerned. While there have been several high profile cases of governments and international organisations opting for open source rather than proprietary software solutions, open source solutions are also gaining increasing acceptance in the broader business community and appear to be having some effect on prices as a result.
According to Andy Mullins, president and chief operating officer of enterprise software vendor Candle Corporation, trials of Linux are being conducted throughout mid-range and high-end enterprise across a range of industries.
"We are very early on the growth curve, but every business I talk to is conducting some sort of trial of the software," Mullins said. "The great hope is that it will lower the cost of the overall software solution, but companies are understandably nervous about any new approach, when you need to keep your services available 99.99 percent of the time there is no room for error."
Ian Atkinson chief executive officer of the Queensland Parallel Supercomputer Foundation, recently oversaw the a substantial investment in two SGI Altix 3000 systems, complete with Linux operating systems for use in areas such as bioinformatics, systems modelling, computational physics and engineering, across the state.
According to Atkinson the decision to go with a Linux-based system rather than one of its proprietary counterparts was taken due to the increasing prevalence of open-source systems in both the corporate and academic sectors.
"What is fundamentally important about Linux is that it is driving down the cost of such systems, and forcing the software market to become more competitive," Atkinson said. "It is opening up high-end computing to a whole new market."
However, Mullins believes that open-source solutions are only one of a number of reasons for ailing enterprise software prices.
"Linux has clearly increased price pressure at the enterprise level, but there is also a continual pressure on providers to lower the costs associated with IT provision." Mullins said. "The trend used to be for hardware to get the pressure, but that market has been totally commoditised, and we are now seeing accounting departments turn their attention to software spending."
Although it is signalling its distress to the US Securities and Exchange commission, Microsoft locally is staying mum on suggestions the increasing prevalence of open-source solutions will lead to a reduction in pricing. When contacted by ZDNet Australia the software giant refused to comment on pricing fluctuations, claiming it was unable to comment locally on such issues.
James Pearce contributed to this report
Microsoft is in a Catch-22.
Open source software developers are now offering software that could easily replace Microsoft on both the server and the desktop. As a result, Microsoft needs to justify the continuing outlay of cash for software that doesn't really offer any advantage, something that's going to become harder and harder.
In reality Microsoft is going to have to reduce the cost of it's software as open source alternatives improve. However, Microsoft is also very aware that it's fortunes are at the whim of investors. If Microsoft drops it's price, then it's bottom line suffers. Microsoft haven't made a loss an any quarterly report for many years, so a few losses (something that's inevitable if you're reducing your price in an attempt to be competitive) will reck havoc upon their stock price.
The simple fact remains that while there are still costs associated with open source software, the ability to control your IT environment and to choose your software, hardware and support suppliers makes Microsoft all-your-eggs-in-one-basket approach costly and limiting.