Today, Microsoft claims to "love" the open-source concept, by which software code is made public to encourage improvement and development by outside programmers. Gates himself says Microsoft will gladly disclose its crown jewels--the coveted code behind the Windows operating system--to select customers.
"We can be open source. We love the concept of shared source," said Bill Veghte, vice president of the Windows Server Group. "That's a super-important shift for us in terms of code access."
Did Microsoft suddenly find open-source religion? Hardly. It was dragged there kicking and screaming by its customers, who are increasingly drawn to open-source software like Linux, whose inner workings of code can be seen by anyone and modified.
While small in scope, Microsoft's adoption of some key open-source tenets is monumental in meaning. It is an acknowledgement that the company sees the technology as its most serious competitor in years and is taking steps to make sure its Windows franchise can survive the attack.
The open-source movement also represents a larger threat to Microsoft that transcends any particular technology or company: The high-tech industry has undergone a psychological shift that encourages challenges to Microsoft, which for many years had been technologically possible but practically unthinkable.
For a combination of reasons ranging from the troubled economy to mistakes in Microsoft business strategies, many large companies are wondering, for the first time in maybe a decade, why they pay so much for its products and how they can get by with less.
"This is going to force Microsoft to look at how they structure their software architecturally, and how they package and market their products, and I think that's good," said Michael Cherry, an analyst with Directions on Microsoft.
Microsoft has itself to blame at least in part for strengthening the hand of its rivals. A controversial new software licensing policy, which raises prices for some customers and asks them to pay in advance for future releases, has angered many Microsoft customers and driven them to seek cheaper alternatives such as Linux.
While no one expects the open-source trend to affect Microsoft's profits immediately--the company is still ringing up record sales and has roughly US$40 billion in cash--it is clear that the technology's popularity has forced the company to respond.
"Microsoft hasn't yet been hurt by Linux in any absolute sense, but open source gives customers alternatives," said Jonathan Eunice, an analyst with market researcher Illuminata. "It means Microsoft has to devote some of its resources to thinking about how to combat it. It makes Linux and open source a strategic problem, not a 2002 revenue-loss problem."
Microsoft customers say the software giant has already made significant changes, such as sharing source code with large customers and launching a "trustworthy computing" initiative to button-up troublesome security holes in its software.
"We're learning, if you will, from the Linux world," Microsoft Chief Executive Steve Ballmer told ZDNet.
The company's next server version of Windows will ask clients to join online newsgroups for support and advice, following the community-based traditions of the open-source philosophy.
"With open source, I can make systems work where closed-source software just won't," said Phillip Windley, chief information officer of the state of Utah and a long-time Microsoft customer. "I can't always afford to wait for a software vendor to come around to my way of thinking."
