US Report: 'Halloween' spooks Microsoft with Linux threat

The open software movement -- particularly Linux -- poses a serious threat to Microsoft, according to an alleged Microsoft white paper posted to the Web at the weekend.

The alleged memo, which has been dubbed the "The Halloween Document", warns that the movement could undermine software giant's revenue streams, mainly because of new development methodologies to which it is accustoming developers.

Microsoft has long enjoyed a tight relationship with developers, thanks to its position as a leading development tool supplier. But Linux and open software providers, with their consensus-rules mentality and pooling of development resources and know how, are threatening to change the way software gets developed. Open source code, as defined in the white paper, "is software in which both source [code] and binaries are distributed or accessible for a given product, usually for free." 'Open Source Software: A (New?) Development Methodology,' is an annotated version of a document dated Aug. 11. Purported to be a confidential Microsoft document, it was allegedly authored by Microsoft employee Vinod Valloppillil. The document, as published on the Web, was annotated by Eric Raymond, one of the posters to www.tuxedo.org, a self-described group of Linux and open source code backers. Because he posted it over Halloween weekend, Raymond called the white paper "The Halloween Document," claiming that "Publishing it will help realise Microsoft's worst nightmares."

When reached at Microsoft (Nasdaq:MSFT) by phone, Valloppillil said "Microsoft will not comment on whether or not this is an authentic Microsoft document." He referred the call to Microsoft's public-relations firm, Waggener-Edstrom. Waggener officials were preparing a response at press time.

According to the document, "OSS (open source software) poses a direct, short-term revenue and platform threat to Microsoft -- particularly in server space. 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.

"The primary threat Microsoft faces from Linux is against NT Server," the paper continues. But, at least in Microsoft's view, "Linux is unlikely to be a threat on the desktop, primarily as a result of 'poor end-user apps and focus' and the unwillingness of customers to incur the costs of switching the installed base of PCs."

The white paper, which allegedly was prepared with the assistance of a number of top Microsoft officials, including Senior Vice President Jim Allchin, examines open source history, process, strengths and weaknesses. It looks at Linux, Netscape Communications (Nasdaq:NSCP), Apache and other open source products. And it makes recommendations about how Microsoft can 'capture' open source benefits and 'blunt' open source attacks.

Chief among the tactics Microsoft should use to beat Linux, according to the document, is the incorporation of 'extended functionality into commodity protocols/services' and the creation of new protocols. It also will need to devise ways to combat Netscape's Mozilla, as it is likely to become the "Dominant browser on Linux and some Unixs [sic]," says the white paper.

Other recommendations in the white paper:

  • Be more liberal in handing out source code licenses to NT to organisations such as universities and certain partners.

  • Provide entry-level tools at low-cost, or for free, to help seed the development community.

  • Publicly release parts of the NT source code, such as part of the TCP/IP stack.

  • Provide more extensibility.

In recent months, Microsoft officials have made a number of public pronouncements regarding open software. In its most recent 10-K statement, Microsoft referenced the 'increasing competition' from Linux operating systems and applications which could affect the Redmond giant. And during several recent speeches, Microsoft president Steve Ballmer hinted that Microsoft may look to emulate some of the open software paradigms by opening up its source code to developers. Other Microsoft officials later distanced themselves from Ballmer's claims, however.

In the white paper, Microsoft acknowledges that, contrary to some analysts' claims, open source code projects have achieved 'commercial quality' and have managed to move into 'large-scale and complex' domains.

However, "OSS projects the size of Linux and Apache are only viable if a large enough community of highly skilled developers can be amassed to attack a problem," notes the white paper. "Consequently, there is direct correlation between the size of the project that OSS can tackle and the growth of the Internet."

Besides the need for a sizeable developer community, the success of open source projects requires controlled management costs, resolved process issues and organisational credibility, according to Microsoft's analysis -- all areas where the open software community could be vulnerable.

The paper also notes that OSS projects are becoming 'long-term credible' because the source code is available from 'potentially millions of places and individuals'. The paper says that, "The likelihood that Apache will cease to exist is orders of magnitudes lower than the likelihood that WordPerfect, for example, will disappear."

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