Is Linux pushing Microsoft into a corner?

At a conference for partners, Microsoft has admitted that the Linux phenomenon has forced the company to change the way it approaches customers

The emergence of Linux as a serious competitor to Windows has forced Microsoft to change the way it approaches customers, according to Microsoft chief executive Steve Ballmer.

At Monday's closing keynote speech to Fusion 2002, the company's annual symposium for its partners, Ballmer said that because of Linux, Microsoft is "going through a whole new world of thinking."

Where Microsoft has traditionally competed with companies such as IBM, Sun Microsystems, Novell and Oracle on the basis of "low price, high volume", Linux and other open-source software have changed the game through its even lower cost -- it is free.

"We haven't figured how to be lower cost than Linux," Ballmer joked.

Instead of a straightforward sales pitch touting more features, better ease-of-use and a lower price, Ballmer said, Microsoft has now been forced to focus on the concept of total cost of ownership (TCO). "We're actually having to learn how to say we may have a higher price on this one but look at the additional value. Look at how the value actually leads to lower total cost of ownership despite the fact that our price may be higher," Ballmer said.

He said that while Microsoft can't be lower-priced, "we can be lower cost".

Ballmer's remarks are the latest turning point in Microsoft's ongoing campaign to head off the threat from Linux, which has gained a major foothold in server software, a key market in the Internet age. Last year Microsoft executives went on the attack, with Ballmer calling the General Public Licence on which Linux is based "a cancer". At around the same time, Microsoft executive Jim Allchin said Linux was "an intellectual property destroyer", and senior vice president Craig Mundie said that releasing software source code into the public domain was "unhealthy".

Since then, Microsoft has toned down its rhetoric, and is even taking a small stand at the upcoming LinuxWorld conference in August. A Web page promoting Windows over Linux now refrains from excessive rhetoric, merely touting Microsoft's superior "clarity of intellectual property ownership".

The General Public Licence (GPL) requires that the product's source code be freely available for modification and redistribution, as long as the redistributed version is itself covered by the GPL. New software added to a GPL-covered product must also be licensed under the GPL.

The text of Ballmer's speech is available on Microsoft's Web site.

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