Governments like open-source software, but Microsoft does not

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Open-source software

Microsoft at the power point
Sep 11th 2003
From The Economist print edition

Governments like open-source software, but Microsoft does not

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IN MAY, the city of Munich decided to oust Microsoft Windows
from the 14,000 computers used by local-government employees
in favour of Linux, an open-source operating system.
Although the contract was worth a modest $35m, Microsoft's
chief executive, Steve Ballmer, interrupted his holiday in
Switzerland to visit Munich and lobby the mayor. Microsoft
even dropped its prices to match Linux—a remarkable feat
since Linux is essentially free and users merely purchase
support services alongside it. But the software giant still
lost. City officials said the decision was a matter of
principle: the municipality wanted to control its
technological destiny. It did not wish to place the
functioning of government in the hands of a commercial
vendor with proprietary standards which is accountable to
shareholders rather than to citizens.

Worryingly for Microsoft, Munich is not alone in holding
that view. Across the globe, governments are turning to
open-source software which, unlike proprietary software,
allows users to inspect, modify and freely redistribute its
underlying programming instructions. Scores of national and
state governments have drafted legislation calling for
open-source software to be given preferential treatment in
procurement. Brazil, for instance, is preparing to recommend
that all its government agencies and state enterprises buy
open source.

Other countries are funding open-source software initiatives
outright. China has been working on a local version of Linux
for years, on the grounds of national self-sufficiency,
security and to avoid being too dependent on a single
foreign supplier. Politicians in India have called on its
vast army of programmers to develop open-source products for
the same reasons. This month, Japan said it would
collaborate with China and South Korea to develop
open-source alternatives to Microsoft's software. Japan has
already allocated ¥1 billion ($9m) to the project.

Why all the fuss? Modern governments generate a vast number
of digital files. From birth certificates and tax returns to
criminal DNA records, the documents must be retrievable in
perpetuity. So governments are reluctant to store official
records in the proprietary formats of commercial-software
vendors. This concern will only increase as e-government
services, such as filing a tax return or applying for a
driving licence online, gain momentum. In Microsoft's case,
security flaws in its software, such as those exploited by
the recent Blaster and SoBig viruses, are also a cause of
increasing concern.

Government purchases of software totalled almost $17 billion
globally in 2002, and the figure is expected to grow by
about 9% a year for the next five years, according to IDC, a
market-research firm (see chart). Microsoft controls a
relatively small part of this market, with sales to
governments estimated at around $2.8 billion. But it is a
crucial market, because when a government opts for a
particular technology, the citizens and businesses that deal
with it often have to fall into line. (In one notable
example, America's defence department adopted the internet
protocol as its networking standard, forcing contractors to
use it, which in turn created a large market for
internet-compliant products.) No wonder Microsoft feels
threatened—the marriage of open-source software and
government could be its Achilles heel.

Policymakers like open source for many reasons. In theory,
the software's transparency increases security because
“backdoors” used by hackers can be exposed and programmers
can root out bugs from the code. The software can also be
tailored to the user's specific needs, and upgrades happen
at a pace chosen by the user, not the vendor. The
open-source model of openness and collaboration has produced
some excellent software that is every bit the equal of
commercial, closed-source products. And, of course, there is
no risk of being locked in to a single vendor.

That said, open-source is no panacea, and there are many
areas where proprietary products are still far superior.
Oracle, the world's second-largest software company, need
not worry (yet) about governments switching to open-source
alternatives to its database software. But Microsoft is
vulnerable, because an open-source rival to its Windows
operating system exists already, in the form of Linux.

If Microsoft is indeed squeezed out of the government sector
by open-source software, three groups stand to benefit:
large consultancy firms and systems integrators, such as
IBM, which will be called in to devise and install
alternative products; firms such as Red Hat or SuSE, which
sell Linux-based products and services; and numerous small,
local technology firms that can tailor open-source products
for governmental users.

As a result, the company has been fighting back. Microsoft
and its allies have sought to discredit open-source
software, likening its challenge of proprietary ownership to
communism and suggesting that its openness makes it insecure
and therefore vulnerable to terrorism. The firm also created
a controversial slush fund to allow it to offer deep
discounts to ensure that it did not lose government sales to
Linux on the basis of price. And Microsoft has paid for a
series of studies, the latest of which appeared this week,
which invariably find that, in specific applications,
Windows costs less than Linux.

More strikingly, Microsoft has been imitating the ways of
the open-source “community”. Last year, the firm launched a
“shared source” initiative that allows certain approved
governments and large corporate clients to gain access to
most of the Windows software code, though not to modify it.
This is intended, in part, to assuage the fears of foreign
governments that Windows might contain secret security
backdoors. Microsoft has also made available some portions
of the source code of Windows CE, which runs on handheld PCs
and mobile phones, to enable programmers to tinker with the
code. Tellingly, this is a market where the company is a
straggler rather than a leader.

Jason Matusow, Microsoft's shared-source manager, says that
developing software requires leadership and an understanding
of customer needs—both areas where proprietary-software
companies excel. As for proposed legislation that would
stipulate one type of software over another, it is
anti-competitive and could leave users hamstrung with
products that are not the best for their specific needs,
says Robert Kramer, executive director of the Initiative for
Software Choice, a Microsoft-supported lobby group.
Microsoft will advance these views next week in Rome, where
it is hosting the latest in a series of conferences for
government leaders. But the signs are that many of them have
already made up their minds.

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