More Balls Through Windows

Is Microsoft finally about to face real competition in desktop-computer software?
Economist StaffApril 20, 2004

For years, hope has ebbed and flowed among many in the computer business that Linux, a freely available computer operating system which uses a penguin as its symbol, would become a viable alternative to Microsoft’s Windows, the near universal standard for the world’s personal computers. The industry—excluding Microsoft and its founder Bill Gates, of course—is currently riding another wave of hope. Will disappointment follow?

Within the past month, some of the world’s most powerful technology firms have pledged considerable support for Linux on the desktop. Hewlett-Packard (HP), which runs neck-and-neck with Dell as the largest seller of PCs in the world, said it will begin shipping some machines that run on Novell’s flavour of the free operating system, called SuSE Linux. And Sun Microsystems, an arch-rival of Microsoft, announced—even as it was preparing to bury the hatchet with Microsoft officially—that it had persuaded Wal-Mart, the world’s biggest retailer, to sell cheap PCs using Linux and Sun’s StarOffice suite of application programs, instead of the ubiquitous Microsoft Office. This follows a deal that Sun struck last autumn with several Chinese ministries to ship up to 1m PCs with Sun’s Linux package to China this year, rising to “tens of millions in future years,” according to Jonathan Schwartz, Sun’s chief operating officer.

Is this the beginning of the end for Microsoft’s virtual monopoly on the desktop? Certainly not right away, says Al Gillen, an analyst at IDC, a technology consultancy. Today, almost 94% of all PCs in the world run on Windows, while slightly more than 3%—mostly in creative industries and universities—use Apple’s Macintosh system. Fewer than 3% use Linux. By the end of the decade, Linux’s share could grow to 7-10%, reckons Mr Gillen, displacing Macs as the main alternative. That would still fall far short of Linux’s growing popularity in the market for powerful server computers. Linux aficionados, however, say its chances on the desktop should be much better.

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They cite several reasons why. First, the quality of Linux—which like other open-source software is developed by a community of volunteers who share their work freely—has been rising steadily. Linux PCs are no longer just for geeks. Second, Microsoft itself looks temporarily chastened, if not weak. A series of worms and viruses has wrought havoc on Windows PCs. Microsoft faced further embarrassment this week when it warned about more security flaws in its software. Meanwhile Linux, which hackers tend not to target, looks safe in comparison. And distrust of Microsoft as a bullying monopolist remains high. Last month, the European Commission fined the company €497m ($612m) and ordered it to behave better.

More specifically, two windows, so to speak, of opportunity appear to be opening. One is that the next version of Windows, called Longhorn, has been delayed to 2006 at the earliest, in part by Microsoft’s realisation that it has to tighten up security a lot more. So, for the next two years, companies and home users thinking about updating their operating system might be reluctant to buy the current version, Windows XP, knowing it will soon be overtaken. Hence they may consider alternatives more seriously. If Linux can establish a good reputation during this period, it might look even more attractive once Longhorn, which will be expensive and is likely to require new hardware, is released. Linux, after all, can be very cheap: $100 per user if bought as part of Sun’s package, for instance. It can even be downloaded for nothing from the internet.

Starting from Scratch

The other opportunity lies in poor countries. Unlike rich countries, which have a huge installed base of Windows computers and billions of documents in Microsoft’s fiddly file formats, most users in Asia and South America are starting with a clean slate. For a country such as China, says Sun’s Mr Schwartz, the attraction of open-source software is obvious: it is cheaper, so it will reduce the incentive to get pirated software (most copies of Windows in China are fake) and thus help China improve its relations with the World Trade Organisation. Better still, it allows China to avoid being locked into a single vendor—and an American one at that.

On the other hand, despite improvements Linux faces real obstacles. It can still be a nightmare for home users to install and, unless bought as part of a commercial package such as Sun’s, it does not come with a help-desk. Worse, there are still too few applications. Fewer than 1% of all computer games, for instance, work on Linux. Software to manage personal finances or organise digital photos is also missing. In theory these programs could all be written but, without a huge increase in users, code-writers will not bother.

This is why even some of Linux’s main backers have relatively modest ambitions for the operating system. “There is no real market for a consumer-grade Linux desktop,” says Martin Fink, HP’s Linux boss. Rather than trying to upstage Microsoft, HP is simply responding to its corporate customers, whose technology bosses have been asking to try out Linux on the desktops of a few dozen employees before committing to any big deployment. “They are at the point where they want to kick the tyres,” adds Mr Fink.

Linux’s main appeal, in other words, is likely to be to companies rather than home users. And even companies are unlikely to ditch their Windows PCs for the sort of employees that Microsoft calls “information workers”—the lawyers, consultants, accountants and so forth who use presentation applications, spreadsheets, fancy graphics and the like. Linux is perfect, on the other hand, for call centres, cash tellers, customer-support departments and other types of work that require employees to use only the same one or two computer functions (and whom their employers might actually want to discourage from goofing off with other applications while on the job). Instead of the “information worker”, says Mr Fink, he is targeting the “transaction worker”.

That casts a different light on Linux’s future on the PC. Companies such as HP do not see it as a way to make money, but as a way for them to drive sales of server computers in company data-centres as part of a complete Linux “solution”. And Sun, according to Pip Coburn, an analyst at UBS, a bank, probably “aims to distract folks in suggesting that Microsoft—certainly damaged by Linux in servers—will get burned at the desktop.”

So Microsoft may not need to worry about Linux on PCs all that much. Insofar as it can point to competition from Linux, as it has been doing with Apple, as “proof” that it is not a monopoly, Linux may even help Microsoft in its legal battles.

But the future is uncertain, and Linux still might yet represent another kind of threat to the company. No standard operating system has yet emerged for mobile handsets, robots, watches, televisions, printers, car gadgets and other such devices. Microsoft, naturally, wants to extend Windows’ dominance to these as well. It is here, rather than the desktop, that Linux could be a real threat to the mighty company’s ambitions.