Analysts: Microsoft will have to embrace Linux

The growing popularity of Linux will force Microsoft to bring its software to the Unix clone starting in late 2004, a research firm predicted on Monday. Surprisingly enough, Microsoft promptly disputed its claims.

By 2006 or 2007, Linux will run on 45 per cent of new servers, Meta Group predicted in a study released to clients ealier this week. That popularity, Meta said, will lead Microsoft to offer Linux support for its server software, including its .Net foundations for next-generation internet services, its Exchange email and calendar software, its Internet Information Server for hosting complex websites and its SQL server database software.

The software titan, which has no love for Linux technology and its open-source philosophical underpinnings, quickly dismissed the report.

"Microsoft will not be engineering server software expressly for Linux, and continues to make its strategic bets on the Windows platform," Peter Houston, senior director of Windows Server Strategies, said in a statement.

But the rapid spread of Linux could force Microsoft's hand, said Meta analysts.

"We think Linux server stuff is going to be huge, and we don't think that's something Microsoft can walk away from," said Meta Group analyst Dale Kutnick. "We think Microsoft will (support Linux) because there are powerful economics. Microsoft is an economically driven company."

Meta also said it believes that Microsoft will re-price Windows, or separate it into new versions, so that it "can be favorably compared against 'free' Linux." This breaking-out of components would be contrary to Microsoft's long-standing practice of bundling products together to thwart competitors.

On the other hand, Meta did not expect Microsoft to begin developing Linux software, such as a version of Office for the Unix variant.

If it proves accurate, the Meta analysts' forecast would indicate a much more rapid adoption of Linux on servers than anticipated. Advances in Linux installations would put Microsoft in a defensive position. While the company's proprietary software commands more than 90 per cent of the market for desktop operating systems and productivity suites, dominance in the server market is less certain.

How far Linux goes in the server market - and eventually the corporate desktop arena, where it has so far had only modest success - would seem to warrant some Microsoft response, Meta concluded. Microsoft certainly takes Linux seriously. In September, CEO Steve Ballmer described Linux as "a serious competitor... Linux isn't going to go away - our job is to provide a better product in the marketplace."

But the software giant appears uncertain on how to handle the growing interest in Linux, according to other analysts.

"Microsoft's competition with Linux is unlike any other they've had before," said Gartner analyst David Smith. "They're not going in as the low-cost provider. Even if you buy the studies that indicate there's not that much difference in cost or that Microsoft is cheaper, at least initially people go in thinking Linux is cheaper because initially it's free."

A study from IDC last week - sponsored by Microsoft - concluded that in the long term Windows would be cheaper to use than Linux. Kutnick agreed with that conclusion: "The difference between running Linux on Intel (processors) and Windows on Intel is negligible in terms of cost."

Meta also found that other factors, such the type of processors and applications available for these systems, will have a significant impact on "shadow IT costs" associated with Linux. In fact, the research firm concluded that because of these cost factors, until 2004, "Linux will be a larger threat to Unix - particularly Solaris - than to Windows."

Still, the perception of lower costs and the presence of the GNU General Public License (GPL) used by Linux have put Microsoft in a competitive quandary.

Smith said that Microsoft "can't use... tactics that have been successful over the years, such as bundling or tying. They're just not going to work. It's a whole new world of competition, and Microsoft can't use the same tried-and-true methods. They're struggling with how to deal with it."

Joe Wilcox writes for News.com. News.com's Stephen Shankland contributed to this report