Anticipation built for weeks beforehand. The city government of Paris, with 17,000 desktop PCs and hundreds of servers, was mulling a technology shift that would have been unthinkable just a few years ago: retiring Microsoft Corp. (MSFT) Windows software from every one of its machines and converting them to the Linux operating system. So when the results of a feasibility study were finally announced on Oct. 13, the recommendation to stick with Windows provoked shock and dismay among Linux fans. "I'm totally bummed," wrote one French blogger.
In Europe, software isn't just about bits and bytes anymore. It has become a matter of politics. In city governments from Paris to Vienna to Rome, civil servants and politicians are caught in a fight over competing visions of the future of computing. On one side is Microsoft, which is trying to hold on to its dominant position in PC and server software. On the other are factions backing the open-source model, which flouts convention by selling software cheaply -- or giving it away -- and sharing code. The contest playing out in city halls has turned Europe into a key battleground in the global software wars.
It's no wonder open-source is fueling such passion. European governments chafe at Microsoft's market power and want to encourage alternatives. "They don't like being beholden to a monopoly," says analyst Philip Carnelley of researcher Ovum in London. At the same time, many policymakers see Linux as Europe's best chance to reclaim a role in an industry dominated by American giants. Two of the world's three largest Linux sellers started in Europe.
There's a cultural element, too. Europeans have an affinity for Linux because it was created by a Finn, Linus Torvalds. And the communitarian culture of the open-source movement strikes a chord with the political Left. "There's an attraction to a business model that is closer to utopian socialism," says François Bancilhon, chief executive of Paris-based Linux software maker Mandrakesoft (MDKFF), which sells and supports Linux software.
AN UNDISCLOSED DISCOUNT
So far, Microsoft has taken most of the lumps in Europe. Vienna has begun switching over hundreds of its 16,000 PCs to Linux. Norway's second-largest city, Bergen, has decided to convert a score of database servers running the UNIX operating system to Linux, not Windows, and could eventually move 32,000 PCs used in its schools to Linux as well. But the most closely watched case is Munich, which aims to switch 14,000 desktops to Linux by 2008, despite Microsoft's offer of a 35% discount to stick with Windows. The number of such defections clearly caught Microsoft off guard. "Microsoft wasn't prepared for a popular uprising," says Rob Enderle, principal analyst at San Jose (Calif.) consultancy Enderle Group.
Yet over the past 18 months the giant from Redmond, Wash., has unleashed a fierce counterattack, and there are signs that it's working. Paris was only the most recent and important victory. Last January the borough of Newham in London reversed course on a planned change to Linux after a consultant's report said Windows would cost $600,000 less to support each year. To seal the deal, Microsoft offered Newham an undisclosed discount. The Finnish city of Turku also changed its mind about dumping Windows after a three-year experiment with Linux showed employees resisted the switch. There are reports of glitches and cost overruns from other Linux adopters, including Munich and the German Parliament, which had to revert to Windows servers temporarily in mid-October when a third of its 5,000 PC users couldn't access the Internet or get e-mail. "We're seeing a turning of the tide," says software analyst Tom Berquist of Citigroup's Smith Barney unit in San Francisco.
The comeback is classic Microsoft. After all, this is the same company that missed the rise of the Internet and then went on to crush browser rival Netscape Communications Corp. (TWX). Microsoft has thrown itself into tackling Linux, hiring dozens of experts in open-source software and offering deep discounts to hold on to clients. It's also sharpening its pitch to address more than just software. "We need to talk in a broader way about investment protection, security, and tying together different kinds of software," says Ashim Pal, Microsoft's European director for platform strategy.
Now, Microsoft hosts booths at Linux trade shows and has set up a Web site brimming with customer testimonials and market-research studies poking holes in Linux. Last summer, Microsoft mounted a four-city "Get the Facts" tour of Britain to pitch its story to IT managers. And it took the unprecedented step of inviting 60 government agencies around the world to view the top-secret source code for Windows and so allay concerns about its security and blunt the advantage of openness enjoyed by Linux. "Transparency increases trust," says Jason Matusow, director of Microsoft's shared-source initiative.
Microsoft's charm offensive isn't all that's vexing Linux. After an initial rush of excitement, governments are weighing more factors. Linux and open-source programs may be cheap, but they can cost plenty to implement. Munich budgeted $35.7 million for its Linux makeover -- $12 million more than Microsoft's last-ditch offer. While most users insist Linux is cheaper to operate, reports from researchers such as Forrester Research Inc. (FORR) and Yankee Group assert that the "total cost of ownership" -- including upgrades, support, and insurance against potential intellectual-property suits targeting Linux -- can be higher than for Windows.
For Paris, the killer was the expense of having to rewrite programs and train thousands of employees on new software. The German city of Heidenheim recently chose not to adopt Linux for similar reasons. "We would have to spend a lot of money to make it happen," says Carsten Urban, head of the city's IT department.
Linux partisans aren't about to surrender. Bancilhon predicts Paris will opt for smaller-scale Linux rollouts in neighborhood offices. Richard Seibt, the European president for U.S. software maker Novell Inc., sees no flagging of interest in Linux among European governments. "What has been announced so far is just the tip of the iceberg," he says, noting that Novell has hundreds of potential government sales of Linux-based products in the pipeline worldwide. All told, figures Gartner Inc. (IT), the proportion of PCs sold with Linux installed will climb from 4.4% last year to 5.7% in 2005. A big shift. But it might be a lot bigger if Microsoft weren't turning up the heat.
By Andy Reinhardt, with Raphael Kahane in Paris and Gail Edmondson in Frankfurt