Asia Loves Linux -- And Microsoft Scrambles

Cost, adaptability, and security concerns have more IT managers ditching Windows for open-source software

Bill Gates has never met Chen Yongguang, but the Microsoft Corp. (MSFT ) founder's future may be more dependent on the Chinese information-technology manager -- and thousands like him -- than he'd like. Chen is in charge of IT for the city of Xiaolan, in China's Guangdong province, and recently has become a convert to Linux, the free alternative to Microsoft's flagship Windows computer operating system. Chen recently turned to the software to run the Xiaolan government's 18 servers. It's cheaper than Windows, though saving money "is not a big consideration," he insists. More important, Chen says, is that Linux is less vulnerable to viruses and other rogue programs. He's also pleased that he can get the source code for the software, which allows him to adapt it more easily to his needs. "Windows is not open," he says. "You can't change it."

Discontent with Windows -- and enthusiasm for Linux -- are increasingly common in Asia these days. Although Microsoft still rules the desktop and racks up healthy server operating-system sales, open-source software is winning fans across the region. Government officials see Linux as a means of cutting costs -- systems using it run as much as 70% cheaper than Windows -- and priming their local software industries. China, Japan, and South Korea, for instance, are working to develop an operating system more attuned to their character-based languages that will likely be modeled after Linux. And policymakers in other countries, especially Thailand and India, are backing Linux development. "Promotion of Linux is very important," says Li Wuqiang, a deputy director at China's Science & Technology Ministry. "Government should give it a hard push."

Asia is a latecomer to the Linux party. The region's governments and companies don't have legions of Linux-savvy tech employees able to install and maintain Linux on computers. So it's easier to use off-the-shelf programs written for Windows -- especially since pirated versions of both the operating system and other programs are often available for next to nothing. Less than 5% of the servers in the region operate on Linux, and almost no PCs or cell phones use it, according to researcher Gartner Inc. (IT ).

But Linux is getting a boost as governments start to crack down on piracy and look for ways to make technology more accessible to the masses. The number of Linux servers in Asia will grow some 30% annually through 2008, to 10.5% of the total market, from 1% today, estimates researcher International Data Corp. Some worry the growth could be slowed by a lawsuit that SCO Group Inc. has brought against IBM alleging that some of Big Blue's enhancements to Linux were copied from SCO's code. But so far there has been no effect.


The operating system is making inroads in domains well beyond servers. Some Chinese PC manufacturers are now selling machines with Linux already installed. And companies including Korean giant Samsung Electronics Co. and Shanghai startup E28 have recently unveiled cell phones that use the operating system. One reason: Programmers can more easily adapt Linux-based phones to consumers' needs, says Roger Kung, CEO and founder of E28. Linux is "the best choice."

Other technology companies are doing their best to make sure Linux gets all the traction it needs. In 2003, Hewlett-Packard Co. (HPQ ) started supplying Linux-based servers to a government computing center in Taiwan. HP also is working with the Thai Interior Ministry to build a Linux-based system to store digital images of fingerprints. Sun Microsystems Inc. (SUNW ) in November announced plans to cooperate with government-run China Standard Software Co. to establish a Linux-based desktop system as a nationwide standard. And IBM (IBM ) has helped China's postal authority, railway ministry, and some state-owned banks change over to Linux servers. "The momentum has increased," says Sen-Ming Chang, who oversees Linux sales and marketing for IBM in greater China.

While most of the action is in the public sector, corporate users are also making the switch. Hong Kong-based Van Shung Chong Holdings Ltd., a steel trader that operates an online steel exchange, moved its server computers to Linux two years ago. "We've got the whole team focused on Linux," says Sean Wan, Van Shung Chong's chief information officer. By using Linux, Wan says the company was able to put off purchasing new servers -- which saved nearly $100,000. Now Wan is a big believer in Linux and praises the reliability of the system. "We never looked back," he says. Similarly, Industrial Development Bank of India, founded in 1995, is using Linux for key operations including phone banking, asset tracking, and human-resource management. IDBI has just 90 branches nationwide, compared with long-established rivals that boast hundreds or thousands of outlets. So the bank tries to make up for its small size by smart deployment of technology, and using Linux has helped the bank cut its IT budget by 70%, says Chief Technical Officer Sanjay Sharma. It also helps that India's state governments are pushing Linux. As a result, "you get a lot of developers who are taking Linux seriously," he says. "So it helps the [software] industry."

Microsoft is responding vigorously to the challenge. Although Asia accounts for just 10.7% of the company's overall revenues today, executives at the software behemoth are focusing on growth in the region. Asia is "the biggest opportunity for us in the world," says Peter Moore, chief technical officer for Microsoft in Asia. And while Linux wasn't much of a worry a few years ago, "now it's something that obviously keeps Microsoft on its toes," says Moore. "Every day there are headlines in the newspaper about some government choosing open-source software."

Microsoft executives are working to convince policymakers that Windows is the right choice. They argue that commercial programs such as Windows will include features users want sooner because the company would lose profits if didn't adapt quickly. And they insist the price differential isn't as great as it might initially seem because Windows systems are less expensive to maintain -- though fans of Linux dispute that. Microsoft officials also say Windows provides a better foundation for building a local software industry than open-source applications. For every dollar's worth of software Microsoft sells, says Sanjay Mirchandani, Asia-Pacific president for the company, local vendors sell eight dollars' worth of Windows-based applications. While there might be a similar ripple effect from companies writing applications for Linux, Microsoft contends that it wouldn't be as significant.

To address concerns about security, Microsoft has started sharing parts of its code with government programmers in China, Hong Kong, and elsewhere. That allows them to write in extra security and "gives them peace of mind," says Mirchandani. These days, though, plenty of Asians such as Chen, Wan, and Sharma are finding even more peace of mind using Linux.

By Bruce Einhorn in Singapore, with Manjeet Kripalani in Bombay and Jay Greene in Seattle

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