Ballmer plays TCO card in Linux debate

Ballmer plays TCO card in Linux debate

In the face of growing competition from Linux, Microsoft CEO, Steve Ballmer, has delivered a four-page memo to customers outlining the economic and security advantages Windows has over Linux, the potential dangers of open source involving indemnification, and the intent to aggressively convince Unix shops to migrate to Windows.

In his lengthy email, Ballmer contended that the increasingly higher prices companies such as IBM, Red Hat and Novell charge for technical services and support, along with costs associated with indemnification, now outstripped the financial advantages of free open source software.

"It's pretty clear the facts show Windows provides a lower total cost of ownership than Linux," he wrote. "The number of security vulnerabilities is lower on Windows, and Windows responsiveness on security is better than Linux, and Microsoft provides uncapped IP [intellectual property] indemnification of their products. [There is] no such comprehensive offering available for Linux or open source," he wrote.

According to the memo, Microsoft took a closer look at its volume licensing contracts last year in order to see what else the company could do to increase customer satisfaction.

He said the top issue discussed by customers was patent indemnification, which Microsoft then capped at the amount the customer paid for the software.

Consequently, he wrote, Microsoft lifted that cap for volume licensing customers who were often the target of IP lawsuits.

"No vendor today stands behind Linux with full IP indemnification," Ballmer wrote. "In fact, it is rare for open source software to provide customers with any indemnification at all. We think Microsoft's indemnification is already one of the best offered by the leading players in the industry for volume licensing customers, and we're looking at ways to expand it to an even broader set of our customers."

Backing up his assertion, Ballmer cited Regal Entertainment Group, the world's largest movie theatre chain, which made the move to Red Hat Linux in 2001.

After evaluating Linux for several months, it migrated to Windows for multiple reasons including lower TCO, more reliability and manageability, and because it felt it was more fully indemnified with regards to IP.

Microsoft pledges to do a better job educating corporate users about issues surrounding indemnification, spelling out the financial ramifications for their businesses, according to other Microsoft officials.

"I do think you are going to hear more about indemnification and IP issues going forward," Microsoft's chief Linux strategist, Martin Taylor, said. "As people move Linux servers from the edge of enterprises to further up the chain to mission-critical tasks, they are asking, 'Well, how exposed am I if someone comes after us, and what will a Linux vendor do for us and what will Microsoft do for us?'"

What inspired Ballmer's memo, in part, were almost identical conversations that Ballmer, Taylor, and Kevin Johnson, the head of Microsoft's worldwide sales and marketing, were having separately with corporate users. Those conversations started inevitably with TCO, which led to security issues, and then indemnification.

"It was almost comical how all of these separate conversations had the same pace and flow among those topics," Taylor said.

"So Steve [Ballmer] figured if we are having these conversations, then everyone else must be so he decided to send out a note to everyone sharing some data points and things they should consider."

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