Australia

Open Source and Microsoft’s Shared Source Philosophy

“Shared Source is not Open Source…Shared Source is a balanced approach that allows us to share source code with customers and partners while maintaining the intellectual property needed to support a strong software business. Shared Source represents a framework of business value, technical innovation and licensing terms…Two decades of experience have shown that an economic model that protects intellectual property and a business model that recoups research and development costs have shown repeatedly that they can create impressive economic benefits and distribute them very broadly.”Microsoft Senior Vice President, Craig Mundie

 Microsoft – Law and Corporate Affairs South Pacific headquarters 2001

What is Open Source Software (OSS)?

Open Source Software (OSS) is a loose concept gaining increased visibility due largely to the emergence of Linux, a software program developed and marketed using the OSS model. As a term, OSS encompasses a broad array of software development, business and licensing approaches. This itself brings into question whether OSS is a true class of products at all or whether instead it is a variety of experiments seeking to challenge aspects of the commercial software industry.

Like anything, OSS has strengths as well as weaknesses. The current debate about OSS, however, has included a level of emotionalism that prevents an honest appraisal of the OSS model in comparison to the commercial software model. Commercial software is the basis of successful products, businesses, and job growth, but the OSS model is still proving itself despite having been in existence for 25 years.

OSS in Australia

A recent IDC study has shown that current deployment of Linux in Australian enterprises is less than 20% and is not used for mission-critical functions. That said, there is increasing interest in selectively deploying Linux and other OSS technologies in Australian businesses. OSS is also used selectively in government IT operations. However, we believe that no software vendor, or model of software development, should be given favourable or exclusive procurement preference.

Open Source Strengths

The one thing all OSS products have in common is that they allow anyone to view the inner mechanics of the product called “source code.” By allowing anyone to view source code, and in many cases modify it, OSS offers some unique benefits over commercial software:

  • Community Review: Broad review of source code allows developers, often working without pay, to enhance products and fix flaws, potentially increasing the pool of talent available to build a product.
  • Low Acquisition Costs: Source code availability coupled with limited intellectual property protections can result in lower software acquisition costs.
  • Transparency: Source code access can lead to heightened levels of product transparency.

Open Source Weaknesses

Almost all OSS carries risks not associated with commercial software:

  • Control & Accountability: The so-called “bazaar” method of software development favoured by OSS advocates make the control of and accountability for a product uncertain.
  • Licensing Risk: Most licenses carry no warranties and many transfer product liability from the software vendor to the end-user.
  • Forking: Loose intellectual property protections can lead to the “forking” of a product, meaning different versions of a product gradually become incompatible. Linus Torvalds, the original developer of Linux, recently indicated Linux is already displaying a limited degree of forking.

Limited Economic Incentives for Innovation: The free exchange of ideas is an important ingredient in creating and fostering an innovative environment, but motivation and incentive are just as important. Existing intellectual property laws provide copyright and patent protection to developers in order to promote innovation and differentiation.

Unproven Business Models: Strong business models matter in the technology industry and in the Australian economy. Over the last five years, open source business models have failed to demonstrate long-term profitability. In some respects, this is because they are based on the same .com business approach that has performed poorly during the last year. By contrast, the commercial software industry has proven the viability of that model.

Areas of Debate

Today, the greatest areas of debate between the commercial and OSS models centre around four broad topics:

  • Total Cost of Ownership (TCO): The cost of software includes an initial purchase cost, as well as costs associated with installation, management, support and training. The latest government studies show commercial software often has a lead over OSS when it comes to total cost of ownership while there has not been any private studies that have measured OSS TCO in Australia.
  • Business Models: The OSS business model uses software as a “loss-leader” in order to drive either hardware sales or services revenue. After four years of experimentation with OSS business models, few firms have achieved profitability. Limited intellectual property protection for OSS products discourages venture capital investors and is driving many OSS products into the hands of large hardware companies that increase hardware costs to offset software development costs.
  • Economic Impacts: If OSS is broadly adopted, it will force commercial software firms to change the way they do business. Currently, revenue from Australiansoftware firms accounts for the preponderance of the software sold in the region. If OSS grows in importance, there will be a shift in IT spending away from software towards hardware and services vendors.
  • Security: Virus and hacking attacks are facts of life for commercial and open source software. OSS has a unique challenge because the availability of source code sets off a race between developers who want to find and fix security vulnerabilities and the malicious hackers who use the transparency the OSS model provides to exploit weaknesses in the product’s code base.

From Open Source to Shared Source

Microsoft has been licensing source code to academic institutions and large OEMs for many years, but up to this point, those programs have been somewhat limited in scope. Recently we have focused attention on our licensing model. Microsoft has heard our customers’ requests, and we have been studying the OSS model. We recognize there are both benefits and drawbacks to OSS, and we believe there is an alternative model.

The Shared Source Philosophy

Shared Source is a balanced approach that allows us to share source code with customers and partners while maintaining the intellectual property rights needed to support a strong software business. Shared Source is a framework that creates business value and fosters technical innovation. It covers a variety of source licensing programs tailored to the diverse needs of customers and partners for source for source code access.

The principles of the Shared Source Philosophy are:

  • Helping customers and partners to be successful through source access programs
  • Building the development community and offering the tools to produce great software
  • Improving feedback processes in order to create better products for Microsoft’s customers and partners
  • Maintaining the integrity of our customers’ environments
  • Increasing educational access to get technology into the hands of universities worldwide, and to seed the future of a strong technology industry
  • Protecting software intellectual property rights based on the firm belief that software offers value as the basis of a successful business

Microsoft believes that the competition that OSS is bringing to the commercial software industry is healthy and will continue to drive debate. Because software changes rapidly, governments should keep their options open and are best advised to select the best software products for their situation, based on technical and total cost considerations, avoiding preferences for one software business model over another.

Microsoft contact details

Julie Inman

Corporate Affairs Manager

Law and Corporate Affairs

Microsoft Pty Ltd

1 Epping Road

North Ryde NSW 2113

Tel:02 9870 2656

Fax:02 9870 2429

Email:

 Microsoft – Law and Corporate Affairs South Pacific headquarters 2001