INDUSTRY ANALYSIS
Linux vs. Longhorn: The Battle Is Joined

While it will be some time before Linux is really much of a threat to Microsoft's (Nasdaq: MSFT) installed base or Microsoft to Linux's, the battle for the consumer and corporate desktop was actually joined some time ago. Both sides are working furiously to derail the other.

With both the WinHEC and TechEd conferences this month covering Longhorn, the next version of Windows, it is time to revisit the emerging battle and address how each platform stacks up. There are at least two aspects of this fight: a server side, where Linux has some clear advantages; and a desktop side, where Microsoft is predominant.

When you have a market share the size of Microsoft's, displacement is very difficult unless you can catch the other side napping. However, recall that Lotus owned the spreadsheet market and lost it to Microsoft; and IBM (NYSE: IBM), which many believed could not be beat, was passed by Microsoft a decade ago in several markets. This showcases the idea it's clearly possible to displace a dominant vendor, which means that the story isn't over, by any stretch.

Desktop: Advantage Longhorn

However, to pass Microsoft on the desktop, you would need first to embrace what Microsoft offers in terms of interoperability, management, software application support and value. While you would think that Linux -- which is viewed by many as "free software" -- could at least meet the value requirement, Linux's hardware, services and applications continue to cost more than the OS does. Even though Linux can match Microsoft platforms on hardware, it tends to fall behind in terms of application support and tends to cost more than Windows, at least on the desktop, with regard to services.

In addition, the desktop market is rabid about consistency. Desktop administrators will often put older nonsupported versions of Windows on desktop and laptop hardware just to get everyone on the same version of the operating system. The continued fragmentation surrounding the Linux distributions would seem unacceptable in the face of such a high -- and often unreasonable -- level of standardization. This fact of the desktop clearly works for Microsoft.

Microsoft can maintain a consistent marketing message because it is a single company, while it is difficult for the Linux vendors to be consistent on much of anything. In fact, many prefer fighting with each other. In addition, when Longhorn ships, the SCO litigation is scheduled for court and the related news should overwhelm any Linux-targeted marketing during that period.

Finally, Longhorn is increasingly appearing to be, by a significant margin, the most secure and reliable platform that Microsoft has every built. If it can live up to the hype, which is a significant challenge, it should provide an impressive barrier to entry for Linux.

Market Trends: Linux Opportunity

Microsoft's image isn't what it once was. Much like it was with client-server computing and IBM, the IT audience is actively exploring Linux as a desktop option. There are trials backed by vendors like IBM and HP (NYSE: HPQ) springing up all over the globe. Governments seem particularly enamored with the offering, which is an important development because governments set standards. If they lock in on a particular version, say Novell's, it could do a lot to overcome the nonstandard problem that Linux has.

Microsoft products are perceived to be overpriced. Because it is difficult to match value to price right now, many feel that Microsoft is overcharging. This perception, coupled with the belief that Linux is relatively inexpensive, is driving companies and governments to overlook services costs and consider Linux. Also, because Microsoft's own image has made it difficult for Microsoft advocates to defend the company's platform, Linux advocates are having a field day disparaging Microsoft.

Microsoft historically puts most of its marketing budget into a big launch party and does very little sustaining marketing. Adoption of Windows XP has been slower than it should have been, and the older a Windows desktop becomes the easier it is to move that desktop to a different platform. If Microsoft cannot get the market to move sharply to Longhorn, the opportunity for Linux to move aggressively against Microsoft will increase just as sharply.

More and more desktop services are moving to servers. With every desktop-to-server application migration, the incompatibilities associated with Linux become less important. Of course, if this goes too far, you could end up with embedded devices everywhere. But, assuming Linux can step up to the challenge, competing with Microsoft on embedded devices should remove many of Microsoft's current advantages revolving around backwards compatibility.

Longhorn is a major release, and major releases not only typically have a slower adoption rate, they often have compatibility issues that make the related migration more painful. Windows XP was, technically, a minor release designed to address several shortcomings with Windows 2000, Windows NT and particularly Windows 9x. XP should have been a slam dunk. The fact that it wasn't indicates a strong potential Microsoft vulnerability.

Server: Linux Advantage

The big opportunity right now is with Unix and Netware competitive migrations. Linux is, at least in practice, a version of Unix. It enjoys the use of similar skills, similar tools and a relatively easy migration path. While Linux is not similar, by any stretch of the imagination, to Netware, Novell is driving the move itself and migrating its tools and applications to the new platform at an impressive rate.

This gets Linux the support, out of the box, of Unix administrators who are already accustomed to differences between Unix versions and who, currently, don't seem to be having much of a problem with Linux distributions.

Today, many use Linux on enterprise servers with great success . The belief structure that surrounds it favors Linux as the better product. Although recent reports indicate that this trend might be changing, it can take years for perceptions like this to shift.

In short, Linux is increasingly backed by the Unix vendors, and Novell as the replacement product and is so similar to Unix that the pain of migration isn't much greater than, and possibly less painful than, a move from AIX to Solaris.

Server: Longhorn Server Opportunity

Microsoft clearly needs a more compatible product to Unix for that market, but with Netware there have been powerful migration tools in place for some time. Microsoft knows of this disadvantage and is working to mitigate it. If they can, it will at least remove one of the barriers, although it won't, in and of itself, build demand.

Informal feedback I'm getting from Netware accounts indicates that many are not at all happy with this forced march to another platform. They report the migration pain is unacceptable, which suggests that Novell could lose significant market share during the migration process largely to Microsoft and soften somewhat the disadvantage Microsoft has with Unix.

While Unix practitioners are clearly wedded to Unix and Linux, IT executives often are more interested in corporate relationships. Microsoft plays this game very well. The typical open-ended IT sales budgets that put Microsoft at an historical sales disadvantage against Unix will probably evaporate around Linux because of the relatively low margins that should work to Microsoft's advantage.

Wrapping It Up

Microsoft's advantage on the desktop is one of position and technology, while the company's exposures to competitors come from mostly image and perception issues. On servers, the opportunity is Unix and Netware. Linux has a similar positional advantage that will be hard to beat.

In the end, this fight will come down to image, marketing, sales execution, focus and which side is willing to make the most sacrifices to win. Microsoft is tested in all aspects; Linux has yet to be tested on everything. This kind of reminds me of Microsoft and IBM in the late 1980s where IBM was unwilling to go the extra yard.

Neither side has it easy. Linux will have to become more consistent, compatible and less divisive -- which is contrary to its nature -- and Linux will of course have to work out the intellectual property issues now being challenged in the IBM-SCO court case. Microsoft will have to address value, pricing, image, disclosure and marketing problems that the company often doesn't even admit it has.

The next three years will definitely be interesting.