The Rise of Open Source Computing and Linux
 Since the last edition of the Handbook, the Open Source movement has transformed from a curiosity to powerful engine of change sweeping across the software landscape. Interest in Open Source is driven by the anarchic nature of software developers, distaste for Microsoft, Microsoft's violation of the fundamental laws of marketing in its positioning of Windows 9X and NT, and now pricing policies that are running into conflict with historic norms. Prodded by the Linux example, Sun's Java is now also distributed via a more limited version of the Open Source model, though it does require developers who use its source code in commercial applications to pay Sun royalties.
Linux's distribution model was actually pioneered by Richard Stallman of The Free Software Foundation and GNU (Gnu's Not UNIX) fame, and requires that the operating system be distributed with its source code at no charge. Furthermore, any modifications to the source must, in turn, be redistributed for free with the source code. This procedure is regulated by the GPL, or GNU Public License. This does not prevent a company from packaging up a version of the product and offering it for sale, much as companies package collections of freeware and shareware and sell them. In such cases, the copyrights of the distributor still apply; you are not permitted to, for instance, resell Red Hat's Linux distribution without their express permission. What the user purchases is a CD, an install program, convenience, and in some cases, support. Your local CompUSA does a brisk business in sales of boxed versions of Linux for about $40 to $50 each (about the price of the original PC DOS) though the handful of commercial desktop applications currently for sale in retailers is still rather sparse.
Strategically, the distribution of Linux and Java under open-source agreements threatens to drain profitability away from the commercial sale of operating systems. This, of course, represents a direct threat to Microsoft's bottom line and its domination of the software industry via its control of the operating environment. One hopes that Microsoft appreciates this ironic turn of events, as the company has specialized in draining profits away from competitors by converting commercial categories into freeware zones, as was demonstrated during its struggle to yank the web browser market away from Netscape's Navigator via its integration of Internet Explorer directly into Windows.
While Linux is Open Source's superstar, it is not the only famous chunk of Open Source code out there; the Apache server application is another superstar in the Open Source constellation. Nor is it the only freeware operating system in widespread use. OpenBSD (Berkley System Distribution) and its different variants are regarded as the most secure and stable UNIXs ever developed and have established themselves in niche markets where these qualities are particularly prized. FreeBSD is now the foundation for Mac's OS X. Reviews of the new Apple operating system have been extremely laudatory and the new Apple OS has been praised as an excellent choice for server environments. Despite this, relatively little commercial development for BSD is currently underway.
Linux has also begun to force the consolidation of the different proprietary UNIXs that have occupied various niches since the 1980s. For example SGI, a company focusing on the high-end graphics and CGI markets, has been impelled to move away from its proprietary UNIX offerings and has begun selling specialized graphic creation systems using 64-bit versions of Linux running on multi-processor boxes. Sun now confronts the specter of Linux undercutting its high-priced, high-margin business model of selling SPARC-based servers running its in-house UNIX, Solaris.
Linux is also proving to be of particular interest to international markets. Eager to establish local software development industries, governments in Mexico, Latin America, China, and in Europe have set up programs to encourage and even subsidize the use of Linux. In a much publicized event, the city of Munich, Germany voted to migrate 14K desktop computers from Microsoft's Windows to Linux, despite Microsoft's undercutting its rivals' bid for the contract, IBM and SuSE, by several million dollars. Such has been Linux's impact on the market that even proprietary Microsoft announced it would share Windows source code under controlled circumstances with several international governments in order to allay security fears about its products.
Microsoft is also vigorously contesting claims that Linux offers a lower total cost of ownership (TCO) and that Linux is inherently more secure than Windows because of the Open Source development model (a claim that has not been proven by real world testing). Microsoft's efforts in this respect have not been very effective, though some unease has been developing in the US over the potential of Linux to accelerate the outsourcing of high-technology jobs overseas.
But despite the utopian claims of Open Source and freeware proponents, the laws of economics cannot be repealed. Few people are interested in consigning themselves to poverty so that others can buy cheaper software, and new commercial applications for Linux are appearing with price tags firmly attached. While Linux may remain free, its success has depends on a commercial market surrounding it.
In server systems this market has appeared. In 2002 Linux was the OS for 33% of new servers (up from 27% last year) with Windows growing to 47% of new servers (up from 41% in 2001). UNIX variants dropped from 14% of that market in 2001 to 10% in 2002; Sun in particular has suffered mightily at the hands of Linux as more and more companies turn to Linux server farms instead of the company's expensive though highly reliable and field-tested server offerings. In 2002 combined sales of Linux servers from technology giants IBM and HP alone exceeded $3.5B. However, revenue from sales of Linux software on these boxes was negligible; Linux is, after all, free. Overall revenues from sales of the Linux operating system also remained unimpressive, with research firm IDC predicting spending on Linux operating environments would increase over five years from 2001's $80M to $280M by 2006. While this represents a 28% compound annual growth rate, the number pales in comparison to Microsoft revenues from sales of its operating system in 2002 of over $8B....
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