Let's Get This Straight: Microsoft's Halloween scare

A leaked memo outlines the company's strategy against Linux and open source software.

Published November 4, 1998 8:00PM (EST)

An extraordinary Microsoft drama is unfolding this week, but you won't find it in the antitrust trial's Washington courtroom. While the lawyers there played their videotape of Bill Gates' testimony -- in which the notoriously hands-on CEO professed a profound ignorance of his own company's competitive maneuvers -- the Net was abuzz with news of a fascinating internal Microsoft memo that outlines the company's pugnacious tactics in bold type. Leaked and posted over the weekend, with its authenticity confirmed by Microsoft, this paper -- dubbed the Halloween Document -- lays out the landscape of Microsoft's next big divide-and-conquer campaign.

It's not about Netscape: Whatever happens in Washington, the browser conflict is yesterday's battle. The new David that the Goliath of Redmond has in its sights is the free Linux operating system and the "open source" software development community that built it. The Halloween Document, a lengthy memo dated Aug. 11 by Microsoft engineer Vinod Valloppillil, which open source advocate Eric Raymond posted to the Net, argues that Linux and open source software "pose a direct, short-term revenue and platform threat to Microsoft." It analyzes the strengths and weaknesses of the open source movement and proposes strategies for Microsoft to neutralize the "threat."

In other words, batten down the hatches -- Microsoft is likely to go after the informal community of hackers and geeks who have gathered online and collectively developed Linux, the Web server Apache, the scripting language Perl and other "free" software. Just as a flurry of internal Microsoft memos about the growing threats of the Web and Netscape led to Gates' historic December 1995 announcement that the company would embrace the Internet, the Halloween Document may signify the beginning of another round of Microsoft vs. the World. Only this time the company isn't fighting a competing corporation -- it's fighting an idea.

The idea is that altruistic programmers, working together across the Net on freely distributed code that's open for everyone's perusal and tinkering, can develop more powerful and reliable software than the old "closed shop" model of commercial software producers like Microsoft. According to the Halloween Document, "Linux and other OSS [open source software] advocates are making a progressively more credible argument that OSS software is at least as robust -- if not more -- than commercial alternatives ... The ability of the OSS process to collect and harness the collective IQ of thousands of individuals across the Internet is simply amazing."

Valloppillil's memo makes clear that Microsoft, faced with significant competition to its NT Server software from the Linux camp, is beginning to grapple with what it means to lock horns with a movement. Open source software has long-term credibility, he writes, because there's no way to drive it out of business, and "FUD tactics can not be used to combat it." (FUD is an acronym for the 'fear, uncertainty and doubt' that Microsoft has traditionally spread to confound its rivals -- by, for example, announcing nonexistent products or spreading rumors that competing products will crash Microsoft's operating system.)

"To compete against OSS," the memo says, "we must target a process rather than a company." And here is where things get nasty. In Valloppillil's words, "Linux can win as long as services/protocols are commodities." In English, this means that Linux can win as long as the basic building blocks of the software are cheap or free, openly distributed and not owned or controlled by any one company.

The Halloween Document's game plan for Microsoft? "De-commoditize protocols & applications: OSS projects have been able to gain a foothold in many server applications because of the wide utility of highly commoditized, simple protocols. By extending these protocols and developing new protocols, we can deny OSS projects entry into the market." English translation? Microsoft can fight open source software by adopting its open standards and protocols and then modifying them -- perhaps offering new features, but mostly making the Microsoft versions incompatible with the "free" versions.

Sound familiar? This is the same strategy Microsoft has used repeatedly in its long history to defend its market, most recently in its move onto the Internet. The company calls it "embrace and extend"; its opponents view it as more like "copy and corrupt."

In the past, when Microsoft has "embraced and extended" its sway at the expense of commercial competitors, the harm to consumers has been tough to locate. Microsoft's products were sometimes superior to the competition, sometimes inferior; but when the company went into war mode, as it did against the office applications suite vendors in the early '90s or more recently against Netscape, consumers usually wound up benefiting from lower prices.

This time around, though, Microsoft's memo basically accepts the idea that the open-source movement's "commodity services and protocols" are producing higher-quality software -- then argues that Microsoft should go ahead and try to "de-commoditize" them. In the technology industry, "commodities" are products you can't sell at much of a profit because the market is too open and competition too stiff. Corporations hate commodities; consumers love them. By talking openly about "de-commoditizing" the standards and protocols behind open source software, Microsoft is basically saying it wants to privatize them, drive other producers out of the market and then jack up the price.

Eric Raymond's commentary on the Halloween Document explores this argument: "To put it slightly differently: Linux can win if services are open and protocols are simple, transparent. Microsoft can only win if services are closed and protocols are complex, opaque. To put it even more bluntly: 'Commodity' services and protocols are good things for customers; they promote competition and choice. Therefore, for Microsoft to win, the customer must lose. The most interesting revelation in this memo is how close to explicitly stating this logic Microsoft is willing to come."

When Raymond first posted the Microsoft memo, some open source devotees speculated that it might have been leaked deliberately: After all, with the company locked in trench combat with the Justice Department over whether it has a monopoly on operating systems, wouldn't it be a perfect time to release a memo about a bright young competitor on the horizon who's giving Microsoft the willies? But Raymond says he believes the memo wasn't a plant: "That stuff about 'de-commoditizing protocols and services' issufficiently spooky (and sufficiently close to the issues in the DOJand Java lawsuits) that I can't imagine Microsoft wanting this memoanywhere an opposition lawyer can see it."

The Halloween Document reads as though it were written for Bill Gates' eyes, but Microsoft says that it's just one employee's views and does not represent company policy. That may be so. Still, the approach Valloppillil outlines is consonant with Microsoft's previous behavior. Don't be surprised if the strategies he outlines play out in the headlines over the next two or three years.

Linux advocates have long talked, only partly tongue in cheek, about their quest for "world domination," and their strategies to achieve it have always been debated online. Microsoft operates behind closed doors. But now we have at least one window on the company's reaction to this latest, most complex challenge to its software hegemony. War hasn't been formally declared yet, but the battle plans are now a matter of public record.

By Scott Rosenberg

Salon co-founder Scott Rosenberg is director of MediaBugs.org. He is the author of "Say Everything" and Dreaming in Code and blogs at Wordyard.com.

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