Halloween Memo: Great Threat or Gobbledygook?

If a memo describing the potential effects of Open Source Software (OSS) on Microsoft's NT Server market is passed around the Redmond, Wash. campus, will anybody read it? Well, certainly if it's leaked to a Web site that's sole purpose is the proliferation of OSS.

If a memo describing the potential effects of Open Source Software (OSS) on Microsoft's NT Server market is passed around the Redmond, Wash. campus, will anybody read it? Well, certainly if it's leaked to a Web site that's sole purpose is the proliferation of OSS.

Coined the "Halloween Memo" for its seasonal timing, the document was originally distributed at Microsoft Corp. in August by staff engineer Vinod Valloppillil. Earlier this month, however, the memo was accessed by Eric S. Raymond, whose Web site (www.opensource.org) is a home for OSS gurus worldwide. As to the source of the memo, Raymond isn't telling.

The memo, which was followed three days later by a similar second memo that also was published on Raymond's site, describes the areas where Microsoft could see some competition from OSS, specifically the Linux operating system. "OSS poses a direct, short-term revenue and platform threat to Microsoft -- particularly in [the] server space. Additionally, the intrinsic parallelism and free idea exchange in OSS has benefits that are not replicable with our current licensing model and therefore present a long term developer mindshare threat," states the memo.

Does this mean Linux is a real threat to NT Server? When ENT asked Edmund Muth, Microsoft enterprise marketing group manager, that question in September, his reply was, "A lot of analysts have said that Linux will take market share away from NT. We don't see this as being true."

Two months later, however, Muth says Linux does present some threat to the NT market share, but only as a, "material competitor in the lower-performance end of the general purpose server industry and the small- to medium-sized ISP industry."

Bob Sakakeeny, analyst for the Aberdeen Group (Boston), says the obvious impact of the memo is the increased level of discussion about OSS. "There's not as much resistance at the senior level," Sakakeeny says. "Senior management is much more in tune with fads. If they read about [Linux] in The Wall Street Journal, they're going to pay attention."

Sakakeeny, however, is skeptical that the leak was a mistake, especially since Microsoft was quick to admit its authenticity. He says that its release may help Microsoft right now more than hurt it. "If Microsoft is in court, and the Justice Department claims they have a monopoly, it's very convenient for Microsoft to release this memo as proof it does not have a monopoly," Sakakeeny says. "I don't believe in coincidences."

Another part of the memo that incited discussion was a section that detailed ways Microsoft might head off the acceptance of OSS. By "developing new protocols, we can deny OSS projects entry into the market," states the August memo.

Tim O'Reilly, president and CEO of O'Reilly & Associates Inc. (Sebastopol, Calif., www.oreilly.com), an OSS book publisher, released an open letter to Microsoft and had some choice words for the company after reading the memo: "You have only to look at the stagnation of Soviet science and industry under a centralized autocratic system, versus the innovation that happened in our free markets, to see what fate you have in store for yourselves if you succeed."

Microsoft's Muth explains the new protocol section of the memo is taken out of context. "Protocols continuously come out and do certain things. Layering on top of that and extending that protocol has always been our strategy," Muth says.

Meanwhile, OSS pundit Raymond is confident in the demise of NT. "I want to live in a world where software doesn’t suck," Raymond says. "For this to happen, closed source has to be seen for the failure it is, and that means Microsoft has to go."