Opinion: A SCO Win Could Hurt Microsoft, Too

If SCO Group won its lawsuit against IBM, Red Hat, and Novell over the intellectual property rights to Linux code, it would seem cause for dancing in the streets of Redmond. There will be a new tax on every copy of the Linux OS distributed or sold, making it just as pricey or pricier to implement than Windows.

Obviously, Microsoft has a dog in this fight. While Microsoft is loathe to admit it publicly, Linux is now clearly a long-term threat to its operating systems dominance on both the server and desktop sides. Not only are end-users now deploying Linux on boxes that ordinarily would have gone to Microsoft Windows, but many ISVs are embracing Linux and open source as well.

Microsoft has already seen some benefit of the fallout from the SCO affair – it lost its title as the most hated company in IT, according to BusinessWeek Magazine. Given SCO’s new-found reputation in the IT world, it shouldn’t be surprising to see a corresponding slump in sales of OpenServer and UnixWare, which have been heading South for the past few years anyway.

However, a SCO victory doesn’t necessarily bode well for Microsoft in the long run, either. First of all, Linux will continue to grow, even with a SCO tax. Surveys I have conducted for clients find that most developers, for example, seem unfazed by the prospect of a SCO tax. Only a handful would reconsider their Linux plans if SCO prevailed.

That’s because a lot of IT shops are attracted to Linux by features other than up-front pricing, which only is a small part of the cost of ownership anyway. Microsoft itself makes a big deal about the fact that up-front cost doesn’t matter as much as cost of ownership over a three-to-five-year period. In some estimates, Windows comes out with a slightly lower TCO than Linux, mainly since there aren’t as many skilled Linux developers and administrators as there are with Windows. That situation may change dramatically – look at all the campuses where Linux is being used.

Even if Linux pricing does rise to the level of Windows or higher, this presents a conundrum for many tight-budgeted IT operations. ENT’s own surveys, for example, find that about half of the enterprise Windows sites also run Linux in some capacity. Imagine if a shop has plans and a budget to upgrade to Windows Server 2003 and Exchange 2003, for example, and suddenly is saddled with additional licensing fees to keep running its Linux servers as well. Maybe that Windows/Exchange 2003 migration can wait a year. Or two, or three. SCO will be taking money out of Microsoft’s pocket as well.

A successful SCO action would send a signal to the rest of the industry that if you can’t succeed in the marketplace, you can more than make up for it in the courtroom. The whole example SCO is setting could sour other efforts to establish common standards and integration methods. By sicking lawyers on community-developed software, SCO is opening up a Pandora’s Box that could put a chill on various community-developed efforts. Think Web services, for one. Through .NET, Microsoft is pinning a great deal of it’s own future on standards-based computing and messaging, much of which involves sharing code and applications between a range of platforms. Could someone try to lay claim to XML schemas the next time around?

Then there’s the whole sticky area of patents – borne in a process considered archaic and out of touch with current IT realities. In January, a judge upheld a decision in favor of Eolas Technologies and the University of California that Microsoft's Internet Explorer had infringed on a process the smaller company patented in 1998. Eolas claims its patent covers code that embeds and calls up separate applications within the browser. To date, Microsoft is still on the hook for $521 million in damages.

Jay Walker of fame put the screws to Microsoft a few years back when he sued Expedia for employing a system akin to his “patented” reverse-auction system. Amazon claims a patent to “one-click” online shopping. More recently, Microsoft itself applied for patents to cover its implementation of XML. IBM could conceivably come back at SCO with claims to patented technology as it relates to the way Linux and various Web services technologies are deployed on servers. Litigation and counter-litigation could spiral out of control, and destroy the openness and integration achieved through community efforts such as Web services and open source systems in recent years.

There’s no question that intellectual property protection is crucial to an industry that is built on information. If SCO loses this litigation, the industry will have drawn the line against intellectual property claims by those that feel left behind by the IT revolution. There are plenty of companies out there that feel that Microsoft has passed them by. Think back to the Sun/Netscape suit that instigated the U.S. Department of Justice and EU anti-monopoly suits against Microsoft. Microsoft seems to have prevailed in that fight, and quashed potential government regulation of software content.

If SCO prevails in this fight, Microsoft has just as much to lose as the rest of the industry. The only ones who will win are the lawyers.

About the Author

Joe McKendrick is an independent consultant and author specializing in surveys, technology research and white papers. He's a contributing writer for