News

Hell: Frozen Over

• By Ed Scannell and Stuart Johnston
• 12/01/2006

In an announcement many thought they would see only after hell froze over, bitter rivals Microsoft Corp. and Novell Inc. recently signed a peace agreement that lays the foundation for Windows and Linux and their respective applications to work smoothly together. Under terms of the deal, Microsoft will offer its corporate customers a chance to license its Windows operating system as part of a package offering maintenance and support for Novell's SuSE Linux operating system.

"They said it couldn't be done," says Microsoft CEO Steve Ballmer. "This is a new model and a true evolution of our relationship that we think customers will immediately find compelling because it delivers practical value by bringing two of their most important platform investments closer together."

Both companies plan to improve the way Microsoft's Office desktop applications and OpenOffice, its open source competitor, work together. As a way to further encourage corporate users to accept Novell's operating system, Microsoft officials promised not to assert its patent rights over any of its proprietary technology that might be intermingled with SuSE Linux or with code developed for OpenSuSE.

Some observers believe the agreement immediately improves Novell's competitive position against Linux market leader Red Hat Inc. on both the server and desktop fronts. They believe Microsoft's endorsement of SuSE Linux could offer greater appeal tocorporate accounts that already have a healthy mix of both Windows and Linux in their shops than what Red Hat could offer by itself.

Other observers caution that Red Hat's position may not be as dire as it appears. It remains to be seen how many major vendors in the open source market will endorse the Microsoft/ Novell deal. "This does put some interesting pressures on Red Hat, but what you have to remember is the deal is between Novell and Microsoft, not between Microsoft and the open source community. We have to wait to see how the community responds, and what kind of technology evolves out of this," says Al Gillen, research vice president of System Software with IDC in Framingham, Mass.

Another development that complicated Red Hat's life just a week before the Microsoft/Novell deal was Oracle Corp.'s announcement that it would offer Red Hat customers technical service and support for Red Hat's version of Linux at aggressive rates. Red Hat generates a significant amount of its revenues and earnings from such services.

Oracle also promised to indemnify customers against patent infringement. Red Hat was quick to respond, quietly announcing on its Web site that it has amended its OpenSource Assurance program to now include indemnification.

Some analysts wonder if Oracle's move is solely directed at Red Hat or if it's also aimed at larger companies that also earn significant revenues from Linux, such as IBM Corp., Hewlett Packard Co. and perhaps even Microsoft. "The burning question that may not be answered for a while is, is Oracle doing this as a tactical slap at Red Hat, which will have modest impact on the market, or it is more strategic and aimed at putting pricing pressures on IBM, HP and Microsoft forcing them to respond," says Dana Gardner, principal analyst with InterArbor Solutions Inc. in Gilford, N.H.

The Microsoft/Novell deal, a five-year agreement that has been in the works since April, has three major components: a technical cooperation agreement, a patent agreement and a business agreement.

Ballmer promised the deal will be good for any IT shop running both Windows and SuSE Linux. He says the technical aspects of the deal will result in "higher levels of interop between the two environments."

This sentiment was echoed by Novell CEO Ron Hovsepian. "When you look at the customers' environments, that mixed source environment that they're dealing with brings a whole host of benefits in each one of the individual platforms while creating other complexities for our customers," he says.

The deal also calls for the two companies to establish a joint research facility at which Microsoft and Novell technical experts will architect and test new software solutions, particularly in the areas of virtualization, Web services for management of physical and virtual servers, and document format compatibility.

Some see this as a welcome maturation of Microsoft's attitude towards open source, which Ballmer once described as a "cancer" in the industry. Even Chairman Bill Gates once called open source developers "communists."

"This move clearly indicates they are maturing in their approach to how they interact with open source. It's a direct reflection of the thinking of people like Ray Ozzie and Bill Helf at Microsoft now having real impact," IDC's Gillen says.

Another surprising aspect of the deal is that Microsoft will distribute about 70,000 coupons per year for support and maintenance of SuSE Linux Enterprise edition. Each coupon entitles the recipient to a one-year subscription for maintenance and updates to SuSE Linux Enterprise Server.

A critical aspect of the deal was determining how Microsoft's "proprietary source code" would co-exist with developers in the open source community. Microsoft promised not to sue individual open-source developers for the use of its intellectual property, as long as the work is for non-commercial purposes.

However, this peace agreement hardly means a new era of detente between the two companies. Ballmer says Microsoft will continue to compete hard against SuSE Linux.

"Tactically this is Microsoft saying, 'You better pay a premium to SuSE in order to be safe from us,' but that's likely an idle threat," InterArbor's Gardner says. "Strategically it is Microsoft finally recognizing it has to play with Linux," he says.