>From Business World India site
War For India's Software Soul
When Microsoft dons battle gear, it's best to get out of the way.
Pastmaster in the art of warfare, it has the reputation of having won
every
single battle it has fought. It decimated Apple, routed IBM, blasted
Borland
and broke Netscape's back. As geeks love to say, this company knows how
to
use FUD devastatingly - stoke Fear, catalyse Uncertainty and create
disproportionately large room for Doubt in the minds of competitors.
Classic
Sun Tzu!
Until now, however, it has always fought and beaten foes with a definite
face and form. To put UNIX out of favour with the computing world, it
had to
beat IBM. In its battle for supremacy on desktops, Steve Jobs and Apple
Computers were Enemy No. 1. In the office productivity suite market, it
needed to target Lotus and Borland. More recently, during the browser
wars,
it simply had to focus on Netscape.
But now, for the first time in its life, Microsoft is facing an
amorphous enemy. Linux, the free source operating system (OS) that has
evolved over the years, owes allegiance to none and is built on the back
of
a world view totally alien to Microsoft. It is backed by an amazing
number
of supporters, big and small. The problem with Linux, in Microsoft's
view,
is that there is no clear target to take aim at.
That the battle has been gaining momentum is old news and has been
discussed extensively. So why are we talking about it now?
Simple. The battle has spilled over into India. Look around. There are
noises being made about how proactively the government is considering
Linux.
The Supreme Court has a few pilot projects underway. So have High Courts
in
Karnataka and Andhra Pradesh. The Central Excise Department has moved
1,000
desktops to Linux. The Delhi Road Transport Office (RTO) has implemented
a
pilot to examine its viability. C-DAC, the government's supercomputing
arm,
has moved lock, stock and barrel to Linux.
Then there is the National Stock Exchange - among the early
adopters
who used Linux to implement a solution unique to stock exchanges
anywhere in
the world. Corporates like Asian Paints and IDBI are cheerleading the
free
source OS. Others like Reliance, Texas Instruments, the Times of India
group
(publishers of The Times of India), Raymond, Bombay Dyeing, Godrej
Infotech,
HDFC Bank, Hindustan Dorr Oliver, Central Railways and Air-India have
deployed Linux to power at least a part of their backends.
At premier educational institutions like Indian Institute of
Technology, Tata Institute of Fundamental Research and Bhabha Atomic
Research Centre, Linux exists - de facto. Those not on the bandwagon,
are
slowly getting onto it. To get a sense of that, step into the Sardar
Patel
Engineering College in Andheri, Mumbai. You'll find people like Dinesh
Shah,
Trevor Warren and Harsh Busa of the Mumbai Linux Users Group (MLUG)
bubbling
with enthusiasm. On weekends, they spend time at educational
institutions
across the country spreading the gospel of Linux in neatly slotted
two-day
workshops. In Maharashtra, the clamour for their workshops has gone up
because the government made Linux mandatory to their curriculum;
beginning
this year. "Catch them young and watch them grow," says Trevor
gleefully.
Clearly, Microsoft has a task on hand. It needs to control the beast
before
it gains too much traction in the country. As Dilip Mistry, a director
at
Microsoft India's Bangalore office puts it, "This country can affect our
(Microsoft's) destiny."
Chapter I: The Importance Of Being In India
While there are no published numbers, back of the envelope
calculations
indicate Microsoft's Indian arm currently generates sales in the region
of
Rs 1,600 crore. That's a little over $330 million. This ties in neatly
with
the fact that last year, India purchased packaged software worth $409
million - of which 80% were Microsoft products. But, honestly, for a
juggernaut sitting on $40 billion in accumulated cash and a projected
turnover of $32 billion in fiscal 2003, $409 million is loose change. So
what "destiny" is Mistry talking about?
The fast-talking British citizen of Indian origin has been in the
country for barely 10 months now. He heads a team of 17 evangelists,
keeps
obscenely long hours, lives out of his suitcase and has an awfully tough
mandate from Microsoft's headquarters in Redmond - do whatever it takes
to
keep Indian developers and programmers working on Microsoft platforms.
Unlike any other director heading operations in the country, Mistry has
no
revenue targets to meet. "The Indian systems integrator, as he moves up
the
value chain, will finally make a decision on what platform to settle on.
We
have to capture them before they make that decision. Which is why, my
team
is very important for Microsoft Corporation, not just for India alone."
Intrigued? Don't be. Estimates put the present size of India's developer
population at anywhere between 450,000 and 600,000. That's about 10% of
the
world's developer population. By end-2002, India will probably have more
developers than any country in the world. This is why it is important to
gain control of this population.
"We are paranoid someone is going to come along and take away
mindshare
from developers. We're paranoid something out there is going to be more
exciting to developers." Quite clearly, Mistry is talking of the threat
Linux poses to Microsoft. Probe him. He'll hark back to January, when he
took up his Indian assignment. Among the first things he did was to put
two
people from his team on Linux forums. They were asked to figure out:
what is
it that excites the Linux community? Is it plain Microsoft baiting? Is
it
Bill Gates bashing? Is it a desire to change the world? For Mistry,
answers
to those questions hold solutions on how to choke the Linux community in
India. By doing that, the open source world loses access to one of the
largest developer bases. Deprived of that base, the movement suffers and
Microsoft gains a major victory. "This is primarily a battle for the
hearts
and minds," says Mistry.
Till sometime ago, Microsoft and Mistry didn't have to worry about
losing the Indian developer. But with the tech downturn and corporates
slashing IT spends, things changed. Public perception that using open
source
technologies reduce the cost of technology deployments convinced
companies
across the world to seriously consider cheaper alternatives.
Consequently,
the number of jobs available for developers working on these
technologies
went up. To get a sense of that, log on to Monster.com, the world's
largest
online job board. The number of people needed with expertise in open
source
technologies is roughly the same as that of those with expertise on
Microsoft platforms.
Now add to this the fact that Indian contribution to the open
source
community has shot up over the last year. Chennaikavigal, a
Chennai-based
product company, is working on an Indian office suite designed to work
on
the Linux platform. In fact, language fonts for Linux are now available
for
practically every Indian language. There is Delhi-based Kandalya
building
applications that work on free and open source technologies. Then
there's
Anjuta, which is a development environment for C and C++ on Linux.
There's
also the Bangalore-based Peacock Solutions, which calls itself the
first
Indian company to commercialise supercomputing technology on a Linux
platform. Peacock's projects include building Linux parallel
supercomputers
for high-speed rendering, molecular modelling, weather modelling and
bioinformatics solutions. And, the list of converts to Linux keeps
growing.
Flashback to October 1999. Businessworld was talking to a senior
Microsoft functionary on the sidelines of a conference on e-commerce.
"What
do you think of Linux?" Businessworld had then queried. "What's that?"
he
shot back. Things have certainly changed since then.
It's the 'roaches-under-the-board theory' at work, says Javed Tapia,
director at Red Hat (India), a Linux distributor. Cockroaches multiply
because typically they're under a board and no one cares what happens
below
the board. One day when you lift the board and look, there are a few
million
of them waiting to get out. By the time you get around to swatting them,
most escape. That's pretty much what happened with Linux, chuckles
Tapia.
"Microsoft ignored us for too long. Thank God for that."
Chapter II: It's The Money, Honey
Forget the developer argument for a moment and focus on the
economics -
a packaged software market currently worth $409 million, of which 80% is
controlled by Microsoft. But the legal market is small potatoes.
Estimates
say for every licensed piece of software Microsoft sells in India, there
are
eight pirated copies doing the rounds. Which means, in an ideal Indian
world, Microsoft would sell software worth a whopping $2.64 billion
(that's
8 x $330 million) in India. Add another factoid here. In 2001, when IT
spending was being slashed across the world, the packaged software
market
grew 37% in India. Growth rates are expected to continue at this rate
for a
few years to come. Those sort of numbers cannot be sneezed away.
Now take another look at the Indian market. Two-thirds of the packaged
software sold in the country is picked up by the government. The rest is
largely accounted for by the private corporate sector. Now imagine a
world
where the government makes a conscious decision to move towards Linux.
There are precedents. Over two dozen governments in Asia, Europe and
Latin
America, including China and Germany, are encouraging the use of open
source
software - the most popular of which is Linux. In Germany, the
government
argued that moving to Linux would help cut costs and improve security.
In an
interview to BBC, German interior minister Otto Schilly said: "We are
raising computer security by avoiding a monoculture, and we are lowering
dependence on a single supplier."
In Taiwan, the government has announced a National Open Source Plan
earlier this year. It aims to establish a software development
infrastructure based on free and open source to create a foundation for
Taiwan's software industry. It includes the creation of a "Chinese Open
Source Software Environment" international cooperation on free
application
software development, and work with community colleges and
non-government
organisations to train 9,600 teachers and 120,000 users. Also, the
national
education system will switch to Open Source.
That these initiatives are being observed seriously in India is
evident
from the number of government projects under way on Linux. Like we
mentioned
earlier, the judiciary, the Central Railways, Air-India, Central Excise,
Delhi RTO, various e-governance projects across the country. The list is
increasing. It's a battle Microsoft cannot afford to lose.
Cut to Corporate India. At a recent Hewlett-Packard seminar on solutions
for
the manufacturing industry, attended by 300 CIOs, almost 60% said they
would
be moving to Linux-based systems. Kamal Dutta, HP India's country
business
manager, isn't surprised. "Enterprise customers are evolving strategies
for
Linux," he says.
In India, manufacturing and telecom companies are looking at some
form
of Linux use, though banking firms are staying away at the moment.
Explains
Dutta: "Banks are conservative." He doesn't expect Linux to completely
take
over the rest of the market but he says that he can see a "more
heterogeneous environment where say core applications like ERP, CRM
could
run on existing systems while others like VPN, mail, load balancing
could be
on Linux."
Hughes Software Systems (HSS) started working on Linux almost seven
years
back. But in the last 12 months, there has been a spurt in interest.
Says
HSS' head of engineering: "Telecom OEM (original equipment
manufacturers)
who make boxes for telecom networks want Linux solutions. It's also
becoming
popular in the area of embedded applications.''
To begin with, companies are deploying Linux to the extent of
15-20% of
the total applications - mainly in mail servers, RAS, Web servers. And
the
reasons for going the Linux way is that "it decreases their dependence
on
the hardware vendor, the companies can negotiate with multiple vendors
and
hence get better deals, it lowers the total cost of ownership and offers
flexibility,'' says Dutta.
That's not an argument that Microsoft is willing to accept. Argues
Sanjay
Mathur, head of marketing at Microsoft India: "With fewer dollars to
spend
on technology, some corporations have been considering Linux. The irony
is
that choosing Linux may be more expensive in the long run. Emerging data
indicates that corporations spend more for additional software, labour
and
consultant costs when they choose Linux."
Precisely the reason why a ruthless battle on Indian soil appears
inevitable.
Chapter III: How Ruthless Does It Get!
WHAT is clear is that Linux has made inroads into the Indian
landscape.
What isn't clear is: to what extent. Details are hard to come by. As
Sandeep
Menon, head of IBM's Linux initiative in the country says: "It is not
owned
or tracked by any one organisation. People simply download the software.
Data from International Data Corporation, or IDC (a research firm that
tracks IT trends) only shows how many CDs have been sold or how many
downloads have been made." The problem with this data is that because
Linux's terms of licence allow a user to make as many copies as he needs
and
distribute them freely, it is impossible to estimate how many copies
actually exist.
The other more significant problem is that those in the know don't like
to
talk. Menon, for instance, knows of virtually every major Linux project
underway in the country. But he doesn't like giving out details.
"Strategic
reasons," he explains.
It's much the same thing with Red Hat's Tapia. Now, Red Hat is the
largest
distributor of Linux in the world. "I can do with little publicity. In
fact,
I can do with no publicity." The reason, says Tapia, is that he doesn't
know
how Microsoft will strike back.
For instance, says a Linux distributor speaking off the record, his
company had recently concluded a deal with a large private sector
company to
implement Linux across the organisation. This was done after the company
rejected a Rs 9-crore Microsoft proposal to upgrade its systems. Even as
the
ink on the deal was drying, Microsoft staged a counter attack by
offering to
implement the infrastructure for just Rs 2 crore. "And we lost out on
what
could have been the best lighthouse projects for Linux in the country,"
rues
Tapia.
Chapter IV: The Chinks in Linux's Armour
But, for all its strengths, Linux has its own crosses to bear.
"It's
too early to conclude that Linux will be everywhere," says Srikant
Acharya,
SCO's (formerly Caldera) country director for India. SCO is among the
largest implementors of Linux- and UNIX-based systems worldwide. The
feeling
is echoed by
IBM's Menon. He reckons that though Linux will catch on, the chances
that it
will overthrow Microsoft are thin. "My guess is both will exist." There
are
various reasons for that.
The most fundamental problem with Linux is that it is an amorphous
entity around which robust business models are yet to evolve. Companies
that
have built a business around it are still gasping for breath. Take Red
Hat.
In spite of a 71% marketshare, it reported losses in excess of $140
million.
Worse, Red Hat's total revenue is down from fiscal 2001. Now consider
the
other Linux vendors - SCO, Connectiva, Turbolinux and SuSE. In a bid to
achieve greater strength, these vendors came together to create
UnitedLinux.
Mathur of Microsoft points out that Red Hat and Mandrakesoft refused to
join
the alliance. "The lack of unity among the Linux vendors offers evidence
of
continued fracturing," he says.
The point in all of this is a simple one really. The largest Linux
vendors are still trying to gain critical size in their home countries.
Given this reality, the incentive they have to push their distribution
unitedly in countries like India, where the market is still exploring
the
operating system, are remote. Over the last couple of months, Microsoft
has
used these facts to hammer home a key point with clients. That unlike
others, Microsoft isn't likely to go down in a rush.
Lack of Support: Then there is the issue of government policy itself. In
spite of the fact that Linux evangelists have been pushing for increased
acceptance of the software in India, truth is, until now, no policy
documents have been framed. Frederick Noronha, a freelance journalist
and
Open Source evangelist points out that Goa actually went ahead and
gazetted
a pro-Open Source/Free Software notification. "But how does one
implement
this? The departments keep flouting it. The basic flaw is with the
tendering
process, which can be subverted in 101 ways if the intentions are
malafide.
Since then, the Goa IT minister (Ramakant Khalap) has defected from the
ruling party. The so-called government policy turned out to be a one-man
initiative, which has all come back to a big zero."
Then there is the case of Karnataka. Here, the IT Department supports
Open
Source on paper. But even as the police force goes in for modernisation,
it
is being equipped with Windows XP machines. The only exception until now
has
been Kerala, where the IT policy makes it mandatory for all government
departments to first consider free/open source software for all its
needs.
And only after open source solutions have been exhausted can the
government
go in for proprietary systems.
The lack of legislation percolates to other areas too. In
education,
for instance. Dr Nagarjuna G, a teacher at the Homi Bhabha Science
Centre in
Mumbai and an active free software evangelist is pained as he flips
through
the IT syllabi of various colleges in the country. The reason is "a lack
of
secular IT education loaded almost entirely against free and open source
software." What he means is this. In most colleges, teachers are asked
to
show the students how to use Excel or Word. "Why?" asks Dr Nagarjuna.
"Shouldn't students be shown how to use a spreadsheet or a word
processing
document? What they ultimately choose ought to be up to them. Why should
the
state make a choice on their behalf?" He's been lobbying to get the
discrepancies removed. And he's notched up some successes. But there's a
long way to go.
Misunderstandings: Tapia of Red Hat faces a rather unique problem. While
the
interest in what he provides is high, most clients are reluctant to pay
for
the services he offers. The problem stems from the fact that most people
imagine Linux is free. They argue that since it can be downloaded from
the
Internet or purchased from any vendor at a nominal cost, the prices Red
Hat
quotes are too high.
But Red Hat's business model, like those of other vendors in the
Linux
space, is built around a simple assumption. While the basic software
itself
is free, users will pay for the support vendors provide. It's an
argument
that has not gone down too well with Indian business. Weaned on a steady
diet of Microsoft support that comes with software purchases, the new
business model is still making itself understood in most places. "I end
up
not signing many contracts as clients don't understand they have to pay
for
support. Where else will my bread and butter come from?" asks Tapia.
Epilogue
In the past, numerous contenders have tried and failed to dislodge
Windows. But like we said earlier, Linux, has a key advantage. It isn't
owned by anyone. To that extent, Microsoft does not know exactly whom to
attack.
Take Asia for instance. Linux, outside of Japan, is being driven by the
fact
that the continent is less developed than the US or Europe. What this
means
is that there are fewer computers in the region. Consequently, there are
fewer small- and medium-sized enterprises committed to Microsoft
products.
More importantly, these companies don't have dollars at their disposal
of
the kind American and European companies have. Which is why, their
propensity to acquire Linux is higher.
Does that mean the future of Microsoft in this part of the world is
at
stake? Not quite. Sure, Linux has been growing rapidly. But it has, at
least
until now, been confined to servers. More importantly, this growth is
coming
in at the expense of older operating systems. By 2006, IDC estimates
that
26% of the servers in operation will be running Linux while 56% will
still
run Windows. The remaining 12% will be on UNIX. As for the desktop
market
itself, shipment details are hazy. Compaq, Dell and, more recently, LG
are
shipping Linux machines into the Indian market. Until next year, when
clear
numbers emerge, it will be difficult to gauge how it is being accepted.
Then there are questions on whether businesses based on almost-free
technology can ever be profitable - a challenge for Linux companies
everywhere, but particularly for those in Asia. A recent IDC report says
that although worldwide sales of servers of all types will rise 17%
annually
over the next four years, revenues will inch up only 1%, largely due to
the
low cost of Linux.
In Korea, growing competition among Linux distributors have forced
prices of
a basic Linux package to as low as $10. A Red Hat version that sells for
$80
in the US, hawks for less than $3 in China. That's hardly any money
worth
writing home about. As for business models built around the support and
services models, they're still nascent and have some way to go before
they
mature. It's a long haul - an awfully long haul.
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