Linux will damage your nations economy

10 February 2006

Microsoft's Steve Ballmer suggests that open source will drain the software industry's contribution to Western economies. Others beg to differ.

Steve Ballmer, the CEO of software giant Microsoft, loves to hit the buyer's emotional touchpoints.

Back in 2000, European Union governments signed the Lisbon Agenda, which set out a ten year plan to become the world's most competitive trading block. IT took centre stage as an enabling technology in both the public and private sectors.

Not much to argue with there. But since then, Ballmer thinks Europe has taken a wrong turn, especially in its public sector purchasing, which favours the use of open source software.

In October, Ballmer chose the Microsoft European Partner Summit in Barcelona to launch his latest assault against the open source software movement. This time, the arguments were macro- rather than micro-economic.

At the Summit, research organisation IDC released a report on the Economic Impact of the IT Sector in Europe, the Middle East and Africa (EMEA). This predicted that, on current growth trends, the IT industry will create 2.1 million new jobs and $160 billion in new tax revenues in Europe by 2008.

IDC reported that software's contribution to these jobs and taxes is disproportionately large for its market share: software makes up around 20% of total IT spending, but generates over half of all IT tax revenues and jobs.

Microsoft, which commissioned the study, was singled out for special attention. About a third of software-related jobs stem from the Microsoft 'ecosystem' of partners, service providers and associated product developers. For every dollar of Microsoft's European revenue, another $7.50 was generated by other companies in that ecosystem.

Ballmer seized on the findings, deducing that commercial software brings vastly wider economic benefits than open source alternatives.

"People need to understand not just the technical advantages of our products but the economic arguments of commercial software," he said, dismissing European politicians who argue that open source brings unique economic benefits to a country. "Microsoft software and other commercial software really create jobs. If you want to have a software industry, people have to be able to charge for their software."

Similar figures for the impact of open source software were not broken out by IDC raising questions about Ballmer's analysis.

Reaction...

Gary Hein, analyst with the Burton Group, says open source can create wealth in less direct ways.

I've seen [Ballmer's] assertion work in reverse in some areas. Just because there is a small acquisition cost associated with open source software does not mean there isn't money spent elsewhere. Organisations still need to buy hardware and pay for integration. We've seen that, because of open source, there has been greater innovation or perhaps greater wealth or job creation. Because companies can leverage open source projects, there is a lower barrier to enter markets. It has spawned a lot of embedded hardware devices, such as wireless access points.
Paul Salazar, marketing director for EMEA at Linux vendor Red Hat says Ballmer is missing the point.

I've also heard that open source is like leprosy! So now open source will cause the Depression? We believe the open source model brings higher quality to the development process. Who knows what that [ecosystem] multiple of seven really includes? Does it include security? What open source tends to do, which is frightening if you rely on selling proprietary software for your revenues, is it commoditises that layer of the infrastructure. And that's fine as far as we're concerned. We're propagating this technology that can be given life through a much lower cost process.

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