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The big unanswered question is what all this means for Microsoft, whose Windows operating system accounts for 60% of the market. Few observers side with Ellison's world-view that Microsoft will be "wiped out". While some companies have dumped Microsoft for Linux, there is no evidence of companies moving from Windows to Linux en masse. Migrating from proprietary Unix to Linux is far cheaper and easier and thus more common. Then again, companies do not tend to switch from Unix to Windows either. The conventional view today is that Linux will cause Windows' market share to plateau, and it may even slip back a little in the course of the next few years.

But while Linux may struggle to eat directly into Microsoft's market share, in many other respects it seems that things can only get better for the open-source OS. As organisations tried Linux out in 2001 and 2002, usually on so-called 'lights off' systems, such as email servers, they generally found it to be reliable and resilient. Significantly, as modifications to the kernel were made, companies found Linux became increasingly scalable and began to consider applying it to more mainstream uses.

Often, Linux came in through the back door, under the radar not only of the company's board of directors but sometimes even the head of the IT department. "We tried it on the mail server but no, we didn't tell people at first," admits Michael Seiwert, an IT worker at Bauer Verlag, the magazine publisher. Seiwert and another colleague used their initiative to switch to an open-source mail server running on Linux after persistent complaints from employees about the reliability of the previous Netscape server running on Solaris. That was in 1999. Today, the board has embraced Linux; Seiwert has become a project leader; and virtually all of the German company's systems run on Linux, including mission-critical Oracle databases and content systems.

Following the lead of Bauer Verlag and others, a growing number of companies have begun moving Linux from the outposts of web server farms into the very heart of the enterprise IT infrastructure. In the important financial services market, for example, brokerage firms have reported testing Linux on computing-intensive applications such as risk modelling and liquidity analysis.

In the banking sector, say analysts, 2002 was the year of pilot Linux projects and 2003 and 2004 will be the years of deployment. Other sectors, including retail, government and telecommunications, are reporting similar trends. Forrester, the IT analyst company, says that Linux will reach a 'tipping point' by the end of 2003, when it will be good enough for most workloads on commodity hardware. "In 2004," says Forrester analyst Ted Schadler, "Linux adoption will explode in every data centre, challenging CIOs to keep proliferation under control."

Driving forward

Five key factors have brought Linux into the mainstream. First, and most importantly, cost. Linux, of course, can be downloaded for free or bought on CD for a nominal price, and there are no ongoing licence fees. "A lot of our customers are seeing absolutely staggering cost benefits after coming to Linux," says David Valentine, IBM's Linux sales manager in Europe. For example, Merrill Lynch has deployed Linux on a mainframe and is reporting savings of 40% to 50%. The US investment bank's adoption of Linux fits into a broader strategy of server virtualisation that, when completed, could generate savings worth more than $100 million a year.

But not everyone is convinced that Linux is cheap, let alone free. Microsoft has always undercut its rivals, from Netscape to Novell, and it is not used to losing the cost argument. It hotly disputes that Linux is cheaper to own than Windows and recently funded a study, carried out by a team of six IDC analysts, to prove its case.

The study found that Windows was 11% to 22% cheaper than Linux over a five-year period for most common computing tasks, largely because Linux experts demand higher wages. But the findings are controversial. "It just goes to show that you can prove anything you want," says Mike Davis, an analyst with the rival Butler Group.

At least the other drivers of mainstream Linux adoption are less contentious. IT undergraduates are now trained on Linux at universities, which is creating a steady flow of Linux skills into the corporate sector. The lack of such skills was one of the key reasons that corporations were reluctant to leave Windows.

Another factor has been the vast improvements in the operating system's functionality, scalability and security during the last few years.

The fourth factor is that Linux has received strong backing from some of the world's leading IT companies. Linux trade shows have become dominated by IBM, Hewlett-Packard (HP) and Dell, overwhelming the individual developers and smaller Linux distributors, such as Red Hat and SuSE Linux, that drove the movement forward in the 1990s.

IBM has been the clearest winner in the Linux market, selling twice as many Linux servers as any other vendor. And, underlining the progress that Linux has made in the high end, about 20% of the IBM mainframe capacity shipped now runs Linux, up from 15% in the first half of 2002. HP, for its part, has generated about $2 billion in Linux-related revenue since CEO Carly Fiorina backed the penguin in 1999. Dell too has enjoyed healthy growth.

The support of Oracle is also significant. The database company launched a $150 million campaign in January 2003 to encourage independent software vendors (ISVs) to write for the Linux platform. At a road show event in New York in April, some 300 ISVs attended, of which about one-third were said to be Microsoft partners considering a defection to the Linux camp. "We want to help them get on an operating system that is growing," says Mark Jarvis, Oracle's chief marketing officer.

Oracle has also begun recommending that its customers try Linux; so far, about 30,000 of its 220,000 customers are using Linux somewhere in their environment, and Oracle expects that number to grow rapidly. "[Recommending Linux] is a big decision for us," adds Jarvis. "We run our own business on Linux, so it is very hard for us to recommend other people use a different operating system."

These giants of the IT industry say they began supporting Linux in response to customer demand. But their move is also a way to curb Microsoft's power. Take the decision of semiconductor maker Intel - whose 'Wintel' alliance with Microsoft helped the software giant gain rapid ground in the server market - to optimise for Linux too. The move gave fresh impetus to Linux. Online stock trading site E*Trade, for example, has replaced 60 $250,000 Sparc-based Solaris servers with 80 Intel-based Linux machines costing only $4,000 each.

The fifth factor behind Linux's success has been the emergence of enterprise-specific versions of the operating system. This has been especially true in the last year or so, says Jasmin Ul-Haque, UK director of SuSE Linux. She has seen Linux running successfully on IBM mainframes and says the OS is being tested for its cost-saving potential by the likes of John Lewis, P&O Ferries and BT.

What is more, SuSE Linux has helped to develop a premium version of its Linux distribution for telecoms companies, called CGL (carrier-grade Linux), which is also drawing interest from the finance and retail sectors.

Danger signals

But could such efforts to beef-up Linux end up undermining it? Since Windows code is far more prone to bugs and security attacks than Linux, some analysts caution that there is no need to rush out a carrier-grade version. There are plenty of incompatible Linux versions and distributions already, they warn. The danger is that Linux is doomed to repeat the mistakes of Unix, whose slow decline can perhaps be traced back to the fragmentation of the OS in the 1980s. Worse, premium versions of Linux eliminate one of the main reasons for its success: the low cost.

Rightly or not, the development of a carrier-grade version also seems to highlight shortcomings in 'standard' Linux. Ul-Haque insists that Linux is constantly evolving and being improved. But even some sections of the Linux community accept that there is a limit to what the operating system can do. "Linux doesn't fit everywhere," says Darren Thomson, solutions strategist for Morse, a UK systems integrator that began supporting Linux in 2002. And IBM's Valentine admits that Linux is unsuitable in certain areas, albeit within the particularly sophisticated environments that only the biggest organisations possess.

Many IT directors will agree with them. It is understood that OMV, an Austrian oil and gas exploration company, and Alcatel, the French telecoms equipment manufacturer, have separately rolled out SAP on Linux machines but left their biggest and most sophisticated databases running on IBM's mainframe operating system, z/OS. Other companies are taking their time before trusting their entire infrastructure to Linux. "It's taken longer [to reach the mainstream] than some people anticipated," says SuSE's Ul-Haque. "Linux is seen as a more cost-effective alternative, but that doesn't mean that people will migrate whole systems over at once."

Another threat to Linux could emerge in the courtroom. SCO Group, the company that owns the intellectual property of Unix, is suing IBM for $1 billion for allegedly stealing its secrets and incorporating them into Linux. IBM is challenging the lawsuit, and it is unclear whether the legal action has much merit. But as long as uncertainty exists about the ownership of Linux, some customers may opt to postpone their investments.

These worries aside, it may be stretching things a little to suggest that Linux has already peaked. It grew 58% in 2002, according to IDC, and now seems to be the only operating system capable of launching a serious challenge to Windows in the coming years. Indeed some analysts, including Butler Group's Davis, believe that there is a strong chance that only Linux and Windows will survive by 2010.

As extreme views go, that may be a little too extreme. Some Unix systems will survive far beyond 2010, not least given the huge Unix-based revenue that companies such as IBM and Sun will seek to protect. Linux may have entered the mainstream, but it is not ready to kill Unix, let alone Windows, just yet.