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RealTime IT News

How Redmond Won Newham

Microsoft chalked up a couple of government contract wins in the UK this week. But while Redmond touts total cost of ownership studies (TCO), an open source consultant says the numbers don't add up.

The Wall Street Journal reported that Microsoft will sign a new three-year memorandum of understanding with the United Kingdom government's public procurement office. The news follows Monday's announcement that Redmond won a 10-year commitment from the London Borough of Newham to make Windows the platform of choice for the next 10 years. Newham will be the focus of the UK's bid to host the 2012 Olympics.

Microsoft has touted the deal as proof that Windows is a better value than Linux, but others say Redmond slashed prices to get the business.

Newham's decision to partner with Microsoft follows an extensive platform evaluation at the borough. According to a Microsoft press release, IT consulting firm Capgemini advised the borough that Microsoft was the cost-effective choice.

But Eddie Bleasdale, president of netproject, an IT consultancy specializing in helping businesses migrate to open source, disputes those figures.

"We have a copy of that Capgemini study, and the one we have totally contradicts what's being claimed," he said.

Microsoft said that Capgemini conducted a 12-week assessment comparing the costs, business benefits and risk profiles of Microsoft Windows XP, Microsoft Office System and Microsoft Windows Server 2003 versus unspecified open source software.

According to Microsoft, Capgemini said the Windows platform could allow the council's technology team to maintain its current level of service while reducing support costs by 13.5 percent. It also found that going with Microsoft could double the cost savings from improvements in productivity compared with moving to open source.

But Newham had funded a previous study by netproject to assess moving to an open source platform. "We actually implemented a Linux-based desktop architecture for Newham, based on work we've done for other clients and for the European Commission," Bleasdale said. "They then had a credible alternative."

When Richard Steel, Newham's IT director, asked Bleasdale if he could give a copy of netproject's study to Microsoft, Bleasdale agreed, with the provision that he would also receive a copy of the Microsoft-funded study.

"In no way does that Microsoft report reflect what's being talked about in the press," he said.

Bleasdale believes that Newham used netproject's work as a club to get Microsoft to slash prices. "We're making a damned good living advising people on how to move to an open source environment," he said. "If people want to use the information to beat Microsoft over the head to get the prices down, good on them."

Microsoft executives didn't respond to requests for comment.

The company is fighting back hard against the threat of open source operating systems to its core business. Many foreign governments have adopted Linux or are considering making the switch, either for cost benefits to avoid being locked into a relationship with a single vendor or to be able to easily customize the software.

In January, Microsoft began a marketing campaign called Get the facts on Windows. The centerpiece of the campaign is a Web site featuring total cost of ownership studies from IT research heavyweights Forrester and Yankee Group saying that Windows is the cheaper option. Another analysis by IT consultants BearingPoint found that licensing and support costs were similar for enterprise server software.

Some of those analyst reports came under fire because Microsoft funded them.

"What the real value of these studies is, I'm not clear on," said Directions on Microsoft analyst Michael Cherry. "They have to publish the algorithms they used to do their calculations. Unless they do that, it's hard to take a study that was done on one company or one industry and extrapolate it to your company or your industry."

"There's a long-term trend where Microsoft is engaged in rhetoric to combat the challenge of open source," said Stacey Quandt, head of the open source practice at Robert Frances Group, a business consultancy. "Part of the rhetoric is that Linux is not free."

But behind the rhetoric are real questions about the relative TCO of Microsoft and open source products -- questions without clear answers despite the dueling research reports.

"It all depends on where you're starting from," Quandt said. "If you already have an investment in Windows, it might make sense to stay the course. Migrating applications is non-trivial. However, the long-term savings of running applications on Linux could potentially be lower than on Windows."

JupiterResearch analyst Joe Wilcox noted that the huge installed base of Windows machines complicates the TCO question. "The cost comparisons might be different if this were 1991 -- if this were just Linux versus Windows in a growth market. But it's a mature market, where Windows is already installed in a lot of PCs and servers. You can show Linux might be cheaper to acquire, but there are still switching costs that are hard to get around." (JupiterResearch and internetnews.com are owned by Jupitermedia.)

But the real battle may be fought on price, not TCO. And that's the real import of Microsoft's latest deals, Quandt said.

"Longer term, Microsoft likely will be under pressure from Linux to reduce the cost of licenses, and hence these efforts to lock customers in for 10 years. That's what I think they're actually doing."

Meanwhile, netproject's Bleasdale said businesses that are really serious about moving to open source have taken vows of silence in order to avoid being besieged by sales calls.

"They don't want brouhaha, they don't want journalists to ring them up, and they don't want Microsoft to ring them up. They don't want to talk about it. They just want to do it."