Linux users to MS: What 'balance sheet liability'?

Microsoft/Novell's patent cooperation agreement unnecessary, say Linux CIOs

While Microsoft may cast the Nov. 2 patent cooperation agreement it pushed on new partner Novell as a way to protect corporate users of the SUSE Linux operating system from potential lawsuits, CIOs Tuesday said they weren't worried in the first place.

"I do not believe that my company has an "undisclosed balance sheet liability," Russ Donnan, CIO at business information provider Kroll Factual Data, said in an e-mail response to questions from Computerworld about the Microsoft deal. Kroll Factual, a Loveland, Colo.-based subsidiary of global services provider Marsh & McLennan Companies, uses Red Hat Linux servers along with Windows servers in its data center.

After keeping mum about Microsoft and Novell's tie-up, Microsoft CEO Steve Ballmer openly declared last week that he believes the Linux source code infringes upon Microsoft's intellectual property (IP). And companies that use Linux, apart from Novell's SUSE distribution, face a latent financial time bomb that he called an "undisclosed balance sheet liability."

Monday, the two companies released separate statements, with Microsoft softening but still standing by Ballmer's comments even as Novell's CEO Ron Hovsepian disavowed them.

Donnan, who described himself as "not a huge fan of software patents," said "the threat of such a 'liability' would not in any way influence" whether Kroll would stick with Red Hat or move to SUSE or even Windows. "Steve Ballmer is posturing for mind share to enterprise executives, knowing it will have little to no impact on IT executives," he said.

Barry Strasnick, CIO of U.S.-based financial services provider CitiStreet, was even more emphatic.

"Like many IT executives, I took great offense to Ballmer's comments," Strasnick wrote in an e-mail. CitiStreet uses Red Hat Linux widely in its data centers. "If Microsoft really thinks there is some code in Linux that violates their patents, they should publish those lines of codes immediately instead of just posturing in the press. [Fear, uncertainty and doubt] may have worked for IBM in the 1970s (some of us are old enough to have been around then), but not today."

When Linux began gaining adoption by dot-coms in the late 1990s, many mainstream CIOs considered it risky in part because of their unfamiliarity with the open-source General Public License (GPL) that governs the operating system's intellectual property, according to Gordon Haff, an analyst with Nashua, N.H.-based Illuminata Inc.

"It wasn't that any circa-1999 CIO had carefully studied the IP issues surrounding Linux, it was that they didn't know much about them and the whole thing sounded kind of fishy to them," he said.

Those risks appeared to become realized in 2003, when The SCO Group, a former Linux distributor-turned licenser, began suing both Linux vendors such as IBM and Red Hat and ex-customers, such as AutoZone and Daimler-Chrysler, for infringing upon its copyrights.

But SCO has made little progress in its lawsuits. Meanwhile, many open-source vendors, including Hewlett-Packard, Red Hat, SUSE and others, quickly responded by offering indemnification against potential lawsuits as part of their standard support packages to customers. Others, such as IBM, have long maintained indemnification was unnecessary.

"We don't offer indemnification because customers rarely, if ever, ask for it," an IBM spokesman said.

Either way, "Linux' success tends to suggest that buyers for the most part don't look on Linux as something risky," Haff said.

And Microsoft's assertions might be even backfire. "There were some applications I had been thinking about moving to a Microsoft platform, but this has now totally alienated me from Microsoft," Strasnick said.

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Eric Lai

Computerworld
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