The open source software movement has gained an important ally in its crusade against purveyors of proprietary code — the public sector. That’s because a growing number of nations and states around the world are mulling over laws that will force software makers to pony up their source code if they

want to do business with government. Mammoth IT contracts are not all that are at stake. Should more governments choose to throw their weight behind open source, they might just reshape the software industry.

Arguably, the reshaping has already begun. In January, the software equivalent of the Caramilk secret was revealed when Microsoft announced a plan to share its Windows source code with several government clients. Under the plan, governments will be permitted to scour the code for security flaws, or secret “”back doors”” that might put public or sensitive data at risk. While it’s a far cry from the open source development model, whereby developers can also modify and redistribute the code, it’s a remarkable capitulation for Microsoft, a company known for guarding its intellectual property like mother bears guard their cubs.

It’s also a testament to the market power wielded by government. Over the past two years, ever since a handful of Brazilian cities passed laws mandating the use of “”software libre,”” there has been global groundswell of public sector support for open source. France, Argentina, and the European Union have at least all considered similar edicts. Legislation in Peru prompted a very public squabble with Microsoft, during which the company was roundly criticized for spreading baseless FUD (fear, uncertainty and doubt) about open source. And, lest you think this is strictly an offshore phenomenon, the state of California has an open source bill pending, too. Even in Salem, Ore., a relative stone’s throw from Redmond, legislators are debating a bill that would, among other things, free the state from the “”monopoly conditions”” imposed by certain IT suppliers.

While Microsoft has clearly been listening to its government clients, and has acted on some of their concerns, it remains firmly opposed to legislative meddling when it comes to software procurement. “”Governments should really only intervene with legislation where there are market failures,”” argues Bob Binns, public sector director for Microsoft Canada, intimating that software markets work just fine.

He points to another global trend as partial proof.

“”In countries all over the world, in places like Canada, Germany and the Far East, there is plenty of investment in open source because of market incentives, not laws.”” Indeed, IBM’s billion-dollar Linux bet — which has already paid off — was driven by real customer demand.

Binns also cautions against using such legislation as industrial policy. “”People dream of spawning new IT industries based on open source, but you have to be careful what you wish for.”” He points out that, at best, the impacts of legislated government procurement practices on R&D and industry growth in IT are unknown. The commercial model, on the other hand, has a proven track record for creating innovation and wealth. At worst, Binns adds, the legislation might actually “”create market failures”” should free market supply fail to keep up with legislated government demand.

As a final argument for letting market forces hold sway, Binns points to all the investment in, and excitement over, XML and Web services as evidence that the IT industry is moving towards a more open model anyway. “”The industry has finally figured out, because of customer demand, data and exchange level interoperability,”” which are key to knitting together proprietary systems. They also make some of the advantages of open source software — properties like vendor neutrality and inherent system compatibility that are so attractive to government — go away. Or so the theory goes.

The other side would argue that it fails miserably in practice. Bruce Perens, an open source champion and former senior strategist with Hewlett-Packard, contends that the market for computer operating systems is, in fact, a catastrophic failure. He notes that by Jan. 3 this year, there were more copies of Windows distributed than there will be Linux copies the entire year — despite the fact that Linux is a mature, high-performance product that is, at least from a royalty perspective, free. Something isn’t right.

Perens stops short of advocating legislation to mandate the use open source software in government, because “”discrimination is not a good way to win, promoting real choice is.”” But to Perens, the choice is clear. “”Given two operating systems of equivalent functionality, one open, one closed, the open system wins.”” His Web site, sincerechoice.org, lays out several principals to help organizations through the software selection process and ultimately make fair choices.

Like Binns, Perens cautions large IT purchasers such as those in government to “”think carefully about the kind of market they wish to foster.”” Focusing on the sticker price of software is a poor approach — functionality has to come first. To minimize costs in the long-term, purchasers have to retain the absolute freedom to choose, regardless of what systems are already in place. This, Perens says, is easily achieved with open, published file formats and intercommunication protocols that let competing products interoperate.

So what does he think of Microsoft’s interoperability initiatives? Perens warns us to “”examine what the company does, not what it says.”” He points to Office 11, which the company boasts as having rich XML programmability, as a typical Microsoft contradiction. “”They build XML into Office, but do not publish the schema. That’s like inventing a language, but not publishing its alphabet.”” That’s not much good.

As for the future of software, both Microsoft and its critics would agree that the proprietary and open source software markets are on a convergence course. Binns can’t imagine the open source model significantly altering Microsoft’s core operating system and desktop applications businesses, but thinks it will flourish “”on the fringes.””

The open source crowd, buoyed by a handful of governments, are hoping for something rather different.

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