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Microsoft offers insurance Linux can't, Ballmer says

By Brier Dudley
Seattle Times technology reporter

Steve Ballmer sent an e-mail to customers worldwide.

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Ballmer played up the insurance Microsoft offers to customers against intellectual-property lawsuits resulting from using Microsoft software.

Known as indemnification, this insurance is increasingly a concern of corporate software customers, Ballmer said. It's also a way that Microsoft can differentiate itself and play up uncertainty created by a pending copyright lawsuit involving Linux.

Microsoft started giving big customers full indemnification in April and Ballmer said the program may now be expanded.

"No vendor today stands behind Linux with full IP indemnification," he wrote. "In fact, it is rare for open-source software to provide customers with any indemnification at all.

"We think Microsoft's indemnification already is one of the best offered by the leading players in the industry for volume licensing customers, and we're looking at ways to expand it to an even broader set of our customers. It's definitely something businesses want to think about as they're building or expanding their IT infrastructure."

Ballmer also used the mail — a periodic letter Microsoft executives send to customers — to answer questions about the cost and security of Microsoft products relative to Linux.

Linux inventor Linus Torvalds declined to comment.

"I don't hate MS, and quite frankly I don't care about them, and whatever new PR spin comes out of Redmond just isn't something I feel is worth my time bothering with," he said via e-mail. "Let Ballmer ramble on. I'm not interested."

Last year, SCO Group, a Lindon, Utah, company that believes that Linux includes its copyrighted code, sent letters to hundreds of companies seeking royalty payments.

SCO's legal maneuvers were widely reviled by Linux backers, but customer concerns about indemnification are real and growing, said Laura DiDio, an analyst with the Boston-based research company Yankee Group.
 
DiDio compared indemnification to homeowners insurance, and said that it's of particular concern in regulated industries such as banking and health care.

The risk of Linux users getting sued is "really low," she said. "It's probably about the same level that you or I as an average taxpayer, our chances of getting audited by the IRS. The real thing here is that low risk can still equal high cost."

Martin Taylor, a Microsoft general manager heading up its Linux competition team, said the e-mail highlights indemnification "because customers are asking us more and more about it."

Taylor also acknowledged it's a selling point.

"In some ways we've always offered some level of indemnification and no question it's a differentiator for us because IBM does not indemnify customers on Linux," he said.

An IBM spokeswoman declined to comment on Ballmer's e-mail.

Perhaps coincidentally, the e-mail was sent the same day Dell announced a partnership with Novell to sell server computers with a version of Linux pre-installed.

Dell is Microsoft's single largest customer.

Taylor said Microsoft knew about the Dell announcement a day or two ago but the timing of Ballmer's e-mail was unrelated and set far in advance. He also said the Dell-Novell deal is not a big concern to Microsoft.

"I don't think this is going to increase their shipments of Linux by any means," he said.

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com