In the face of growing competition from Linux, Microsoft CEO Steve Ballmer delivered a four-page memo to customers on Wednesday outlining the economic and security advantages Windows has over Linux, the potential dangers of open source involving indemnification, and the intent to aggressively convince Unix shops to migrate to Windows.

In his lengthy e-mail, Ballmer contended that the increasingly higher prices companies such as IBM, Red Hat, and Novell charge for technical services and support, along with costs associated with indemnification, now outstrip the financial advantages of free open source software.

"It's pretty clear the facts show Windows provides a lower total cost of ownership than Linux. The number of security vulnerabilities is lower on Windows, and Windows responsiveness on security is better than Linux, and Microsoft provides uncapped IP (intellectual property) indemnification of their products. (There is) no such comprehensive offering available for Linux or open source," he wrote.

According to the memo, Microsoft last year took a closer look at its volume licensing contracts in order to see what else the company could do to increase customer satisfaction. He said the top issue users discussed by customers was patent indemnification, which Microsoft then capped at the amount the customer paid for the software. Consequently, he wrote, Microsoft lifted that cap for volume licensing customers who are often the target of IP lawsuits.

"No vendor today stands behind Linux with full IP indemnification. 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," Ballmer wrote.

Backing up his assertion, Ballmer cited Regal Entertainment Group, the world's largest movie theater chain, which made the move to Red Hat Linux in 2001. After evaluating Linux for several months, they migrated to Windows for multiple reasons including lower TCO, more reliability and manageability, and because they felt they were more fully indemnified with regards to IP.

Microsoft pledges to do a better job educating corporate users about issues surrounding indemnification, spelling out the financial ramifications for their businesses, according to other Microsoft officials.

"I do think you are going to hear more about indemnification and IP issues going forward. As people move Linux servers from the edge of enterprises to further up the chain to mission-critical tasks, they are asking, 'Well, how exposed am I if someone comes after us, and what will a Linux vendor do for us and what will Microsoft do for us?'" said Martin Taylor, Microsoft's chief Linux strategist.

What inspired Ballmer's memo, in part, were almost identical conversations that Ballmer, Taylor, and Kevin Johnson, the head of Microsoft's worldwide sales and marketing, were having separately with corporate users. Those conversations started inevitably with TCO, which led to security issues, and then indemnification.

"It was almost comical how all of these separate conversations had the same pace and flow among those topics. So Steve (Ballmer) figured if we are having these conversations, then everyone else must be so he decided to send out a note to everyone sharing some data points and things they should consider," Taylor said.

In the memo Ballmer emphasized another item high on the company's list of strategic initiatives for the next 12 months, namely Unix migration. He referenced the recent one-year anniversary of the company's "Get The Facts" campaign that has attempted to lay out in a no-frills fashion for Unix users the technical and cost benefits of choosing Windows over Linux.

In his memo Ballmer advises IT and other business decision makers to migrate ERP systems from more expensive Unix environments to Windows. He said an independent survey of shops that have completed a migration of their SAP (Profile, Products, Articles) or PeopleSoft (Profile, Products, Articles) ERP systems from Unix to Windows found more than a 20 percent reduction in the numbers of servers required compared with Unix.

He cited as one example the Raiffeisen Bank Group, Austria's largest bank, which was running its shop with Unix and did an extensive evaluation comparing Linux and Windows. The bank finally chose Windows Server 2003 because it believed the Microsoft server offered the most economical solution as well as better performance.

Finally, Ballmer contended that Windows can provide corporate IT shops with superior security over competitive Linux servers, saying the company has made software security "a top priority the last three years." He said Microsoft has invested heavily in a multi-pronged initiative to improve software quality and a number of development processes.

"But still, Linux has often been touted as a more secure platform. In part, this is because of the 'many eyeballs' maxim of open source software that claims a correlation between the number of developers looking at code and the number of bugs found and resolved. While this has some validity, it is not necessarily the best way to develop secure software. We believe in the effectiveness of a structured software engineering process that includes a deep focus on quality, technology advances, and vigorous testing to make software more secure," Ballmer wrote.