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Open source computing has sparked a revolution in South America, but the heads of Microsoft say they aren't losing any sleep over the trend. With developing countries the world over looking to cut IT costs, maybe they should be . . .

A determined government in South America's largest country wants to give Bill Gates a history lesson he will not forget. With just 14 percent of the population able to afford a computer, Brazil would seem an unlikely challenger to one of the world's most powerful monopolies. Despite solid growth in recent years it remains handicapped by an enormous $US215 billion foreign debt. But it is developing countries with lower per capita incomes that are leading the charge to open source.

The prime incentive is cost; spending government funds on software licences takes on ethical overtones when 46 million Brazilians live below the poverty line. As the largest country in the region, Brazil is a natural leader for its South American neighbours and many are already following suit.

On the world stage the weight of another large country voting with its feet and fingers for an open source future takes Microsoft one step closer to the tipping point of widespread open source acceptance in developed countries. When Brazilian President Lula da Silva appointed Sergio Amadeu de Silveira as head of the National Institute for Information Technology (ITI), the government organization responsible for managing IT policy, it was a clear vote for open source.

Confident and outspoken, the former economics professor mixes IT with social responsibility. In his book Digital Exclusion: Misery in the Information Era, Amadeu argued that the enormous gap between Brazil's rich and poor would widen further unless the lower classes enjoyed the same access to technology as the wealthy.

Prior to ITI, Amadeu had put word into action by opening a network of 86 "Telecentro" free computing centres for the 11 million inhabitants of Sao Paulo, the world's fifth largest city. Running on open source software, the centres educate the poorer Paulistanos in the use of e-mail, Internet and word processing. Once appointed, Amadeu immediately set about putting Microsoft Brazil's future to the sword with a series of initiatives to strengthen the local open source software industry and phase out the use of proprietary software in government.

"We have some islands in the federal government using open source, but we want to create a continent," Amadeu said in a recent interview. In June 2003 the financial daily Valor announced plans to migrate 80 percent of all computers in state institutions and state-owned businesses from Windows to Linux over a three-year period. The stated goals were to save money, foster the production of local software and "democratize access to knowledge", according to Amadeu.

A Chamber for the Implementation of Free Software was created to assist with the migration and develop measures to stimulate the local industry. In the same month the House of Representatives announced it would not renew Microsoft Office licences and was considering free software alternatives. The House also migrated to a free software e-mail system. IBM stepped in to pledge local assistance in writing software for the Linux operating system. Microsoft's veteran competitor declared its intention to raise Brazil as a role model for other Latin American countries looking to cut their computer costs, according to Vania Curiati, IBM's software director in Brazil.

In November 2003 the tension between local Microsoft and the Brazilian government worsened when a Microsoft spokesman said that any government-mandated move towards open source was a move away from freedom and choice. "We still think free choice is best for companies, the individuals and the government," said Luiz Moncau, Microsoft's marketing director in Brazil. "There is the risk of creating a technology island in Brazil supported by law."

The feud became personal the following year when in June 2004 Microsoft Brazil threatened Amadeu with a defamation suit after he compared Microsoft's business practices to those used by drug dealers. Amadeu claimed that the offer of Windows for Brazil's "digital inclusion" programs, aimed at increasing the number of computer owners, was a Trojan horse designed to secure a critical mass of Windows machines.

This critical mass would discourage the development of a local and competitive open source software industry, he said at the time. The tactic was part of a "strategy of fear, uncertainty and doubt", Amadeu added. (Neither this comment nor the drug dealing analogy was original - both had been in use by industry analysts and Microsoft's competitors.)

News of the impending suit sparked a hostile reaction among Brazilians, who decried what they saw as bullying tactics of a US multinational intent on restricting open debate. Microsoft received petitions from the international open source community, criticism from senior politicians and outright condemnation in the opening address of the country's annual IT forum by the Ministry of Science and Technology's policy secretary, Arthur Pereira Nunes, which drew a sustained ovation.

Microsoft Brazil quietly dropped the action. Since then the open source movement in Brazil has grown apace with regular encouragement from Amadeu. In March this year ITI announced Casa Brasil, an extension of the original Telecentro experiment. The $R204 million national plan will install 90 telecentres in the poorest, most heavily populated and under-employed urban and rural suburbs as part of its digital inclusion strategy. Each centre will have 10 PCs running free software, a reading room and auditorium for 50 people.

US: A Neighbour, but Not a Friend

The lessons of recent history mean open source attitudes in South America are coloured by anti-US sentiment. Citizens of Ecuador, Guatemala, Chile, Colombia and Argentina have had fatal encounters with US foreign policy, and US multinationals are often viewed with as much suspicion as the White House itself.

Brazil is no exception. More than 40 years ago a US-backed coup overthrew the elected leftist government and helped install a military dictatorship. Da Silva's Workers' Party, elected in 2003, is the first leftist party to win power since that coup. Therefore it is hardly surprising that ardent nationalism and anti-US tension have left an imprint on national politics. This is evident in Brazilians' pride in Petrobras, the state-owned petrol company that produces more than two million barrels of oil and natural gas per day.

Not only does it supply cheaper petrol but also the satisfaction that Brazil does not need to rely on imported oil to make its own future. Microsoft is a global superpower as much as its home country, and the idea of independence delivered by a local software industry fuels similar nationalist sentiments as Petrobras.

Amadeu believes that taking software development in-house does much more than free Brazil from the relatively powerless role of consumer. The bulk of money spent on developing open source software for government is marked for local software developers, keeping Brazilian currency (reals) within the country and improving trade debt. In turn this would lead to greater employment in the software sector and a more advanced skill base, which could write and fix source code instead of simply administering the software. These new skills would improve local administration and support services and could be exported to other countries that have been slower to move towards open source.

It will take time before these benefits are realized, if they ever come to fruition. Microsoft, as one would expect, is openly sceptical.

However, to a ministerial adviser, they are dollops of honey that sweeten the decision to migrate to open source. The strategy also has its supporters outside of Brazil. Earlier this year the Massachusetts Institute of Technology announced its approval of the creation of a local community of skilled software writers in a letter to the Brazilian government.

"[Open] source serves not only as an example of programming ideas and implementations, but also the development community serves as an accessible social learning community of practice," wrote Walter Bender, director of MIT's Media Lab. "If the source code is proprietary, it is hidden from the general population. This robs them of a tremendous source for learning."

The MIT letter recommended the use of open source software over a cut-down version of Windows in Brazil's PC Conectado project, which aims to sell one million computers at a subsidized price to the poor.

"We advocate using high-quality free software as opposed to scaled-down versions of more costly proprietary software," said Bender and co-author of the letter, research scientist David Cavallo.

"Free software is far better on the dimensions of cost, power and quality."

More than 27 free software programs are to be included in the minimum configuration of the PC Conectado, and Amadeu hopes to add more programs produced by local developers throughout the year. The project is aiming to sell one million desktops for $R1400 to the 89 percent of the Brazilian population who have never accessed the Internet. Retailers participating in the program will also offer Microsoft's alternative Starter Edition, a scaled-down version of Windows that can only run three programs at one time and cannot connect to networks - but adds just $R300 to the cost of the PC. (Microsoft refuses to disclose its price.)

Bill Gates is unlikely to lose sleep over a million homes in Brazil running on Linux. However, the conclusions drawn by a respected organization like MIT will be read by other governments considering similar programs.

"Since sustainable economic growth lies in contributions to the creative and knowledge-based economy, it is obvious to us that the best path is providing the greatest possible saturation," Bender and Cavallo said. "It is also obvious that the most powerful technology at the lowest cost provides the greatest penetration."

The Linchpin of Democracy

Peru has rivalled Brazil in proclaiming the open source revolution in the boldest terms. As early as 2002 the Peruvian government passed a bill that defended the mandatory use of open source software by the state as essential in fulfilling its obligations to its citizens.

In an open letter to Microsoft Peru, Congressman Dr Edgar Villanueva stated three fundamental democratic values embodied in the responsibilities of government that demanded the use of open source:

• Free access to public information by the citizen, which could only be guaranteed by the use of standard and open formats.

• Proprietary formats, such as .doc used by Microsoft Word, for example, were unsuitable for encoding public data because it placed control of access to that data in the hands of one company instead of the government.

• Ensuring the permanence of public data, which required software that could be used and maintained in the long term without depending "on the goodwill of the suppliers, or on the monopoly conditions imposed by them".

In developing suitable systems that could be openly maintained, the state required the availability of the source code, a carefully guarded secret in Microsoft products. The third principle, security of the state and citizens, again related to access to software code. Dr Villanueva wrote that it was necessary to view source code to verify that the software could not be controlled remotely or used covertly to transmit information to third parties. Open source code can be inspected by the state, citizens and independent experts to eliminate the use of "spy code", he said.

Governments using proprietary software were forced to accept its integrity on the word of the software developer. While the bill did not forbid the production and sale of proprietary software, it ultimately ruled that restrictive intellectual property rights prevented the state from guaranteeing adequate processing of its own data.

However, a reading of Dr Villaneuva's letter reveals a broader rejection of proprietary software, as he berates Microsoft for forcing software (and therefore hardware) upgrades on users, ceasing technical support for older versions of its software still in use, "trapping" customers into proprietary formats and other anti-competitive practices.

Other countries have cited national security as reason to move away from Microsoft products. China, openly suspicious of employing a US company to handle its IT systems, has developed a local Red Flag version of Linux to prevent the possibility of spying through loopholes in the software.

Investing in its own operating system was also necessary to avoid the local software market becoming "completely controlled" by foreign software vendors, said Qu Weizhi, vice-minister of the China Ministry of Information Industry, in 2001.

Politicians and businesses in other parts of South America have shown few qualms in frog-marching Microsoft over and away from their borders. Venezuela's entire government is switching to open source over the next two years as directed by a decree issued by President Hugo Chavez in 2004. The plan faces at least one challenge: Microsoft managed to win a long-term contract with the Ministry of Education immediately before the decree after it donated several hundred computers to Venezuelan schools.

The migration to open source "follows the principle of national scientific independence, so that we do not depend on privately-owned software. If knowledge does not have owners, then intellectual property is a trap set by neo-liberalism," Chavez said.

In Argentina, nearly 50 percent of businesses were using Linux in 2004, according to a survey by Argentine analyst Trend Consulting. Cost was cited as a major factor among the 115 businesses interviewed, reflecting the country's prolonged economic recession.

The Price Crunch

Despite the technical arguments put forward in support of open source software, licensing costs remain the most sensitive. Threats by governments to go open source have forced Microsoft to make more concessions in its pricing strategies on a case-by-case basis. The first cracks in the one-price-for-all-markets approach began appearing in 2003 when the Thai government launched its "People's PC" project.

The 700,000 desktops and 300,000 laptops (selling at $US250 and $US450 respectively) ran a Thai language edition of Linux and the open source productivity suite StarOffice. Microsoft was invited to join in the project but initially declined to lower its price below $US600 for the Windows OS and Office suite, a hefty sum in a country with an average annual income of $US7000. When the People's PC proved to be enormously popular, Microsoft rushed out a simplified version (similar to the Starter Edition) that sold for 95 percent less, at just $US37.

A more publicized incident involving the regular Windows OS occurred in the same year when the city of Munich considered moving to open source. In desperation Microsoft sent CEO Steve Ballmer to plead its case and slashed the sticker price by 35 percent to win the deal. However, these measures proved to be in vain and set a precedent for other countries (and large companies) to follow.

Now it seems the cat is out of the bag; last year a Meta Group executive admitted that obtaining Microsoft discounts simply by considering open source was a sound business move. The London Borough of Newham demonstrated the effectiveness of this strategy in 2004 when it won large discounts from Microsoft after first examining an open source alternative.

It remains to be seen whether Microsoft, drunk with victory after establishing an invincible position in the developed world, has become too complacent to see the threat coming from the southern hemisphere. Bill Gates must find it a little disconcerting that governments in China, India and Brazil, three countries with enormous populations and experiencing record economic growth, are hotbeds of open source development.

The simple truth may be that in many areas of software - word processing, spreadsheets, Web browsing and multimedia entertainment - proprietary software developers are finding fewer opportunities to add innovations that are worth paying for.

For many users, a streamlined, open source version that costs little or nothing to buy is a better deal. The danger for Microsoft is that one day wealthier governments could agree and join the revolution themselves.