It seems clear that it is not very wise for foreign governments to choose to depend on a single American monopoly for their IT needs. If there was no alternative, that would be one thing. But Linux and the open-source office software that runs on it, not to mention server software like Apache, is a completely viable alternative.

Sure, on a pure cost basis Microsoft is arguably competitive -- or can be when they are desperate enough to offer huge discounts in order to snag the undecideds. (Something everyone knows they only do so that they can eventually charge a ransom later, when the customer is so dependent that it has no choice but to pay.)

But the Munich decision is part of a trend that is very likely to steadily gain momentum over the next few years. Microsoft is going to find it more and more difficult to make sales to countries and large businesses that have the resources to successfully adopt Linux, thereby keeping their IT fates in their own hands rather than putting them in Microsoft's. Microsoft's stock options are going to be worthless because it won't have new markets to grow into, and Microsoft will therefore have to settle for second-class software developers. Ultimately it will become a mediocre, but still huge, monopoly -- not unlike the old Bell Telephone monopoly.

Sure, people will like Longhorn and Windows users will upgrade to run it. But its advantages won't be enough to offset the financial and control-related advantages to foreign governments and large businesses of going with Linux. Microsoft will still have a revenue stream, just as Bell Telephone always did. The question is whether it will be able to continue to grow, not just exist.

The only alternative growth path is for MS to is find way to dominate new markets in other fields than operating systems and office software. They are trying to do that now with the DRM tools, which they hope to cause to be adopted by the vast majority of mp3 players (and ultimately, video players).

They certainly have the financial and technical resources to give it a good shot. They also still have considerable reserves of business smarts, and they are not yet a stultified mediocrity. This may be their last chance to save themselves before they become one.

10:26:37 AM