New Challenges Face Microsoft in Government Market

Open-source software backers have been attracting increasing attention by suggesting that governments and other public agencies should adopt open-source software. As the owner of the world’s biggest commercial software franchise and a major supplier to governments worldwide, Microsoft has taken the other side of this debate. Public spats over open source’s suitability for government use are unlikely to have any immediate impact on Microsoft, but they highlight the long-term challenges the company faces when selling to governments—in particular, Microsoft will have to respond to changes in government procurement policies, address public pressure to move away from proprietary standards and technologies, and manage its own political visibility.

Open-Source Buzz

Governments are a market that no major technology vendor can ignore: the U.S. government is expected to spend nearly US$50 billion a year on information technology (including both hardware and software) in 2002, and worldwide government expenditures on technology exceed US$100 billion. Less influenced by overall economic factors than the private sector, government spending can actually increase during an economic slowdown, making it an important refuge for vendors.