Brazil Extends Microsoft Challenge With Global Group (Update3)

30.12.2009 | Bloomberg.com | Editoria: Internet May 11 (Bloomberg) -- Brazil extended its challenge to Microsoft Corp., proposing an international group to encourage developing nations to replace the U.S. company's programs with open-source software such as Linux.The proposal by state-owned Banco do Brasil SA is part of a broader push started by President Luiz Inacio Lula da Silva's government in 2003 to curb use of Microsoft programs. Banco do Brasil, the state-controlled oil company, postal service and national statistics agency all have switched to Linux at the government's recommendation.``Microsoft will have to cut prices because of competition from free software,'' Jose Luiz de Cerqueira Cesar, head of technology at the bank, said in an interview today in Brasilia after a press conference to announce the proposal. ``It either adapts, and it's a company that has shown great ability to adapt, or it will be out.''Brazil's is the most aggressive push to promote software such as Linux and replace Microsoft programs, which run 95 percent of the world's computers. Microsoft's Windows program is too expensive for many companies and governments in developing nations, Cerqueira Cesar said at the press conference. The bank plans to disclose more details in June.

Munich, Vienna
Even governments in the world's most industrialized nations are making the switch. In June last year, Munich decided to remove the Windows operating system from 14,000 computers at the German city's offices. Vienna's city government is allowing departments to choose free alternatives to Microsoft's Windows operating system. In Asia, the use of government agencies of open-source computer software will more than triple to 60 percent by 2010, according to an industry research forecast made in December last year.Brasilia-based Banco do Brasil announced the creation of the World Open Source Software Organization during a summit called by Lula, 59, of Arab and South American countries to broaden economic ties between the two regions and challenge the U.S. and European Union in global trade talks.The bank's software proposal is ``focused on developing nations because they don't have the stock of patents and the capital to invest that developed nations have,'' Cerqueira Cesar said in an interview after the conference. ``Free software helps reduce the gap between developed countries and emerging countries.'' Banco do Brasil, Latin America's largest bank, expects all of its 200,000 desktop computers run on open-source software within five years.

Microsoft
Redmond, Washington-based Microsoft argues its software is easier to use, more reliable and more impervious to computer viruses. The company also claims its programs cost less than Linux when customers factor in training workers on Linux, managing the systems and purchasing additional software that's not included in Linux and is part of Windows.``It is a tough challenge for us,'' said Martin Taylor, a Microsoft general manager who handles the company's efforts to compete with Linux and met with Brazilian government officials in March, said at a press dinner in April in Kirkland, Washington. ``In the U.S. or UK you don't have such a government program to use open source.''Still, Taylor said that while in Brazil he met with senior ministers who told him they liked Microsoft and wanted information and data to help back up and justify their decisions to the government.

Lower Spending
The drive to expand Brazil's use of open source software is part of Lula's attempt to trim government spending and, separately, to help foster a local software industry. While the potential savings represent no more than 0.08 percent of the country's budget, a move to free software could mean loss of some of the biggest, most influential customers in Brazil for Microsoft, Oracle Corp., and other software makers.``The government is an important client to us and certainly an important market leader,'' said Paulo Cunha, director of government relations and education for Microsoft Brasil, in a phone interview May 3 from Sao Paulo. ``We will continue to work to improve our performance with them.''Jose Dirceu, Lula's chief of staff, is studying a decree for Lula requiring use of so-called open source software, said Renato Martini, a federal official involved in promoting Linux, an operating system that is available for free on the Internet.``The goal with this decree is to shift the way things work, so that now open source software will be the standard and proprietary software may be used in exceptional circumstances,'' Martini, a department head at the Information Technology Institute, known as ITI, said in an interview April 25 from Brasilia.

Information Technology
ITI estimates Brazil's federal government spends about 300 million reais ($121.3 million) a year in software licensing fees, out of a total 2.8 billion reais spent on information technology. The government saved 28.5 million reais since Dirceu issued the recommendation to use the Linux operating system and OpenOffice.org from Sun Microsystems Inc., the agency said.Brazil already has the largest number of companies using Linux in server computers -- the bigger computers used to run a network -- in Latin America, according to a 2004 survey by market researcher IDC in the region. About 43 percent of companies use Linux in at least one server, compared with 29 percent in Peru, 28 percent in Colombia, and 23 percent in Mexico, IDC said.Companies such as Casas Bahia, Brazil's biggest electronics and furniture retailer, the company managing Sao Paulo's subway system and Tele Norte Leste Participacoes SA, Brazil's biggest phone company, use Linux in cash registers and call centers.

Latin America, Asia
``I see Linux catching on more quickly in Latin America, Asia, as these companies look to reduce licensing fees,'' said Donald Feinberg, a vice president at researcher Gartner Inc. in Brazil. ``For smaller companies, every penny that they spend makes a difference,'' he said.Two-thirds of companies that installed or planned to install Linux software in servers in 2004 used it to replace Microsoft's Windows operating system, IDC said.

Local Industry
Brazil expects the focus on Linux and open source will help foster the local software industry because domestic programmers are able to modify and implement any changes in those programs, which is not possible in proprietary software, said Djalma Valois, an adviser to the ITI.Microsoft last month began selling in Brazil a version of Windows XP, called ``Starter Edition,'' that has fewer features and lower price. The company started a campaign April 27 to sell its software to small- and medium-businesses in Brazil in 10 interest-free installments through a credit line in partnership with a unit of Banco Bradesco SA, Brazil's third biggest bank.Microsoft shares fell 16 cents, or 0.6 percent, to $24.74 at 11:17 a.m. New York time in Nasdaq Stock Market trading. They have dropped 7.5 percent this year.Linux isn't the only non-licensed software government agencies are turning to. Brazil's postal system chose Sun's OpenOffice.org for 14,000 desktop computers purchased in January and plans to replace Microsoft's Office suite of programs on about 32,000 computers around the country, said Eduardo Medeiros,director of information technology at the company.The postal service expects to save 8.1 million reais this year and 21.4 million reais in coming years in licensing fees for Word, Excel and other Microsoft programs, he said.

Statistics Agency
Brazil's national statistics agency hasn't upgraded any of its Microsoft software since 2000 because of the high cost of fees, said Luiz Fernando Pinto Mariano, information technology director at the agency. IBGE, as the agency is known, has one- third of its 4,500 desktop computers and 150 servers running on Linux and other open source software, Mariano said.``Our decision was based on cost, we wanted to save money,'' said Mariano, in a phone interview from Rio de Janeiro. ``Open source software doesn't mean that it's free. Of course there is a cost to using that, but it's nothing close to using proprietary software.''Linux will save Banco do Brasil 13 million reais in licensing fees, said Jose Francisco Alvarez Raya, general manger for technology at the bank, in an interview last month.Banco do Brasil, which averages two server computers at each of its 3,700 branches, is also testing Linux in automated teller machines. The bank has shifted about 10 percent of its servers to Linux from International Business Machines Corp.'s OS2, and expects to have all servers running the operating system by the end of next year, Raya said.To contact the reporter on this story:
Elzio Barreto in Sao Paulo at ebarreto@bloomberg.net