Linux Nips at Microsoft's Heels

Taylor also said the company is countering Linux's unbeatable price tag by commissioning studies that show the total cost of ownership over the life of the software is higher with Linux than Windows.

Finally, Microsoft execs cite one other advantage they offer over open-source software: tightly integrated products. Microsoft's next major operating system release, dubbed Longhorn, aims to integrate numerous products into the operating system and desktop, creating interdependencies that could further lock customers to Microsoft, notes Joshua Greenbaum, a technology consultant and principal with Enterprise Applications Consulting in Daly City, Calif.

The problem for Microsoft is Longhorn isn't expected to be released until 2006. By then, Gus Zinn, an analyst with Waddell & Reed, expects Linux will have killed off most of the Unix market, setting the stage for the real showdown against Microsoft.