Linux emerging as a real threat to Microsoft's position Microsoft, the world's leading software maker, is struggling to maintain its market dominance in Korea in the face of a host of challenges. First of all, the company will face a crucial ruling from the country's anti-trust regulator, possibly late next month, on the allegation that Microsoft violated fair trade rules. It is not certain that the Fair Trade Commission (FTC) will rule against Microsoft but experts predict that the possibility is high. The dominant status of the Windows operating system, a flagship product of Microsoft, is also under threat following the strong emergence in Korea of an opensource alternative called Linux. The country's love affair with Linux is being pushed by the government, which aims to become a software powerhouse by diluting the monopolistic status of Windows. In addition, a homegrown software package is gaining prominence among local users, causing a headache for Microsoft and its popular Office suite. Imminent Anti-Trust Ruling on MS To finalize the long-pending anti-trust ruling on Microsoft, the FTC called two plaintiffs, Daum Communications and RealNetwork, as well as Microsoft, which is on the defensive, last August. Leading the hearing on Microsoft, FTC general director Huh Seon said the agency's nine-member committee would reach a decision as early as at the end of October. In 2001, Daum, which runs one of Korea's most popular Web portals, lodged a complaint with the FTC accusing Microsoft of illegally incorporating its instant messaging software, MSN Messenger, into the Windows operating system. Daum claimed its messaging service, Touch, lost grounds due to the unlawful bundling while MSN Messenger easily took firm root in the local market thanks to the fusion. Using the same reasoning, Daum also launched a damage suit against Microsoft in the Seoul District Court in April 2004 seeking 10 billion won ($9.8 million) in compensation. In a separate event, RealNetworks, producer of RealPlayer audio-visual software, joined the wrangling last year by crying foul at Microsoft's linking of Media Player with Windows. Microsoft has gone all-out to win because the case is significant to it. This is the first anti-trust ruling it has faced in Asia, Microsoft's emerging market. Should the FTC side with the plaintiffs, Microsoft is expected to suffer setbacks in the domestic market and be bombarded with similar suits in other Asian nations. Indeed, Microsoft had to unload its music player program Media Player from Windows in Europe after the European Commission ruled the bundling obstructs fair competition in March, this year. In Korea, things are not favorable to Microsoft, either. A preliminary report by FTC investigators on the case is believed to be unfavorable to Microsoft. Although the regulator's final decision is not bound by the report, the report will affect the ruling. Observers also predict the FTC will not acquit Microsoft. "It is hard to predict what the ruling will be like exactly. But I think that the FTC will not acquit Microsoft of all the charges," a Seoul analyst said. In response, Microsoft Korea said it expects a favorable ruling from the FTC since the bundling benefits customers. "We should regard mixtures of programs with Windows as a kind of digital convergence because they offer new values to end users, which are implausible with separate software," Microsoft Korea executive Kwon Chan said. Digital convergence refers to the latest trend that blurs conventional barriers between disparate businesses as shown at a camera phone, which bundles a cell phone and a embedded digital camera. Korea's Love Affair With Open-Source Program Currently, the Windows operating system of Microsoft enjoys a monopolistic status in Korea. But a thorn is springing up in its Korean bed of roses, a thorn called Linux. Linux, first developed by Finnish university student Linus Torvals, is a free and open-source software unlike the closedsource operating system Windows. Its underlying source code is available to the public and anyone can freely use, modify and redistribute it. Such features empower Linux throughout the world. Programmers upgrade Linux continuously as the system can be adjusted by computer manufacturers and users to meet their own needs. The Korean government, does not want to be tied to expensive, specific closed-source programs and is pulling out all stops to boost Linux. Korea Post, the postal service agency, announced last month that it will begin using Linux on its desktop computers. In the first stage, Korea Post will install the Linux-based operating system on 4,748 PCs for customers in its 2,800 branches. The Ministry of Planning and Budget also jumped onto the Linux bandwagon by revealing a plan to start 37 state informatization projects next year with the open-source software. A new online school information system, the National Education Information System (NEIS), will also install Linuxbased systems on its 2,331 servers in the first large-sized state project with Linux. The NEIS system, which will allow schools to collect such private data as students' names, dates of birth and graduation, as well as sharing them, will debut next March. In addition, Korea has been cooperating with China and Japan to standardize the Linux operating system in the three countries. An official at the Korea IT Industry Promotion Agency that leads the Linux campaign explained Korea's commitment to open-source programs. "The bottom line is that we need to change the whole game to become a global contender in the software industry. Without building up our own competitive operating system, we will be unable to make high-margin applications," the official said. Homegrown Software Dies Hard Late last week, Haansoft, a domestic software maker, signed a memorandum of understanding (MOU) with Hana Bank, the nation's third-largest bank by assets, on sales of its own office software package. Under the deal, Haansoft will provide Hana with 9,000 copies of Hancom Office, which consists of Hangul word, Nexel spreadsheet and Hancom Slide presentation. All 9,000 personal computers in the bank's headquarters in Seoul and 600 branches across the country are now equipped with both Hancom Office and Microsoft Office. Originally, Hana depended solely on Microsoft Office suite, including Word, Excel and PowerPoint, but decided to employ a new dual-standard strategy to reduce risks and costs associated with being dependent on a single office program. "We will use both Microsoft Office and Hancom Office to reduce costs. The tactic works well because it gives us an advantage in negotiating with Microsoft by having a plan B other than Microsoft Office," Hana Bank general manager Huh Yun-suk said. Huh added Hana already saved 5 billion won in purchasing the latest versions of Microsoft Office thanks to the existence of the alternative Hancom Office program. The price of Hancom Office is roughly about a fifth of Microsoft Office, according to Huh. "We recommend that our workers use both office programs in making documents. Although there were some hitches during the pilot tests, they now work well together. We once mulled over shifting our main system to Hancom Office when talks with Microsoft fell apart," Huh said. Haansoft chief executive Baek Jong-jin said Hancom Office has a shot at making a splash because it provides the same applications as Microsoft Office at a much lower price. "Banks such as the Korea Exchange Bank and Kookmin Bank show interest in using our programs. We have a competitive edge," Baek said. The Korea Exchange Bank is the country's seventh-largest bank in terms of assets while Kookmin Bank is Korea's leading bank by any measure. The unexpected emergence of Hancom Office is a bitter pill for Microsoft to swallow because Microsoft almost killed the homegrown product several years ago. Hancom Office was at risk of disappearing after Haansoft signed an MOU with Microsoft in 1998 to stop developing the Korean-language software in return for a $20 million investment. However, the decision was rescinded as a nationwide fundraising campaign was staged to revive the software, regarded as an icon of national pride. With that kind of support, Haansoft progressed further, coming out with the full-featured bundle Hancom Office in 2002 which includes a presentation tool and a spreadsheet on top of the existing word program.