A fascinating (and alleged) internal Microsoft memo has been making the rounds this weekend on the Internet, showing a company that has privately taken the Linux threat to heart while it publicly asserts that it has nothing to fear. The memo, which is now known simply as the "Halloween Document," explains the Open Source software phenomenon, including such competitors as Linux, Apache, and Netscape Mozilla, while offering up some strategies that Microsoft can implement to avert disaster.

In the memo, the unnamed author alleges that Linux is a serious short-term threat to Microsoft's NT Server strategy, but poses no threat on the desktop. The document (correctly) states that much Open Source software is commercial quality (sans the cost) and that this prevents Microsoft from using its standard FUD (Fear, Uncertainty, Doubt) tactics against it. Furthermore, since Open Source software isn't associated with a single company, Microsoft will have to target "a process, rather than a company."

The most interesting conclusions in the memo regard Linux, which the author believes "can win" as long as Internet services and protocols are a "commodity." Linux will soon "own" the x86 UNIX market, the author says. To beat Linux, Microsoft must use the same tactics it used to beat UNIX in the past. And perhaps most disturbingly, it must create proprietary extensions to protocols such as TCP/IP, HTTP, IMAP and the like so that its customers will be forced to seek Microsoft-only solutions. The memo says that new protocols will be accepted only if they "raise the bar & change the rules of the game."

Scary, isn't it? The memo, if real, offers a fascinating look into the decision-making process at Microsoft. If it isn't real, it's still worth reading, however, because it offers up an intelligent comparison between the directions Open Source and Windows are taking.

Open Source expert Eric Raymond has posted the Halloween Document along with his own notes on the Web

For those of you unfamiliar with Raymond, he is the author of the famous "Cathedral and the Bazaar" paper that convinced Netscape to go the Open Source route with Communicator. Check out Raymond's home page for details