"This puts open source on my radar screen," says Tom Shelman, CIO of Northrop Grumman, a Los Angeles-based defense contractor and shipbuilder. Indeed, 60 percent of respondents to the latest CIO survey said they had decided to begin using open source as a direct response to Microsoft’s new licensing plan.

Shelman is considering open source reluctantly, he admits. But he feels trapped because he could not create a business case to justify signing up for Microsoft’s new licensing program. He tried, but his IT staff found that the licensing plan could increase the cost of an upgrade 60 percent more than in the past. "If you’re going to increase the license cost, you have to look at three things to balance it," Shelman says. "Will the support cost go down? Does it increase functionality? Does the ability to use it let you win more business? Right now, I can’t demonstrate business value for doing it based on those things."

So in December, Shelman, who controls 100,000 desktops at Northrop Grumman, made a decision that could represent a turning point for Microsoft. He decided he needed an alternative. "We decided to explore whether it’s feasible to move a $25 billion company onto open source," he says. He has no problem with Microsoft software, he says, nor is he at all sure whether open source can work, but if it can demonstrate more business value than what he’s using now, he’ll consider it for part of his desktop population.

"We don’t chase the latest release of anything," he says. "For any type of software, you have to ensure that what you’re doing is adding value. You can’t automatically pay just because a vendor raises prices or changes strategy. You have to think carefully. The reason costs were spiralling out of control for years was CIOs said, Hey, we gotta buy the new stuff."

Peter Houston, Microsoft’s senior director of server strategy, says Microsoft will not give up the new licensing plan, although last month it extended some support provisions for NT Server 4.0 through 2004. Nor will it give away its software?as some analysts have speculated it will. But it is reasonable to speculate that if the company begins to feel enough pressure?from open source, from its customers, from the economy?it will respond. Most likely, Microsoft will simply drop its prices to meet or beat any perceived cost advantage that emerges from Linux and open source.

And that could mean that those who have taken the bet against the new licensing plan might wind up with something to show for their troubles.