The Mysterious Munich Affair Could Be Embarrassing for Microsoft

The city of Munich in Germany began an effort in 2003 to migrate 15,000 personal computers and laptops of public employees from Windows NT to free and open source software. In doing so, they chose a Linux distribution (named LiMux) based on Ubuntu, with a KDE interface.

Despite Microsoft CEO, Steve Ballmer getting on a plane to Munich to make a personal plea, the city stuck to their guns.  Their rationale was that cost savings were to be had by migrating from NT, as support was being discontinued by Microsoft and moving to open source software. Here’s where things start to get a little snippy.

In November last year, Munich announced that by switching from Windows to Linux, Munich saved over €11 million or US$14.3 million. They calculated their savings by comparing the cost of the LiMux migration to Windows 7/Office and Windows 7/OpenOffice configurations.

They assumed that they would have had to upgrade to Windows 7 by the end of 2011 and by doing so, Windows 7 and Office would have cost them just over €34 million, while Windows with Open Office would have cost about €30 million.

Using LiMux and OpenOffice on the other hand, has cost the City of Munich less than €23 million – a minimal savings of €7 million. They also produced a detailed report (in German) for public viewing.

Microsoft has countered with a Total Cost of Ownership (TCO) study contracted to HP claiming the city’s numbers are plain wrong, and Munich would actually have saved a staggering €43.7 million if it had continued using Microsoft products.

The leaked study claims that if Munich had stayed with XP and Office 2003, they would have saved this money. The study claims the city did not consider all migration costs and furthermore, 25% of all desktops are still running Windows.

The problem here is that while the conclusions of the study were leaked to a German weekly called Focus earlier this week, Microsoft has declined to release the details of the study for third party review. But inquiring minds of course, want to know. However, as ITWorld reports;

“The study was commissioned by Microsoft to HP Consulting for internal purposes only,” said Microsoft’s German communications manager Astrid Aupperle on Tuesday. Microsoft commissioned the TCO study on Munich’s migration to Linux because the company would “like to have some recommendations for other projects,” she said. She declined any further comment on the study.

Since the report was commissioned by Microsoft, HP also declined to comment, said Anette Nachbar, spokeswoman for HP.

Without details, my opinion is that the HP report is utterly useless. Intuitively, it is not possible to see how moving to a free Linux variant and free OpenOffice could be €43.7 million (almost $60 million) more expensive than Windows 7 and Office.

Apparently, Karl-Heinz Schneider, head of the Munich’s municipal IT service IT@M, asked Microsoft to provide him with the study, but was rebuffed. He commented that Microsoft’s assumption they could have stayed with NT (the OS in 2003) is not practical, as support has been discontinued.  XP was mentioned in the Microsoft report – an interim OS – but this too would have required an upgrade in the light of its maintenance being discontinued next year.

As to some systems still running on Windows , Schneider stated that 13,000 of 15,000 PCs, or 87% have been migrated so far and that he had confidence in Munich’s publicly available savings estimates.

As this story gains traction, it would be best if Microsoft released the details of its HP-commissioned study to clear the air. But something tells me that will not happen.  I have not met an IT analyst who can find a way to justify Microsoft’s (HP’s) numbers.  Besides, is HP a disinterested party?

This is what I wrote about in “Surprise! This is the Biggest Threat to Microsoft“, namely the use of Office alternatives like Google Apps and OpenOffice.

It is also what Adam Hartung touched upon in his interview with Windows 8 Update editor, Onuora Amobi.

Rather than denying the threat exists, I think Microsoft should be thinking through the best business response to it. What do you think?