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Microsoft must take an approach that favors and embraces the diversity of open-source software or face oblivion, David Stutz, a departing Microsoft executive, wrote in his farewell letter to the company.

Stutz, a respected technical thinker at Microsoft, sees networked software as the future for computing. Open-source software is already there, while Microsoft still has to move past its PC-centric roots, he wrote.

Looking Ahead

"If Microsoft is unable to innovate quickly enough, or to adapt to embrace network-based integration, the threat that it faces is the erosion of the economic value of software being caused by the open source software movement," Stutz wrote in the letter that he posted on his Web site.

"Useful software written above the level of the single device will command high margins for a long time to come. Stop looking over your shoulder and invent something!" he wrote to Microsoft. "If the PC is all that the future holds, then growth prospects are bleak."

Stutz left Microsoft earlier this month. He held several key positions at the Redmond, Washington, vendor, including chief architect for Visual Basic and most recently group program manager for Microsoft's Shared Source program, the company's answer to open source.

Perception Problem

Stutz worries that efforts to recover from current poor perceptions of the company as "politically inept," among other things, and a focus on being the lowest cost commodity software producer will lead to rule by managers and accountants at Microsoft rather than by visionaries.

Microsoft's "denial" when it comes to networked computing is understandable because the company built its empire on the notion of the PC as the natural point for hardware and application integration. However, "network protocols have turned out to be a far better fit for this middleman role," according to Stutz.

"Microsoft still builds the world's best client software, but the biggest opportunity is no longer the client. It still commands the biggest margin, but networked software will eventually eclipse client-only software," Stutz wrote.

Microsoft products due out later this year, such as Windows Server 2003 and the successor to Office XP, will offer more networked features than the previous versions, the company has said.

Posing a Threat

The greatest threat to Microsoft is not the Linux operating system, but applications, Stutz warns. As the quality of open-source software improves, there will no longer be a need for Microsoft's Office one-size-fits-all suite of applications, he wrote.

"Open source software is as large and powerful a wave as the Internet was," he wrote. "Microsoft cannot prosper during the open source wave as an island, with defenses built out of litigation and proprietary protocols."

Steven Milunovich, a vice president with Merrill Lynch, agrees that Microsoft needs to innovate more.

"Microsoft must notch up the innovation component to do well in new areas," he wrote in a report on Wednesday.

Microsoft has publicly said in the past that open-source software is a threat to its business. The company could not immediately be reached for comment.

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