May marks the second anniversary of Microsoft's so-called shared-source initiative. Microsoft has made parts of its Windows and Windows CE operating systems available to third parties, as well as elements of its Passport identity-management software, Visual Studio .Net development environment, and ASP.Net. The world's largest commercial software company is increasingly letting other developers not only view the internal workings of its operating systems and middleware, but also modify portions of its software and sell products that incorporate the changed code.

Microsoft estimates that it has made 100 million lines of code available under the initiative. "It was important for Microsoft to say, 'This is what we believe in,'" said Jason Matusow, the shared-source manager spearheading the program, last month in an interview. "We're going to learn from open source."

Not everyone is thrilled. When Matusow spoke at an open-source industry gathering at George Washington University not long ago, the Microsoft representative drew demonstrators. Eric Raymond, president of Open Source Initiative, a nonprofit organization that promotes open source, says shared source is little more than "source under glass," because the company limits changes to the code.

Why the opposition? Make no mistake, Microsoft is not fully embracing the open-source model or its playbook, the General Public License. Microsoft's deal with SCO--which sued IBM in March and has warned others they face legal action for misappropriating its intellectual property--is a none-too-subtle endorsement of the for-profit approach to software development.

Microsoft general counsel Brad Smith issued a statement reading: "The announcement of this license is representative of Microsoft's ongoing commitment to respecting intellectual property and the IT community's healthy exchange of IP through licensing."

Microsoft's strategy is two pronged: Emulate the open-source model where it benefits the company while still competing aggressively against open source. As Microsoft sees things, it's merely trying to adapt some of the most interesting principles of the open-source movement--such as encouraging others to use its software and fostering technical innovation--at the same time that Linux vendors are learning to compete in the software market.

What it amounts to, Matusow says, is a "move to the middle," where commercial software companies and noncommercial developers adapt each other's concepts.

The differences between Microsoft's shared-source approach and the Linux community's open-source model are greater than the similarities. Microsoft's approach doesn't come close to the high-minded goals of the Free Software Foundation, which encourages freelance developers to borrow publicly available programs for their own purposes and, in turn, requires them to share any development work they do for the common good.

Microsoft, on the other hand, attaches royalty fees to some of its shared software and carefully controls who has access to its code and what they can do with it. For example, while Microsoft lets others modify and distribute Windows CE under certain conditions, any changes to its flagship Windows operating systems are strictly off limits. What Microsoft wants to avoid, in part, is a situation like SCO's, in which derivative works (if that is, in fact, what they are) become difficult to track, control, and license. "Our concern is the integrity of the platform," Matusow says. By Microsoft's estimate, more than 200 variants of Linux exist.

In a May 12 letter addressed to Linux users, SCO stated that it believes parts of Linux are an "unauthorized derivative" of its Unix System V code and warned they could be held liable for using Linux. The Linux community has been quick to rebut the charge, and large IT companies that sell Linux, so far, continue to stand behind it. Hewlett-Packard has issued a written statement saying it's "unaware of any intellectual property infringement with Linux." Says Oracle: "SCO's announcement has no impact on Oracle's commitment to Linux and to our relationship with other Linux distributors and the Linux community."

One of the ironies of this brouhaha is that SCO was founded in 1994 as Caldera Inc., a Linux company. In 2001, Caldera acquired the Unix server software of the original SCO, and in 2002, Caldera changed its name to The SCO Group. Now, SCO has stopped selling Linux and started pressing its claim that Linux is comprised, in part, of its Unix technology. The company hasn't provided proof of its claim but says interested parties can come to its offices and, after signing a nondisclosure agreement, see for themselves.

So what exactly does Microsoft plan to do with the Unix code it recently licensed? Microsoft already uses some Unix code in its Services for Unix product, which makes it possible to run Unix applications on top of Windows by overlaying Windows with Unix interfaces and protocols. Microsoft execs were unavailable for comment, but an SCO spokesman says Microsoft also plans to use unspecified patented technology from SCO in future products.

One possibility could involve giving Windows' graphical administration tools more of the look and feel of Unix, for those who want it. In an interview earlier this year, Microsoft's director of Unix solutions, Doug Miller, said his group would deliver "several dozen" new Unix scripting commands sometime this year. "One of the things we heard loud and clear from Unix IT staff is, 'I'd like to be able to administer my Windows system much in the same way I do from Unix boxes,'" Miller said.

CEO Steve Ballmer acknowledged in a recent interview that Microsoft has more work to do when it comes to helping customers port Unix applications to Windows. "If you're trying to migrate an application that's been written for Solaris onto Intel hardware, we're pushing ourselves" to do better, he said.

Not coincidentally, given the similarities between Unix and Linux, Microsoft's Services for Unix is what the vendor also sells customers who want Windows-to-Linux interoperability. "One of the platforms we support out of the box is Linux," Miller said.

As Microsoft moves toward something vaguely resembling the open-source model, one of its biggest challenges is figuring out how to share Windows--and how much of it to share--with independent software vendors. "It presents our most significant challenge," Matusow says. The benefit, he says, is that developers would be able to write better applications. The challenge: controlling the spread of incompatibilities that might result as developers write applications based on their own tweaks to the system.

Microsoft, however, remains open to the idea of sharing Windows in some fashion with independent software vendors. "It's an active piece of discussion," Matusow says.

So far, Microsoft has made Windows' internals available to customers, academic researchers, students, original equipment manufacturers, systems integrators, and some foreign governments. They're allowed to use the code for debugging and security assessments, but changes or redistribution to others are prohibited. Taiwan, Russia, China, and the United Kingdom are among the governments with access.

Yet, few of Microsoft's customers actually take up the offer to look under the hood of Windows. Of the 5,000 public and private organizations that qualify for Windows source-code access, fewer than 100 have done so, Matusow says. And those that get the code, he says, generally don't spend much time tinkering with it.

So if Microsoft's prized source code is relegated to shelfware among the few companies that have it, why get it at all? It gives CIOs a sense of security to know it's there. "It's a transparency and trust issue," Matusow says.

And Microsoft itself is not above using some non-Microsoft code in its operating systems. Matusow says 3% of Windows has been licensed from others.