SCO's complaint cannot be understood without reference to a seismic shift now occurring in the software industry. The root of the shift lies in the approximate doubling of hardware capacity every eighteen months which has been the trend since the mid-1970s. This means that the typical complexity of software designed to fully utilize state-of-the-art hardware also doubles every eighteen months, escalating the difficulties of software engineering to previously unimagined levels.

In the mid-1990s it began to be understood that the traditional production models for software were running out of steam, increasingly unable to produce an acceptably low defect rate at these escalating complexity levels. There was much talk of a 'software crisis' and attempts to resolve it through resort to various attempts at process improvement.

These attempts at process improvement consisted largely of introducing more formality, rigor, centralization, and statistical monitoring into the software-development process. They had honorable precedents in the systematization of assembly-line manufacturing and industrial process control in the 20th century. But producing software is not like producing automobiles or soap flakes. The analogy to industrial process control turned out to be fundamentally misleading, and all these attempts failed, merely adding additional cost to the process without reliably reducing defect rates.

Relief came from an unexpected quarter - from the loose-knit community of programmers and engineers associated with the Internet and the Unix operating system. Since the 1960s, the Internet and Unix hackers[4] had been pioneering a style of software engineering which reversed the premises of industrial software development.

Instead of centralization in large programming teams, the Internet style used small distributed programming groups. Instead of process control and hierarchy, the Internet style used peer review and open standards. Most importantly, the Internet style abolished secrecy in favor of transparency and what came to be called 'open source' code.

Rather to the surprise of all concerned, after about 1997 it became apparent that this was the answer (or, at least, an important part of the answer) that the software industry had been looking for. Defect rates and costs associated with open-source software proved dramatically lower than for closed-source software. The most skilled programmers flocked to the new mode. The explosive success of Linux, and IBM's adoption of it, is a consequence of the dynamism of open-source development.

We did not, however, use the term 'seismic shift' casually. As with previous technological revolutions, one of the prompt effects has been what the economist Joseph Schumpeter famously called 'creative destruction' - to wreck the business models of a great many companies attached to the legacy model of closed-source development.

The evolution of today's software industry is confusing to many people because it is proceeding in exactly the opposite direction from previous technological revolutions. Previously, the rationalization of production has been associated with movement away from decentralized cottage industry towards a factory system organized around concentrations of capital. This time, the move is away from the factory system, towards a new form of artisanship and individualism critically enabled by cheap PCs and the Internet. Thus, Linux.

This process panics companies like SCO and Microsoft who stand to lose everything if they fail to adapt, but it should not be viewed with alarm by any objective observer. What is actually happening is that the diseconomies of corporate scale are being competed out of software production ? the market is seeking a new and more efficient equilibrium.