So it's begun. Microsoft is admitting in its financial filings that Linux and open source are eating into its revenues. Worse for them, they say, is that what they're seeing is the tip of the iceberg.

Hello, Microsoft Titanic? Meet Mr. Open Source iceberg. Hope you brought your life raft.

And like the Titanic - that unsinkable wonder - they are beginning to spring leaks.

To be honest, they warned us about it a long time ago. But no one really thought it would amount to much. And, to be honest, it really hasn't - yet.

But the panic in the voice of their financial filings this quarter was impossible to miss. Just listen: "Our direct competitors include firms adopting alternative business models to the commercial software model. Firms adopting the noncommercial software model typically provide customers with open source software at nominal cost and earn revenue on complementary services and products, without having to bear the full costs of research and development for the open source software."

More directly, they expressed, "the popularization of the noncommercial software model continues to pose a significant challenge to our business model, including recent efforts by proponents of open-source software to convince governments worldwide to mandate the use of open-source software in their purchase and deployment of software products."

Hmm. Microsoft complaining about large organizations standardizing software products? Hasn't Microsoft just spent 20 years talking the corporate world into doing just that? (I guess it's different when people standardize on products that aren't yours.)

But before I'm accused of bashing Microsoft too harshly, let's take a step back.

The truth is, if Microsoft is being impacted by Linux and open source, it's just a reflection of how exposed they are. They essentially sell commodity applications to a very large market. They've also been able to maintain very high margins because in many ways they've had a lock on their markets. These factors mean they're a big target. They have so much to lose primarily because they've accomplished so much.

But Linux and open source are having the same impact across the entire IT industry. Anywhere "commodity"-type applications exist, there are open source developers working as I write this to create "Free" alternatives.

Does this mean that all software companies are at risk of having their lunches eaten by small and loosely organized groups of open source developers from around the world? Hardly.

What we're seeing is similar to what's been happening in the field of mathematics for centuries. Math is essentially an open source phenomenon. Everyone publishes their results for others to see and build on. In fact, math may have been the original open source technology. But just because everyone gets to use algebra, geometry, and calculus for free doesn't mean we're running out of new math problems to solve. In fact, just the opposite is true.

By making the fundamental math "technologies" free for everyone to use and share, it's actually enabled more innovation and new ideas than ever would have been available otherwise. Imagine what would've happened had Sir Isaac Newton tried to charge license fees for anyone wanting to use calculus - the overall innovation rate in math would've been a fraction of what it's been.

There's no reason to think that Linux and open source won't have the same effect. By making so many core, base technologies free to use and share, the overall innovation rate should accelerate. In fact, it should make the overall innovation rate accelerate dramatically.

While there will be some big losers (like potentially Microsoft), there will be some big winners too. The winners will be all of us who get to "stand on the shoulders" of all those who are dedicating their time to creating open source applications.