Microsoft has "no trouble" beating open source rivals when competing head-to-head on features, chief executive Steve Ballmer claimed during a public speaking engagement in Silicon Valley yesterday.

Customers do not opt for open source applications because of " quasi-religious beliefs" that their openness is better than proprietary alternatives, he argued, but because of their features.

"This is a good old-fashioned engineering competition," Ballmer said at an event at the Churchill Club and Commonwealth Club. 

"When we don't have market share [against open source] it is because we have to innovate."

Ballmer admitted that Microsoft is trailing behind open source for security appliances and e-science applications. "We need a better high-performance cluster technology than Linux," he said.

"The key is the [same] as with any other competition: better products and a better total cost of ownership. It's hard to beat open source on the cost of procurement. It's not hard to beat Linux on total cost of ownership."

Ballmer acknowledged that there are mature open source applications in the areas of file servers and email servers, but boasted that Microsoft has a " strong" market share in those segments.

Linux is outgrowing Windows in the server market, but Ballmer said that he is happy with his company's performance in this sector.

He expects to close the gap between the two operating systems by beefing up functionality in the areas of server clusters, web servers and security. "That is where we need to pop our game versus Linux - at the server level."