NEW YORK (CNN/Money) - After years of defending itself against anti-competitive allegations, Microsoft is now on the other side of the coin, as a number of international government agencies are encouraging the use of free, "open source" server software, according to a published report Thursday.

Shares of Microsoft (MSFT: down $1.10 to $47.11, Research, Estimates), the world's largest software maker, fell about 3 percent in mid-day trade Thursday.

As it faces the growing threat of "open source" software, particularly the Linux operating system, Microsoft is backing an industry group called the Initiative for Software Choice, comprising mostly small international companies and organizations, according to the New York Times.

Peter Houston, a senior strategy executive in Microsoft's Windows group, told the paper customers will increasingly see the limitations of Linux as it becomes more widely used.

Windows, he added, has a wide range of tools and technical abilities that Linux does not have in a "comprehensive, integrated, easy-to-use" package, the paper reported.

"All we're looking for is a level playing field competitively," Houston continued.

China is one country pushing the use of Linux as it does not want one company "to manipulate or dominate the Chinese market," said the director of a Chinese software development center recently, according to the Times.

In June, the German government said it will use open source software in national and municipal government agencies.

"The fact that Linux provides a true alternative to the Windows operating system," said Otto Schily, the German interior minister, "increases our independence and improves our position as a big customer for software," the paper reported.