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January 24, 2000

Linux Comes Alive
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Earlier this month, IBM unveiled a reorganization and product development strategy aimed at marketing Linux as a platform for companies engaged in E-business. The technology vendor has created a Linux unit within its enterprise server group to ensure Linux runs smoothly on all its server platforms, port its enterprise software to the open-source operating system, and possibly create an IBM-branded version of Linux suited for E-business requirements. Senior VP Sam Palmisano, who reports directly to CEO Lou Gerstner, is responsible for the company's Linux strategy, and VP of technology strategy Irving Wladawsky-Berger, a 30-year company veteran who successfully launched IBM's RS/6000 SP high-end server business in the early '90s, then headed the company's Internet division, will manage the unit and report to Palmisano.

All of which makes it sound as though IBM has high ambitions in the Linux market. "It's conceivable there's going to be a 'Blue Linux,'" that incorporates IBM's work on improving clustering, symmetric multiprocessing, and systems-management support, says Wladawsky-Berger. "With anything we build, even if we end up distributing and supporting it ourselves, we'd license it back to the other Linux vendors," he says.

This kind of commitment is leading more IT managers to adopt Linux, which has historically crept into companies from the bottom up. According to the InformationWeek Research survey, 86% of all IT managers, and 92% at companies with more than $500 million in annual revenue, say the support of large technology suppliers has made their companies more likely to deploy Linux.

Cendant Corp., a $5.3 billion travel services, real-estate, and direct-marketing company, has deployed Caldera OpenLinux 2.3 servers and workstations in about 60% of the 4,500 Super 8, Days Inn, and Howard Johnson hotels connected to its new Unix reservation-management system. Stability and ease of administration have been "remarkable," says Scott Gibson, VP of hotel IT with Cendant. That's important, since the franchisees have no IT staff on the premises. "Whereas the people who originally built Linux were not in it for the profit, Red Hat and Caldera certainly are," Gibson says. "But we'll get better support, and the features and functions that we need."

In some ways, however, Linux is still in its infancy as an enterprise platform. Two-thirds of companies using the platform have been doing so for a year or less. And while Linux deployments are widening, they're not deep. Respondents to InformationWeek's survey say just 4% of their total operating-system environments consists of Linux. Two years from now, that figure is expected to rise to 15%--impressive, but still far short of Windows' ubiquity.

Linux's main selling point is its bargain-basement price, with 61% of survey respondents citing low cost as a primary reason for using Linux. But that's closely followed--surprisingly perhaps, given the community approach to Linux development--by performance and reliability.

It's especially attractive to Unix shops that want to add commodity servers to an existing environment that they can manage without learning new skills. "For the kind of applications we're running--back-office and departmental--Linux does everything Solaris does, the way Solaris does it," says Mike Prince, CIO at Burlington Coat Factory Warehouse Inc., a $2 billion, 280-store retail clothing chain in Burlington, N.J. "We have a lot of experience running Unix; there's nothing but Unix on the back end of our company. Linux interfaces with Unix servers more naturally than NT does. It hits the sweet spot of our expertise."

A year ago, Burlington began rolling out Red Hat Linux on Dell Computer servers in its stores networked to the company's Solaris inventory system. "We wanted a platform that would allow us to Web-enable all of our apps and simplify the architecture in the stores," Prince says. "All of this is going toward developing a Web-enabled thin-client architecture. We ruled out NT--it wasn't as reliable, and it's fairly complex to administer a hybrid network."

According to Prince, the Linux servers don't crash or need rebooting for six months or a year at a time. "We're running a free operating system that's not running outside its capabilities, on state-of-the-art boxes. Where's the risk?" Prince estimates the cost of ownership for the store-level system is a tenth of what it used to be, though he says he doesn't have hard numbers to prove it. "Whereas every NT box has its own configuration, Linux blends into the woodwork," he says. "We run both types of systems, and the savings with Linux were so obvious, we didn't try to quantify them."

Dwight Davis, an analyst at Summit Strategies, says Linux's popularity is fundamentally about the technology market's desire for choice. "For a long time in the 1990s, it looked like the computer world was rapidly moving toward one in which consumers and corporate customers wouldn't have a choice, and that scared a lot of people," Davis says. Businesses were ambivalent about Microsoft, and even its supporters were reluctant to give control to any one company--especially Microsoft. "Many people had thrown up their hands and said Microsoft is going to dominate with the versions of its operating system, and it would marginalize Unix," Davis says. "No one could really see anything tripping up that scenario."

Then, in mid- to late 1998, database vendors began porting their software to Linux, and major systems vendors threw support behind Linux as well. "Suddenly, this was a real effort with a real set of companies standing behind it, instead of a bunch of open-source developers," Davis says. "Vendors like a few horses to ride as well as users. Maybe it's Sequent-SCO-IBM Unix next. But today, we've got Linux."

Wall Street is betting on a Linux boom. The operating system that grew up on the Internet, powering the Web-page, application, and caching servers that underpin the network, is suddenly reaping Internet-like valuations for the companies that distribute, preload, and support it. Last summer, leading Linux distributor Red Hat held the first bottle-rocket IPO, debuting at $14 per share, and closing last Wednesday at $117--the company is now worth about $17.5 billion. Last year also saw the successful debuts of Andover.Net Inc., an aggregator of Linux developer sites, and Cobalt Networks Inc., which preloads Linux on server appliances. Corel Corp., last fall an also-ran $5 stock, injected some life into its shares by shipping a desktop Linux package and adapting its software to run on open-source standards.

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