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January 24, 2000

Linux Comes Alive
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Photo by Terry Miura

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It all culminated in the frenzied run-up of VA Linux Systems, a company that generated only about $17.7 million in sales in fiscal 1999. Yet CEO Augustin says companies that exploit any association with Linux in order to jack up their share prices, or obscure fundamentally unsound businesses, give him pause. "That kind of thing gives everyone a bad name," he says. "People start to believe it's overhyped."

Will Linux fever last among investors? Caldera Systems Inc. will find out. Earlier this month, the company registered for an IPO and closed a $30 million round of funding from investors that include Citrix, Novell, SCO, and Sun Microsystems.

In addition to Caldera, SCO this month invested in Linux vendor TurboLinux Inc. Though analysts say SCO's Unix-on-Intel variant, UnixWare, is in some ways better than Linux, the open-source operating system still poses a threat to SCO because it hits the same small-business market targeted by UnixWare. SCO product marketing director Tamar Newberger says the company wants to ensure Linux compatibility with UnixWare, while characterizing Linux as a low-end environment.

Open-source proponents say Linux companies' valuations recognize that their unconventional development model, in which thousands of far-flung programmers volunteer their efforts for the public good, is more effective at creating features and fixing bugs than proprietary methods of development. "The capital markets are saying this is a fundamentally better way of developing technology," says Red Hat founder and chairman Bob Young.

Maybe. But the cash pouring into Linux companies from high-tech vendors, Silicon Valley venture capitalists, and Wall Street investors is raising some questions. How do Linux companies build sustainable businesses selling software that isn't tied to a traditional license agreement? Can these vendors make the software run well enough and provide the necessary development tools to make Linux a compelling alternative for running back-end E-business systems, thereby expanding the market? And, perhaps most important, can Linux satisfy enterprise customers' demands for a formal sales and support chain without buttoning down what's best about Linux?

Photo by Jim Bounds To be sure, Linux runs into difficulties as companies try to leverage its strengths in cost, reliability, modifiability, and the quick availability of tools and bug fixes from the open-source community in E-business environments. As companies expose more of their back-end data through the Web, lines between infrastructure and back-office applications are fuzzier, pushing Linux more firmly into the arena of business-critical processing, analysts say. But Linux's current version 2.2.12 kernel--the part of the operating system that's common to most distributions--doesn't support more than four processors and 2 Gbytes of memory in most production implementations, though more-robust systems run in lab settings. "These are architectural limitations," says Tony Iams, a senior analyst at D.H. Brown Associates. "People are working frantically to improve them, but if you need more than this, you're not going to get it from Linux."

The kernel also lacks a journaling file system, which maintains an application's state in the event of a crash. It also doesn't support Fibre Channel technology for communicating with input/output devices. Visual development tools are still largely absent.

In addition, IT managers cite the lack of business applications as among Linux's most-significant weaknesses, with two-thirds of survey respondents noting that complaint. For example, front-office software leader Siebel Systems Inc. doesn't sell its applications on Linux. A company spokeswoman says there's not sufficient demand yet to port its applications to Linux.

"The biggest shortfall for Linux is that it doesn't have all the applications we need today," says Monty Mullig, VP of CNN Interactive in Atlanta, which like other companies is getting its early experience with Linux in projects that aren't officially sanctioned. For now, CNN is testing some of its community software, such as message boards and fantasy sports games, on the platform. Mullig says he's "excited by the prospect" of running live applications on Linux, but needs to see support from more software vendors. "The uptake will happen on less-complicated applications, and will work its way back," he says.

For these reasons and others, Linux isn't being adopted by all businesses. Indeed, companies with no current plans to deploy Linux outnumber those that are using it or planning to, according to the InformationWeek Research survey. "One part of the IT community views Linux as a viable choice, but another segment--banks and financial institutions, for example--isn't touching Linux," says Gartner Group VP and research director George Weiss. "It's a very bifurcated market right now."

Microsoft is quick to point out these shortcomings and is eager to brand Linux as a low-end system with niche appeal. Though Microsoft product manager Edwards acknowledges "Linux is a competitor in some low-end scenarios," he takes the software to task on its supposed cost and ease-of-development advantages. For IT organizations, the operating system represents about 3% of the total cost of ownership, he says, with the rest accounted for by help-desk support, management processes, and application development. Microsoft's platform integrates a visual development environment, middleware, a directory service, and group-policy management features, whereas "with Linux, you have to piece the infrastructure services together," Edwards says.

Microsoft says the Linux hype has caused people to take its claims of reliability at face value. Still, it's ironic that the world's largest software company feels threatened, given the Linux market's fragmentation and the fact that Microsoft has always touted the advantages of a single version of Windows.

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