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January 24, 2000

Linux Comes Alive
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Photo by Terry Miura

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"It's fair to characterize Microsoft's attitude toward Linux as frustration and astonishment that corporate customers are willing to trust and invest in an operating system that doesn't have an identifiable company backing it," says Summit analyst Davis. "They're going to be gunning for Linux, but they need to step gingerly because they have original equipment manufacturer and developer partners that are shipping Linux."

The bad feelings run in both directions. "Microsoft isn't the disease, but they're a symptom," says Eric Raymond, a self-described hacker, president of the Open Source Initiative, author of The Cathedral & the Bazaar (O'Reilly & Associates, 1999), an open-source tract, and a newly minted multimillionaire as a result of his seat on the VA Linux board. "If your critical business processes are controlled by software whose inside you can't even see, that means you're on the wrong end of a monopoly. Prices will rise, and you'll pay more to be locked in."

Technology vendors are working to improve Linux's shortcomings as a platform for E-business, and more applications continue to become available. Oracle plans to ship its front-office suite, Oracle11i, on Linux. Oracle claims only 800 paying customers for the Linux edition of its database, accounting for about $6 million in revenue, compared with about $900 million for Windows NT products. Yet, "there was a time when NT was only $6 million," VP Burton says. IBM has ported its DB2, Domino, MQSeries, and WebSphere middleware to the platform, and its VisualAge for Java builder is slated for general availability on Linux this quarter.

Informix Corp. next month plans to reveal a broad Linux strategy, including an aggressive price promotion that reduces the licensing fee for its Foundation 2000 database to $32,000 for a four-way Linux system. Director of Linux marketing Janet Smith estimates that's an 85% discount. And Sybase Inc. last fall shipped its Adaptive Server Enterprise 11.03 database on Linux and plans to add replication capabilities this quarter. The company says about half of Adaptive Server Enterprise sales to online businesses are on the Linux platform, compared with 45% for Unix and the remainder on Windows.

Caldera Systems this quarter plans to ship a Java suite of E-commerce components called OpenLinux eBuilder. "Linux needs to be more easily manageable from a browser, from a centralized place in the corporation," says CEO Ransom Love. "The next step is to provide a framework based on open standards like XML and Enterprise JavaBeans, which allow you to wrap Linux around existing systems. The infrastructure layer is the higher-margin environment."

Red Hat is leveraging its stock value to acquire companies that help position its products for customers who want more enterprise-class functionality. Chairman Young says Red Hat is investing in three areas: technology that enhances its platform, online content for developers, and services and support. In November, Red Hat spent $674 million to acquire Cygnus Solutions, which makes Linux software developer tools that provide a common development platform for server, workstation, and wireless devices. Earlier this month, Red Hat bought Hell's Kitchen Systems, a developer of E-commerce payment software, for about $86 million.

The clear trend among Linux suppliers is to expand their portfolios of related products and services. "The way the market is structured, the only way to make money on Linux is to add more layers of value above the operating system," says Gartner Group's Weiss. "But service is going to become a very competitive area, hotly pursued by vendors such as IBM, and it's not necessarily going to offer great riches for the Linux companies," he says. "It's very hard to grow a service organization more than 15% or 20% per year."

The catch for Linux vendors is that businesses want a service infrastructure, but they're happiest if they never have to use it. Jeff Davis, a senior systems programmer at Amerada Hess Corp., the $6.6 billion oil and gas concern, says his company has no plans to bring in outside help as it migrates a seismic-imaging application from an IBM supercomputer to a group of about 140 Linux servers. Given the company's in-house Unix expertise--Hess runs IBM's AIX widely--"there's not a steep learning curve to start using Linux," Davis says. "If we get into things like Oracle and database servers, then we'll seek more services."

That's what vendors are hoping. Indeed, if there's one thing on which IT managers and Linux vendors agree, it's the need for at least a few strong suppliers to emerge. Forty-three percent of respondents to the InformationWeek Research survey count lack of control by a single vendor among Linux's biggest shortcomings, while 20% of businesses with no Linux plans in the coming year say they don't trust open-source software.

"You can't hold an open-source community accountable," says Dick Sullivan, a VP of marketing in IBM's software group. "Customers say, 'How long do you think I'd last if I told my CIO, I've registered this problem on the Internet and I'm waiting for the open-source community to get it fixed.' It's not in the business culture today."

As established Linux vendors emerge, it raises other concerns. The open-source model thrives on the group-development dynamic, but will vendors hire many of the seasoned Linux developers and diminish the volunteer talent pool? While no one questions Red Hat's commitment to the Linux community, some wonder where its acquisitions will ultimately lead. "Some of the attraction of Linux as an open-source and initially free operating system will probably erode over time now that certain vendors are selling Linux licenses and providing service and support," says Cendant VP Gibson. "They're going to see growth in their market share come directly from how they can differentiate themselves."

Red Hat chairman Young downplays any tension between Linux suppliers and the freeware community. "The free software movement is a little like the Homebrew Computing Club was for the PC in the late '70s," Young says. "They built the PC model, but they didn't have the resources to bring companies like Apple Computer and Compaq to market, and turn these into replicable and scalable systems for corporate customers."

The question remains whether Linux can achieve credibility as an enterprise operating system while still preserving the spirit of innovation that created it. Sure, Linux is about low costs and user control, but it's also largely about being an alternative. And nothing tends to squelch an alternative like its own success.

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