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8/11/2006
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Survey: There's No Business Like Linux Business

Technology solution providers are making good money on Linux -- and the more Linux business they do, the more profitable they are, according to a survey by the Institute for Partner Education & Development (IPED).

"To build a channel-oriented product, we needed to concentrate on Windows and make it really easy for someone to carry, install, configure and manage," said John Glen, vice president of worldwide sales for the U.K.-based company with U.S. headquarters in Palo Alto, Calif.

XenSource is recruiting traditional VARs and managed service providers it has dubbed XSPs to deploy the product on Windows and Linux. XenSource supports Windows and Linux, although Glen acknowledges that the inclusion of Xen in new Linux distributions from Novell and Red Hat makes virtualization a hot profit area for Linux-oriented solution providers.
"Our chosen route to market is through a channel. Only a small quantity of VARs and systems integrators [currently] carry virtualization, but it's becoming mainstream," Glen said. "We are looking for channel partners to be involved in the delivery of services and support across the user base, and we won't dilute this by having our own professional services organization."

Many Linux solution providers deploy open-source applications on Linux and Windows, but the profit picture is better on Linux, some vendors say. SpikeSource launched a channel program earlier this year, as well as a new focus on the channel and the small-and midsize-enterprise market. The company has about 50 solution providers, including AgileCo, Dextrus and Initsoft Solutions.

Partners can earn 15 percent to 20 percent commission on the sale of a SpikeSource subscription, but they can make more money on extensions and customization work on top of the ISV's pre-integrated open-source software stacks, said Kim Polese, founder of SpikeSource. These high-end services tend to be more profitable than typical integration services, she said.

Polese and other SpikeSource executives say profitability is better for partners that deploy on Linux, as opposed to Windows.

"The use of open source and Linux frees up the budget that goes into product licenses for proprietary software," said Corey Williams, director of product management at the Redwood City, Calif.-based company.

According to the IPED study, solution providers cited cost savings as the top reason for deploying Linux. And although Linux got its start in the enterprise market, its increasing penetration into SMBs makes it a ripe opportunity for partners.

Revolution Linux is a Sherbrooke, Quebec-based company that deploys open-source applications on Windows and Linux but prefers to deploy on Linux.

"What's interesting with Linux is scalability. If you use one server or 100 servers, it's the same cost for licenses," said Patrice Albaret, a business developer at Revolution Linux. "We see it as a big profit opportunity." The company's revenue has doubled each year.

Albaret noted that Revolution Linux will make more profit on a typical Linux implementation, but during the first year on a major project, it tends to be profit-neutral because of the higher costs of customization and training his team. Still, the delivery of a more secure, more customized and feature-rich Linux solution translates into higher profitability in the long run, he said.

Some Linux partners also are seeing increased profitability as customers deploy higher-end applications on Linux.

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