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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).
According to the IPED study, one-third of the revenue from the strongest Linux solution providersthose earning more than 20 percent of their revenue from Linuxcome from deploying Linux for mission-critical applications, not edge appliances.

San Francisco-based GroundWork has signed up six partners, including Novacoast and Revolution Linux. As part of GroundWork's partner program, VARs get a flat 25 percent fee on product sales and 100 percent of the services business they generate from the open-source platform.

Initially, partners will be shadowed by GroundWork Professional Services to teach partners the ropes. There is a program fee of $15,000, but the fee is waived in lieu of partners paying GroundWork Professional Services consultants for their time on those first few service co-engagements, said Tony Barbagallo, vice president of product management at GroundWork.

"The only way to scale is though the channel," said Barbagallo, who built an indirect channel for Dantz, which is now owned by EMC. He said GroundWork initially ran 90 percent on services and 10 percent subscriptions, but the product- services ratio has shifted to an even 50:50.

Vendors' business models are firming up, and this is enabling some of the Linux channel growth, observers say. "If you want to get any traction with the channel, you have to prove the market, and that's what we've done," Barbagallo said. "We have a small direct sales force and professional services arm that has proven the marketing and business model, and we can show the business case with empirical data."

Centeris, Bellevue, Wash., is the ISV behind the recently released LikeWise 2.0 server management suite, which enables Linux to better interoperate with Windows networks.

Centeris executives are finalizing a formal partner program, to be announced later this fall, that it hopes will spawn and support a crop of service providers and resellers to serve the midmarket, said Centeris Vice President of Sales Lee Finck, who formerly ran F5 Network's channel.

"We'll deliver a more formal program later this fall for selling and providing services to midmarket companies," Finck said.

One Centeris executive said it makes sense that more channel programs are being launched as Linux spreads downmarket.

"If you look at Red Hat's results recently, they cited an increase in midmarket customers," said Manny Vellon, co-founder of Centeris. "They've got 25,000 new subscribers, and by definition, they can't all be Fortune 2000 companies."

Linux management vendor Levanta also plans to kick off a multitiered U.S. channel program at LinuxWorld Expo. The ISV will offer a premier-plus level and a second preferred level that is based on referrals.

Paul Anderson, president of Novacoast, Santa Barbara, Calif., said Linux accounts for roughly 5 percent to 10 percent of his company's sales and is growing.

"I don't see that it's any more profitable than our other service offerings, but it is certainly a high growth revenue opportunity for us," he said.

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Sara Peters, Editor-in-Chief, InformationWeek / Network Computing