SuitWatchWednesday, February 6, 2002
Exposed advantages
Paul Saffo says we tend to overestimate in the short term and underestimate in the long. Now it's finally starting to look like Linux is fitting the model at both ends. In the late "new" economy, many hot stock categories were ironically high short term bets on long-term successes. But no category invited bigger short-term investments than Linux did in late 1999. The IPOs for Red Hat, Cobalt, Andover and VA Linux ran up to dizzying, even record, heights. Yes, they were all bets on Linux as a Hot Topic; but they were also harbingers. There was something to this Linux stuff.
Back in that same wacky time frame I spotted another harbinger that's worth visiting again. At the time I called it the Linux "infection" of IBM.
The first time I met with IBM folks as a Linux Journal editor was at an early Linux World Expo. They had cautiously put Linux on Netfinity servers, as a way of testing the market for a strange new operating system that had been arriving quietly "over the transom." I am sure the same kind of transom-entry had been happening at Compaq, HP, Dell and other companies where engineers tended to accumulate old boxes over the years -- boxes that were too slow for the latest OSes and applications from Microsoft but ideal for Linux and its workhorse apps. Linux was an easy way to put these old boxes to work. Once that happened, the infection was complete.
The next time I met with IBM at a Linux World Expo, I thought I was in a roomful of Moonies. Now the company was gaga over Linux. One IBMer related the results of a survey in one technical division at the company. The idea was to test levels of Linux "awareness." At the bottom level was "can spell Linux" and at the top level was "hacks kernel code." All 600 respondents answered yes to the first question, and 120 answered yes to the second. Suddenly Linux was a "strategic" OS.
Last year IBM bragged (as it still is) about spending $1 billion on Linux. At last month's Linux World Expo in New York, there were IBM people saying the investment has already paid off.
So Linux is now a mainstream operating system -- to say the least. And IBM is hardly alone in its advocacy. Egenera is selling Linux-based servers ranging in price from $200,000 to more than $1 million, and recently reported a deal with Credit Suisse First Boston. Gartner's report on Egenera's BladeFrame system treats the hardware's OS in a casual, matter of fact fashion:
BladeFrame systems run the Linux operating system. Red Hat has certified the processing area network (PAN) architecture, ensuring that all applications supported by Red Hat Linux will run correctly, out of the box, on the BladeFrame.
In her keynote speech at Linux World Expo, Hewlett-Packard's Carly Fiorina said 2002 would be a "breakout" year for Linux, pointing to a Gartner projection of 15% growth despite the economic downturn. HP also announced Linux products for enterprise and telecommunications customers, showcasing Amazon, BMW, Boeing, Speedera, ViaWest, Dreamworks SKG and Verizon. Significantly, Amazon credits Linux with enormous savings, some of which no doubt contributed to the company's first profitable quarter.
Also during the show, Jim Rapoza of eWeek sent out a letter under the title "Open-Source is Overcoming its Low-Cost Stigma". It closes with this:
...expect to see more implementations of open source enterprise applications. After all, the more businesses use them in other key areas, the more comfortable they will become with them. And given current economic realities, it will be harder to justify a six-figure system when your competitor is running something that is just as good and is also free.
And nothing speaks more eloquently about Linux' success than what Microsoft CEO Steve Ballmer said recently:
"I think you have to rate competitors that threaten your core higher than you rate competitors where you're trying to take from them... It puts the Linux phenomenon and the Unix phenomenon at the top of the list. I'd put the Linux phenomenon really as threat No. 1."
To get a better look at that threat, here's something Carly said in her speech:
As 2001 came to a close, a number of pundits, columnists and community members from across the Linux world weighed in on the state of the Linux industry. Some sentiments dealt with the irony of the economic downturn. On the one hand, venture capital is hard to come by, and we're already seeing consolidations and some Linux startup failures. On the other hand, customers are feeling the pinch, and they are more open to considering Linux as they go in search of lower-cost solutions.
So there it is. Price is the Number One ticket, stigma or not. Linux is there for the taking. You can pay a small sum for a distribution's particular value-adds, or you can just download it for nothing.
There are other cost savings. Take security. The last I looked Linux had suffered exactly one virus. Windows and Windows-based apps had something like 50,000. Even if Linux has stayed out of the virus-makers' line of fire, it's still much harder to infect. This is a nontrivial concern for customers.
And price isn't the only cost we're talking about here.
A couple weeks ago I was talking with Mary Anne De Young of 1mage ("One Image"), a document imaging company that has experienced a strong sales surge since moving its Unix-based applications to Linux in 1999. Today 90% of its apps ship to run Linux systems. Mary Anne answered a question I had been asking for some time -- where is all the Linux going?
Big-name vendors brag about big-name customers, but there's plenty going on in the less well known parts of the industrial world where 1mage has most of its customer base. One example is Reynolds & Reynolds, a large Ohio company that sells car dealership management software and has been in business well over 100 years. Today Reynolds & Reynolds ships thousands of systems out to car dealers, all of which run 1mage's software on Linux. The main reason, Mary Anne said, is cost savings -- not only at the front end, but later on tech support, flexibility and other virtues.
What's happening, basically, is the commoditization of operating systems. This is an inevitable trend, as certain kinds of basic functionalities tend to sag down into common infrastructure. Linux is driving that trend, for the simple reason that it has all the core virtues that make infrastructure what it is:
Today, for more and more companies, Linux is the top infrastructural layer on the Net -- a simple, easy, reliable, durable, flexible and low-cost way to host apps and drive devices connected to commodity hardware. As a sustainable advantage, that's pretty hard to beat. Even if you're Microsoft.