December 2000: IBM announces its intention to invest $US1 billion in the development, marketing and servicing of Linux on mainframes. Nine years after Linus Torvalds composed the kernel and registered the Linux name, the "alternative" operating system is gaining some serious recognition from IT heavyweights.
As part of a renewed focus, IBM has already announced its intention to introduce its iSeries servers, the rebranded AS/400 line, compatible with Linux-based software. Sun Microsystems, spurred on by IBM's focus, has announced its intention to "embrace" the Linux operating system and make its own Solaris 7 interoperable with Linux.
However, even within the IT-savvy community, the constantly evolving Linux world remains a strange and mysterious one. A world where benchmarks, release dates and corporate launches are replaced with a vast network of programmers working collectively on their own non-proprietary solutions.
The Linux business model is an interesting one, the roles of vendor, distributor and reseller are merged and quite unrecognisable. For some of the more network-savvy Web development and integrator types, Linux is quickly attaining must-know-about status.
One of the main obstacles Linux needs to overcome in the channel is the perception it is open source, and therefore free. Contrary to popular belief, there is a good deal of money to be made in the Linux channel, especially in terms of services.
Nutting out the Linux kernel
An updated version of Torvalds' original kernel is now available via the Internet. Anyone with Web access can log on to the Linux site and download an operating system. However, not everyone has Internet access with sufficient bandwidth and sufficient time to wait for the download to complete. Furthermore, there are few mortals capable of downloading and configuring their own Linux operating system from scratch, which is where the channel fits in.
Anthony Rumble, managing director of Linux-focussed VAR Everything Linux, explained how the Linux channel makes money out of free software.
"To begin with it is not free - it will cost you money to buy a neatly packaged version of Linux, with applications and a user-friendly startup system," Rumble said. "But it will cost you more to pay for the Internet access to download it, and you won't get any extras."
In the Linux world, resellers need not be concerned about low margins on software affecting their profits because their profits are almost entirely based on the services they bundle with the software.
While the pre-packaged versions of Linux retail for between $10 and $100 depending on accessories and availability, few end users are willing to pick up a box, go home and install it without significant support.
While Linux operating systems packages have become increasingly user friendly over the last five years, the prevalence of Windows operating systems and Windows-based applications such as Microsoft Office, has resulted in the establishment of a monolinguistic PC user community.
According to Borland managing director Ray Bradbury, Linux is doing well in markets where there is not a strong Microsoft Windows presence.
"Places where first-time users are introduced to Linux GUIs instead of Windows, end users have no qualms about using Linux-based PCs," Bradbury said. "In places like China and Southeast Asia the potential is enormous, especially as governments realise they don't have to bother with foreign copyright laws and licensing agreements."
However, industry pundits believe there are still plenty of opportunities in Windows-saturated markets as well.
Alfred Shippen, managing director of Best Linux Asia Pacific, believes that while different versions of Linux have become increasingly user friendly there is an important role for the channel in the product support and end-user training arena.
"Linux is emerging to the point where an average person can install an Internet server without much difficulty, and there is a wealth of information out there that covers standard applications," Shippen said. "However, the reseller still needs to get the end user started and show them where to find that information."
So central is the services element of a Linux sale that Everything Linux's Rumble believes traditional retailers will not be able to make the transition.
"The people who will make money out of Linux are the small retailers. In the big chains people will walk in, pick up a box with Linux operating system written on it, ask the assistants for some help and get a shoulder shrug," Rumble said. "If they walk into a small reseller, on the other hand, they get a half hour chat and ongoing support as part of the package."
However, according to industry pundits, some of the more exciting reseller opportunities exist in the realm of small-to-medium businesses rather than home-user options.
Unlike rival proprietary operating systems, resellers have the opportunity to tweak Linux software according to their end-user requirements. Traditional resellers can supply a box, operating system and applications and profit from the margins they scrape in from each. Customers end up with computers chock full of software they don't really need, and the reseller ends up with a margin established by the vendor.
The Linux-savvy reseller, however, has the opportunity to provide SMEs with a specific software package with minimal redundancy and appropriate training. The actual price of the software constitutes a very small part of the final sale, and the reseller profits on their ability to service and support the software.
In a perfect world, the reseller manages to make more money out of the sale and the customer spends less and ends up with streamlined software tailored to their needs.
Fear of the unknown
Nonetheless, Linux has thus far failed to take off in the consumer/SME space, while considerably more expensive Microsoft products continue to make William Gates astronomically rich.
Despite the potential gains Linux offers in terms of scalability, flexibility, productivity and cost, a lack of Linux expertise at the reseller level, and comfort at the consumer level, remain the principal hurdles to its uptake.
According to Borland's Bradbury, the IT market place needs to be weaned off the Office environment.
"In the desktop space, end users are used to a Microsoft Office applications environment, despite its redundancies," Bradbury said. "End users are not used to an applications environment where you want a machine to do just one thing and do it very well."
However Bradbury believes that lack of knowledge in the IT industry, as well as among the end users, is equally to blame for slow uptake. He believes a lack of intuitive, graphically driven developer tools has contributed to Linux's lacklustre performance, despite its potential.
"Using Linux you can provide applications without all that extra baggage, but for Microsoft it takes time to learn how to program in a new environment," Bradbury said.
Targeting what they see as a hole in the market, Borland has created a development tool called Kylix which enables programmers to compile either to a Windows or Linux environment.
According to Bradbury, Kylix will stimulate the Linux market by making it easier and quicker to develop Linux applications. "One of the humps Linux needs to overcome is the perception that it is a geek operating system. Offerings like Kylix will make it more accessible to developers, and therefore to end users," Bradbury said.
Mark White, vice president and general manager, Asia Pacific, of Linux development and distribution company Red Hat, is also looking at different ways to popularise Linux-based offerings.
In order to overcome the perception of a lack of applications and general user unfriendliness, Red Hat has worked with a series of Australian developers to release a demo CD containing both the operating system and a series of business applications.
"We distributed 50,000 throughout the business community and the feedback so far has been very positive," White said. "People are starting to realise that Linux provides business with a more flexible and cost-effective approach to IT resources."
Deep down on the inside
There are also several areas of development which do not depend on snazzy GUIs or developer comfort levels. Companies such as Linux-based integrator Scirocco and embedded Linux solutions developer Tuxia are using Linux-based solutions without end users' knowledge.
Scirocco managing director Charles Hodgson believes the Linux developer industry needs to become more pragmatic before it can become more mainstream. "There is a kind of holy war mentality that exists between the Microsoft and Linux camps," Hodgson said. "You can't expect people who have a substantial investment in Windows to just throw it all out overnight."
Nonetheless, Hodgson remains a true believer in Linux's Internet applications. He also believes the sheer reliability of Linux-based networking software leaves rival Microsoft applications for dead. However, his principal concern is using these as the backbone for networks which otherwise rely on Window's based end-user environments. "With the advent of ASP-type offerings, Internet access has become increasingly mission-critical and businesses need a stable operating system, even if it is hidden in the back end of the computer system."
Tuxia is embedding Linux even deeper, using Linux-based solutions for TV set top boxes and thin-client solutions. Executive director Jackson Yin explained that the decision to use Linux in the thin-client space was a simple one, because Windows did not fit.
"Basically it takes Windows CE 48 Megs to do what a Linux solution achieves in 16 Megs - there's no real contest between the two," Yin said. "Unlike Windows, which had to be cut down to fit in to thin-client solutions, our Linux solution was built up from the kernel - there are no compatibility problems, and no redundant features."