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Winds of Change

No one ever said it would be easy to make money from Free or Open Source Software, and the events of the past several weeks have definitely driven that point home. In late June, VA Linux Systems announced that it would begin another round of layoffs and that it was exiting the hardware business. Considering VA is the company that practically invented the "Linux hardware business," the announcement definitely made for a gloomy day in the open source community.

No one ever said it would be easy to make money from Free or Open Source Software, and the events of the past several weeks have definitely driven that point home. In late June, VA Linux Systems announced that it would begin another round of layoffs and that it was exiting the hardware business. Considering VA is the company that practically invented the “Linux hardware business,” the announcement definitely made for a gloomy day in the open source community.

However, as tough as things may look for VA right now, it was a comment by Caldera System’s CEO Ransom Love that really caught my attention. It seems Caldera has decided the business model behind all this Free Software stuff is not working quite the way they would like it to, so they are going to try a more traditional tack –charging per-seat licensing fees.

Now, with all due respect to Ransom, I have to say I don’t think this is a very good idea. One of Linux’s biggest advantages has always been its lack of licensing fees — that’s what allowed it to spread the way it has in the first place.

Of course, the deeper issue here, and what I’d suspect is really causing Ransom (and many others) some consternation, is the fact that Caldera is a business, and as such, has lots of expenses and obligations to meet. They’re finding it difficult to generate enough revenue solely from selling Free and Open Source Software solutions to recoup those expenses.

It’s true that the entire technology industry is experiencing a pretty severe contraction. However, I think it’s also fair to say that many of the companies that attempted to build a viable business around selling Open Source Software are running into some unique problems.

Looking at all the companies that have tried and failed to build a business around Linux has led me to believe that in the not too distant future, there probably won’t be any companies that try to earn their keep by selling a distribution of Linux. When you think about it, the remaining commercial Linux distributors are relying less and less on selling Linux itself; instead, they are concentrating more and more on selling proprietary software that works with the operating system (from IBM, Oracle, and other traditional software vendors) or selling custom development and support contracts and services.

In fact, I’d like to advance the notion that the commercial Linux distributors are starting to look more like traditional VARs and less like traditional software companies.

Of course, this situation introduces some new issues to consider. For example, there’s a business model for a VAR, but it doesn’t necessarily include enough margin to invest in developing software such as the Linux kernel. So if the old-line Linux vendors find themselves having trouble supporting all the kernel R&D they used to support, then where’s the investment going to come from? I would speculate that it would come from the vendors of proprietary systems that are leveraging Linux to sell their products.

In a way, we’re coming full circle here — the traditional software vendors are becoming “the new community” and are stepping in to take the place of the commercial Linux pioneers. So then the question becomes; “Can Linux teach the traditional software and hardware vendors to play nicely together?” The impressive thing is, so far, it seems to be doing that.

See you next month,

Adam Signature

Adam M. Goodman

Editor & Publisher

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