“Here’s the riddle: If Linux is gaining more market share among big-spending corporate customers, why have sales at Red Hat — the undisputed Linux leader — been creeping steadily downward? […] Red Hat now has 90 percent of its 630 employees working to lure corporations looking to move their computing platform from expensive systems running on the rival Unix operating system to Linux, widely considered to be the more cost-effective choice. But it might be the cost-effective part that comes back to haunt Red Hat. With the Linux operating system available for free, Red Hat has struggled to find a way to secure paying customers. After a year of adjusting the focus at Red Hat away from smaller businesses and e-commerce applications, the company now needs to prove that it can translate Linux’s growing popularity into stronger sales.” Read the rest of the story at NewsObserver.
Red Hat Bitten by Linux’s Low Cost
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Eugenia Loli
Ex-programmer, ex-editor in chief at OSNews.com, now a visual artist/filmmaker.
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Redhat is only selling Linux to companies interested in saving money, and willing to deal with the changover issues, and to the more knowledgable computer user. Going after more corporate sales is a good idea, but I think there is another avenue they can take.
What they need to aim at is “Joe Average”. They can be done by selling computer hardware with Linux and the KDE desktop GUI and K-Office suite (for instance). People expect a full running system these days. I think a low cost Linux computer would have a maket. I have seen a few of them being sold, but not at many stores, if they get theme out there, and the cost is low, people will likely start buying them.
I’m not sure it is low cost that is completely responsible for Red Hat’s slump. I think some it has to do with plain old competition. After all, Mandrake is hugely popular these days. And Debian is finally accessable to the average user. And plus, with Debian’s apt-get, you don’t have to pay a subscription fee to get automatic updates like you do with Red Hat.
And then there is the bad economy in general. Sun is suffering from that as well. That’s why they ended the Free StarOffice program and it is also why they are dicontinuing Solaris on x86 for now.
So basically, I think we need to look at a larger picture here. Is Red Hat being bitten by Linux’s low cost? Or is it being bitten by the bad economy bug that is biting all of the other tech companies as well?
“What they need to aim at is “Joe Average”. They ca”n be done by selling computer hardware with Linux and the KDE desktop GUI and K-Office suite (for instance).”
There’s no money to be made in targeting consumers with operating systems really. And its not cost effective to market to them. For example, an add campaign can more than pay for itself with a single order from a fortune 500 company. But you would need hundreds of thousands of individual consumer orders to pay for the same campaign.
This is why Microsoft is pushing corporate strategies like .NET so hard, and its also why they are spending so much time slamming Linux and other open source software. Linux is no threat to MS in the desktop OS market. But it is a huge threat to them in the server and high end workstation market. And MS knows as well as Red Hat this this is where the majority of money will be made. It will not be made in consumer operating system sales.
“What they need to aim at is “Joe Average”. They ca”n be done by selling computer hardware with Linux and the KDE desktop GUI and K-Office suite (for instance).”
Don’t hold your breath for this one. Wasn’t it the CEO of RedHat that recently said Linux would never make it on the desktop?
“Don’t hold your breath for this one. Wasn’t it the CEO of RedHat that recently said Linux would never make it on the desktop?”
I used to hold this same view. That Linux will never make it on the desktop. In fact, I have made several posts in previous discussions about why it won’t.
However, I’ve since changed my view some. Linux *might* be able to succeed on the desktop. But if it does, it will be the hobbiest developers that get it there. It won’t be commercial companies like Red Hat because there is no money to be made for them in targeting the desktop masses.
BTW: Remember the Imac challenge that the guy at PC Magazine did? Where he gave up his PC for a certain period of time to see if he could do all his work on a Mac?
I’m willing to try this with Linux. Basically, I will see if I can go the entire summer without booting Windows, and whether I can do all of my work in Linux. And I will keep a journal of my experiences that maybe can be posted on OSNews once in awhile.
Should be fun…
“Basically, I will see if I can go the entire summer without booting Windows, and whether I can do all of my work in Linux.”
Install LINUX and all your peripherals right away. That’s the hard part. After that, I think will be surprised how easy it is to get work done without Windows.
There’s no money to be made in targeting consumers with operating systems really.
I guess that’s why MS sold 7 million copies of WinXP to OEMs in the first month. I guess that’s why Apple sold 2 million copies of OS X before the new iMac was released. It’s not a question of whether or not there’s money to be made, it’s a question of whether or not a particular company can do it. MS couldn’t have made money if Windows XP sold at the pace that OS X did, after all, the 2 million copies of OS X was over 2 years, and probably wouldn’t have covered MS’ advertising budget for XP. Apple, on the other hand, is quite comfortable with that number, especially with half of them being sold with purchases of Apple’s computers.
And its not cost effective to market to them. For example, an add campaign can more than pay for itself with a single order from a fortune 500 company. But you would need hundreds of thousands of individual consumer orders to pay for the same campaign.
At the same time, with the fortune 500 company you’re going to need more than an ad campaign most of the time. You’re going to have to send some people out to talk to them, you’re going to have to show them white papers giving information on their transition, showing that it’s been done before and can be done again, and so on. You don’t just run an ad campaign and land a contract with a fortune 500 company, you have to work for it.
This is why Microsoft is pushing corporate strategies like .NET so hard, and its also why they are spending so much time slamming Linux and other open source software. Linux is no threat to MS in the desktop OS market. But it is a huge threat to them in the server and high end workstation market. And MS knows as well as Red Hat this this is where the majority of money will be made. It will not be made in consumer operating system sales.
If you look at what .Net is, it’s easier to understand why they’re pushing it so hard than just explaining it as a corporate strategy. .Net is the next version of Windows NT Server, .Net is the next version of Office on the PC and the Mac, .Net could very well be the next version of Windows on the desktop, it is the newest version of Windows CE. It’s the new version of Visual Studio, and it’s the development framework that that product talks to. It’s what will run nearly every piece of Microsoft software available in the next 5 years and what will run a large percentage of 3rd party software for Microsoft’s platform during that same time. They slapped .Net on so many different things that no one knows what it is, but at the same time every single one of them benefits from the advertising dollars pushed into the others, because of marketing 101: brand recognition. If the Microsoft name isn’t a good enough brand for consumer and corporate recognition, then they’ll shove .Net down everyone’s throats until they can’t forget it.
As for why they’re slamming the GPL and Linux, you’re pretty much right on that. They can get some good money from corporate contracts for servers and support, and right now some of those contracts are going to Linux companies. Sometimes they pull some companies that went from Unix to Linux already, and that is where the real victories are for them. Otherwise, their biggest concern is selling Win2k and Interix along with SQL Server and the rest of their BackOffice software.
“At the same time, with the fortune 500 company you’re going to need more than an ad campaign most of the time. You’re going to have to send some people out to talk to them, you’re going to have to show them white papers giving information on their transition, showing that it’s been done before and can be done again, and so on. You don’t just run an ad campaign and land a contract with a fortune 500 company, you have to work for it.”
Sure. But with consumer OS sales, the reveune stream drys up as soon as the software has been purchased. This isn’t usually true with corporate sales. With major corporate sales, you aren’t just selling them software. Rather, you are selling them entire solutions. There is money to be made from support, consulting, etc. This is why it is generally better to go after large corporate contracts than to go after end users. Going after corporate contracts often ensures a continious revenue stream (for example, Microsoft can sell them their gold support plan and subscriptions to TechNet and such).
Don’t discount the desktop. Companies have gone fully Linux, from server to desktop. This does require asking outsiders to send files in a more neutral format (not the latest MS Word version). Still it can be a lot less expensive. Just need an MIS department who wants to go through the change.
I think there is enought of a Linux consumer market out there that it is worth at least one of the companies providing hardware with Linux preinstalled.
But I don’t see this business model working forever. IBM might pull it off, as they also offer unique hardware solutions. But Redhat, software wise, doesn’t offer much of anything in my opinion.
I think “not for profit” solutions, like with Debian, will be the long term winners for free OSes like FreeBSD and GNU/Linux.
Expecially since even commercial vendors have started to embrace Debian. Example: HP is installing Debian on some x86 servers. They do it in their configure-to-order factory near Stuttgart. Saw it with my own big blue eyes.
I hope this isn’t anything confidential. If it is, I didn’t say it.
(BTW -I- don’t use Debian, neither I like it.)
>I think “not for profit” solutions, like with Debian, will >be the long term winners for free OSes like FreeBSD and >GNU/Linux.
Not to mention that Debian-based distros seem to set up a lot easier and actually work.
I was a “Wall Street” type equities analyst for 15 years. When you look behind all the Linux hype, you see that RH is in a highly competitive market devoting a lot of resources to develop an edge. Because of their size and in-house R & D they do have an advantage in the larger company market relative to other Linux branded companies. As others have pointed out, this does not necessarily buy them much when the battle is against IBM and/or Sun. They have yet to prove that they have a business model that will earn consistently high returns on their shareholders’ invested capital. In all fairness, it is still early in the day.
Linux on teh desktop has taken some strong criticism and it has issues today. However, it really is just a matter of time. I have to agree with Simba. The hobbiest developers just keep plugging away. They don’t care about profits or return on investment and they keep going at it. Eventually, we’ll see a linux that is user friendly to even the PC-illiterate masses. Mandrake is already pretty good. The thing about linux is that its not a high level/loud assault. It a quiet tenacious thing. You ignore it and one day it just creeps up on you.
“”Basically, I will see if I can go the entire summer without booting Windows, and whether I can do all of my work in Linux.””
“Install LINUX and all your peripherals right away. That’s the hard part. After that, I think will be surprised how easy it is to get work done without Windows.”
Plus, by the time Linux is installed and all of the peripherals function correctly, it will -be- the end of summer 😉
Sorry, I couldn’t resist. Just kidding.
“What they need to aim at is “Joe Average”. They can be done by selling computer hardware with Linux and the KDE desktop GUI and K-Office suite (for instance).”
I think this would be a big mistake. Linux is definitely not ready for Joe Average’s household use, and then Redhat has to then support Average Joe as he stumbles around linux. Also, I think even Microsoft makes a decent share of its money (maybe even a majority of it) selling OS’s to business and selling their other packages (such as server software or Office). Joe User isn’t the big cash cow for OS companies, the business world is.
The only profit I can see from the Linux/Free Software arena is in support. Sell lots of support contracts to major corporations. Sell support to home users via a 900 number. The biggest thing I hear from suits who don’t want Linux/*BSD in their shops is not being able to support it. Go to these guys with a few success stories and sell support contracts to them.
“The thing about linux is that its not a high level/loud assault. It a quiet tenacious thing. You ignore it and one day it just creeps up on you.”
I used to think the same thing, and its exactly what linux people want the general population to think. It isn’t true though. I’ve heard that mantra for almost 3 years now and linux use as a desktop solution hasn’t gone up at all (discounting darwin and linux users who now have it on 4 computers instead of 3). The saddest part though is it doesn’t matter if it ever catches on. MS has made itself and its investors rich, and made the pc an integral part of business and pleasure. All linux can do now, even if 10 years from now its in 99% of homes, is say we did it too. Only no one got rich and things probably didn’t get any easier for anyone (they’d get harder, unless some unified standards are created).