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IDC Report Sees Current Decline, Long-Term Growth for Linux

Aug 05, 2002, 19:15 (21 Talkback[s])
(Other stories by Brian Proffitt)

Despite steady revenue growth since 1999, Linux operating environment revenue declined by almost 5 percent in 2001, according to a report released by IDC analysts late last week.

This marks the first year of contraction for Linux on a commercial level.

The news is not all bad, however. The same report projects spending on Linux operating environments will increase over the next five years from $80 million in 2001 to $280 million in 2006, which means a compound annual growth rate of 28 percent.

The reason for the slight slowdown Linux growth is found, the report stated, in the flat growth of new license shipments for server operating environments (SOE), which makes up an overwhelming percentage of the $80 million spent in 2001 on Linux software.

Still, on the bright side, client unit shipment grew by nearly 50 percent with the Asia/Pacific region contributing generously (34 percent) to 2001 sales. The report, "Worldwide Linux Operating Environments Forecast and Analysis, 2002-2006: A Market in Transition," was put together by IDC analysts Al Gillen and Dan Kuznetsky.

"The previously strong growth of Linux SOE shipments was interrupted during 2001," said Gillen, research director for system software at IDC. "We also saw China's Red Flag and Brazil's Conectiva make strong contributions to the Linux COE market, which continued to grow at a healthy pace."

Despite the unconventional ways Linux can be bought and sold, the report from IDC said it has become a mainstream choice for many infrastructure workloads particularly because the software is available either freely on the network or as a low-cost packaged product that can be deployed on low-cost, high-volume systems.

Furthermore, since Linux is often packaged with other open source software such as Samba for file/print services, Apache for Web services, and MySQL or PostgreSQL for data management, this makes it a highly functional and cost-effective environment for corporate systems, the report stated.

No operating system fared very well in the IDC study. All operating systems saw revenue loss, with the exception of Microsoft Windows.

Gillen indicated that the two big reasons he expects the growth in the Linux revenue stream are "Linux vendors will increase the amount of revenue captured and will also increase the amount of units shipped."

Gillen also pointed out that while Linux will continue to grow, its revenue stream is still very small compared to that of other operating systems. He cited that the current $80 million revenue stream would be generated by Microsoft in just two days of business for that company.

The report also went into some detail about the growing success of the Red Hat Linux distribution, citing the North Carolina company as being the major player in all of this future growth.

Mark de Visser, VP of Marketing at Red Hat, was quick to point out that while the 28 percent growth number was very respectable in today's current market environment, he would "be very disappointed if that number stayed the same."

While he recognized that compared to other operating systems, Linux revenue numbers were small, de Visser firmly believes that Linux, and Red hat along with it, is poised for a huge rate of growth--much larger than the IDC projection.

Red Hat, he explained, has stayed focused on one market--the server customers--and has maintained a fairly conservative fiscal policy along the way. By holding on to its resources, Red Hat has weathered much of the IT storm that has battered the likes of VA Linux, Corel Linux, and just recently Turbolinux.

de Visser also explained how his company has continually worked with software vendors to get enterprise-level software apps ported to Linux, steadily eliminating potential clients' objections to moving over to Linux.

Given this crumbling of the walls surrounding Linux migration opportunities, de Visser said, "We think there's an enormous potenial for breakout."

de Visser also hinted at some near-term shifts in Red Hat's customer strategy, alluding to the upcoming release of Red Hat Linux 8.0, which is currently known as Limbo in its beta form. This new product, de Visser indicated, would try to provide "a much stronger end-user experience."

Red Hat believes that paying more attention to the desktop is a better business decision, de Visser said.

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