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Eric S. Raymond: When Times Get Hard [Notes on VA Linux and the Tech Downturn]

Feb 21, 2001, 12:40 (46 Talkback[s])
(Other stories by Eric S. Raymond)

By Eric S. Raymond

It hit the papers today that VA Linux Systems is going to have to cut 25% of its staff. The press release, as usual, was bland and neutral, emphasizing our healthy revenue growth and our bright prospects -- the kind of corporate-speak everybody expects, and that VA has to generate. It's part of the game.

It's no secret that I'm on VA's Board of Directors. I was at the board meeting where the five-odd people who have the responsibility to advise Larry Augustin told him what he had to do. I was part of that decision, and it was not an easy one.

I'm not speaking for VA now (I basically never try to do that anyway; it's not my job). I'm speaking for myself. It was a weird, wrenching feeling to wander around VA headquarters that afternoon, talking with good friends of mine, knowing in a few cases that they were likely to be canned through no special fault of their own.

What VA is going through now is a sort of ritual bloodletting. The logic of the market is pitiless; when you don't make your numbers, the investors want to be appeased by evidence that you're doing things to raise your profitability. That means making more dollars per employee, and the fastest way to get there, the way investors effectively *demand* that you get there, is by laying off your least dollar-yielding employees.

Otherwise, you get what is politely called "loss of investor confidence". Companies go on life support when that happens -- they can't get capital by selling shares, and that has ripple effects -- it tends to make potential customers bolt. When the customers bolt, the company runs out of money and die. Or it gets acquired, either by a large competitor or (worse) by a slice-n-dice artist who will sell off the assets and shitcan the company.

I went along with the 25% cuts because I understood the possible alternative: no company. And no employees. And no possibility that my friends will ever be able to come back to work for a company they still love and care about.

I think VA's problems are solvable ones. The company got rocked by the popping of the dot.com bubble and the economic downturn we're in. But we know what we have to do to deal with that. In order to avoid making what the SEC calls "forward-looking statements" I'm not going to talk about our strategy or future prospects here; you can go ask VA's corporate-communications folks about that.

But the real reason I'm writing this little broadside is larger than VA; it's about the state of the open-source community, and the things we need to keep in mind when times get hard.

VA, along with Red Hat, is one of the two bellwethers of the open-source business community. Some people are going to freak out and think this setback is a harbinger of doom, that it means our community's game is over. Some people, especially at certain monopolistic closed-source competitors I don't need to name, know better -- that troubles like VA's are pretty common in a market downturn -- but they'll use it as ammunition in a FUD campaign anyhow. Expect to see Steve Ballmer and Jim Alchin quietly gloating at any trade-press reporter they can collar. Brace for it.

And, as it says in large friendly letters on the back of the Hitchhiker's Guide, DON'T PANIC! What we're seeing now is entirely normal. It's the long, dizzy boom time that has just ended, all smiles and champagne and venture capital sloshing around looking for business plans, that has been exceptional. Business cycles happen, there are layoffs and retrenchments all over the economy -- and this, too, shall pass. Things will get better.

There is actually one good thing for us about economic slumps. During them, IT departments and software users in general feel pressure to cut costs. That makes low-cost and free software more attractive. Over the next few months you can expect to see a lot of submarine Linux deployments suddenly surfacing as managers realize that they'll look *good* on their quarterlies if they cut their licensing and service costs, and as the techies working for them get that message and fess up to how many NT boxes they've been replacing by stealth.

So the downturn isn't all bad news for us, by any means. We just need to keep doing what we're doing, the best work we can. And when the economy picks up again, we will have gained by it.

Back at IPO time I wrote an essay called "Surprised By Wealth" in which I tried to deal with how weird it felt to have a theoretical net worth of $41 million. Am I upset that all that "wealth" is gone, at least until the stock bounces back? Well...yes and no. As a member of VA's Board, it's my job to worry about our stock price, on behalf of all of our stockholders. So I care about that.

But personally? Nah. I wasn't in this for the bucks then, and I'm not now. Like most hackers, I do what I do for love and I thank the gods that I can occasionally talk people into paying me money for it. Feels almost like taking advantage of them sometimes, doesn't it?

All the corporate stuff is not, after all, the point -- the point is to change the world, to do better software and give users more choices. It's been a nice party, but some of us did get a little distracted by all that easy money flowing around. If the slump does nothing else but take our eyes off those dollar signs and put them firmly back on the work, maybe it will have been the best thing for us after all.

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