Community Column: Tux the Impaler?
Mar 21, 2001, 06:38 (22 Talkback[s])
(Other stories by Gary Edwards)
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By Gary Edwards
The phone rings. Your Blackberry buzzes wildly. And your
wireless Palm Pilot has gathered so much static from the sudden
onslaught of messages that nearby paper clips are orbiting the
antennae. It's 3:00 AM. You pick up the phone. On the other end, a
distraught and panicked Alan Greenspan breathes hard, begging your
advice. The future of the free world awaits the measure of your
The questions from Alan are direct and to the point.
A. Is Linux and the GNU/GPL destroying America?
B. Is Linux destroying the NASDAQ tech sector?
C. Did Linux liquify the new economy?
D. Will Linux destroy IT and the unawares Dow Blue Chips, still
basking in the afterglow of Linux having liquified the new
E. If the Federal Reserve starts paying people to borrow money,
will that be enough to stop Linux?
F. And, if all else fails, will the secretly purchased Clinton
pardon of Microsoft, now in the hands of the appeals court, be
enough to stop that raging beast, Tux the Impaler?
Inquiring minds want to know. Mr. Economy needs to know! You
answer still asleep, "yes, a global economy demands an info grid of
universal connectivity and collaborative computation where stable,
highly integrated operating systems based on open sourced and
openly shared technologies are portable across every device and all
platforms. Get a clue man, Tux rules!" Exhausted, you drop the
phone, clutch tightly your stuffed penguin, and lapse into
The urgency of the situation came to mind while reading Linux
Today member Gareth Barnard's comments,
"Is Linux destroying IT"?
Gareth's question extends to it's natural conclusion the Allchin
implication that Linux is un-American and a destroyer of
intellectual property. Gareth then goes on to debunk the
implications of his own question, concluding that Linux will save
IT, and perhaps the economy with it.
The unexpected downturn of the economy has everyone pointing
fingers. M$ has the view that competitive under pricing is both un
American and destructive. They don't like the "services as
software" crowd where competitors, who collaboratively build openly
shared freeware, then use it as the basis for delivering fee based
services. M$ prefers the "software as a service" approach, where
the platform provider can extract a vig from all participants.
Salon Magazine politicizes the downturn, blaming old economy
campaign contributions to Bush for the collapse of the new "highly
productive" economy. And The Economist finds the downturn
explanation as a high tech ponzi scheme having run out of
As American as M$ Pie:
Since the 4th of July is yet a ways away, I had assumed that the
timing of the Allchin tearful lament had little to do with an
unexpected wave of patriotism sweeping through Redmond on the eve
of their appeals hearing. More likely the comments had to do with
the more than likely threat that the leaders of the free world
might follow the lead of Communist China and trot down the open
source path with the dreaded Tux The Impaler leading the way.
But Gareth points something else out. The patriotic pain and
anguish of Mr. Allchin was unwittingly unleashed at a time when all
of Silicon Valley seemed to be coming clean with the investing
public concerning the economic realities of the day. Now, there's
something that can bring us all to our knees in despair!
So I wonder with Gareth, what does Linux have to do with the
current downturn? Is Tux the Saviour of Silicon Valley, or the
dreaded destroyer Mr. Allchin and company fear?
This morning I wasted a few precious minutes on a
witless piece of garbage put out by Salon. The article asked
and answered the question in its title, "Who needs the new economy?
Bush's bias toward industrial dinosaurs is strangling America's
The Salon claim is that the progressive, "high productivity",
new economy entities of Hollywood and Silicon Valley poured their
money and efforts into support for Algore. Big Oil, Big Tobacco,
and Big Drugs spent billions of their illegal and immoral profits
supporting Dubya. The thinking at Salon (ok, I'm being kind) goes
like this; now that Dubya is President, Government largesse is
flowing into military armaments and every rusting old economy
corporate project that can be dusted off. So, with this impeccable
logic, the Salonista's claim that crooked campaign financing is why
the stock market tanked and world recession looms. The downturn is
Presidential payback to mucho bucko Bush supporters whose companies
couldn't otherwise compete against the highly productive new
I'm still waiting to hear what Clinton actually did to pay back
his new economy supporters. Eight years where they could more fully
express their "high productivity" aspirations and claim that in the
new economy, profits are not necessary?
The other economic analysis I caught this morning
was published in The Economist, "That falling feeling
....With one profit warning after another, the technology giants
are falling to earth. Most blame a short-term downturn, but the
truth is more worrying: some of their earlier growth was
After suffering the mindless drivel of Salon, the mere thought
of well researched and considered analysis scorched the paws of my
click happy mouse. This excellent piece put forward a number of
salient points and contributing factors:
- When one tech company in a sector discloses disappointing
sales, investors punish the entire sector. This indicates that the
market doubts the assessment ability and projections of key tech
players across the board.
- Technology growth is expected. Moore's Law (which states that
chip power doubles every 18 months) has collided with Metcalf's Law
(which states that the value of a network increases exponentially
with each additional connection. The number of Internet users has
doubled every 18 months since the inception of the Web. PC sales
(and Microsoft profits) grow at steady 25-40% rates.
- Y2K hysteria combined with Internet eCommerce mania to extort
corporate tech spending increases of 42% in 1998 and 37% ($822
Billion) in 1999.
With a noticeable smirk, The Economist says, "This was a
natural response to an unprecedented opportunity: technology had
created its own business cycle."
- Tech infrastructure companies like Intel, Microsoft, Sun, IBM
and Cisco heavily invested in the dot-com dogs loudly barking at
the old economy. Investors, seeing the blue chip tech names, poured
on the biscuits. The infrastructure guys sold lots of hardware and
software to the hounds hot on the hunt of a newly christened global
The investor logic was simple, "When a company as big as Cisco
can grow by more than 60% a year, it is hard not to get excited.
What could be a safer bet than the continuing growth of Internet
traffic and the infrastructure it needed? After all, Cisco was
selling real goods, such as routers, not dotcom vapour and banner
ads. Surely its growth reflected real demand."
- Soon enough the old economy got caught in up in the chase. The
Economist puts it succinctly, "Big traditional firms caught the
bug too. Spooked by the frantic spending of Nasdaq's darlings, they
stepped up their own technology investments to keep pace."
Having captured both the old and new economy hunger for essential
competitive needs, the tech infrastructure guys were off to the
races. Since the rules of competition had been changed to that of
technology, regardless of the market sector, the good times looked
to last forever.
"On top of this, technology companies often took equity stakes
in their customers, or even took shares and options as payment. As
the customers' share prices soared, the big vendors saw their
earnings boosted by huge capital gains. Last year, Intel alone had
investments in more than 450 firms, which were worth more than $10
billion combined at their peak. The tech-stock boom had another
effect. The vendors' own rising share prices allowed them to pay
employees with stock options rather than cash, creating payroll
savings and further boosting profits."
- The feeding frenzy feeds on itself. Blue Techs invest in and
sell to dotcom dogs. Investors sink funds into both surging Blue
Techs and, their dog investments. A rising stock market pulls in
more suckers, especially those investment geniuses not wanting to
be the ones who missed out on the boom moment of a lifetime.
"All this grossly inflated the sales and profits of the
technology bellwethers. Between April 1999 and June 2000, the
average revenue growth of eight of the largest technology firms
almost tripled, from 30% year-on-year to nearly 90%; over the same
period, the Nasdaq almost doubled (see chart). This created a
temporarily virtuous circle: a rising stock market boosted the
profits of big tech firms, creating the impression of higher
sustainable growth. In investors' minds, that in turn justified
higher multiples for firms across the board, which sent the stock
market even higher, and so on."
- The highly inflated growth rates of the late 90's are unlikely
"Cisco estimates that capital spending by new local-access
competitors, which were among its best customers in recent years,
is down by more than half. Many technology vendors have had to
write off their loans; second-hand equipment from bankrupt
customers is flooding the market. And bricks-and-mortar companies
have turned conservative again. A recent survey by Merrill Lynch
found that big corporations planned to increase their tech budgets
by only 5-6% this year, half last year's figure."
"But when some sort of equilibrium returns, the former growth
will not. Howard Rubin, an analyst at META Group, predicts that
post-bubble growth in tech spending will be around 8-10% a year,
compared with around 20% for most of the past decade. That is
nothing to sneeze at, to be sure, but it is no new paradigm
Okay. So the Clinton economic boom was really a global ponzi
scheme. And Silicon Valley entrepreneur's are not the designers of
the next new new thing. Nor are they the geniuses behind a new
economy killer app. More like they are the masters of the killer
The good news is that the politics of old economy vs. new economy
died when the barking dotcom dogs chased the "no need for
profitability" fox right over the cliff of finally skeptical
investors. What remains are the facts of a massive transformation.
The old economy has learned some new tricks. They have learned how
to use an open platform of universal connectivity and collaborative
computation to reinvent themselves and bring on the global economy.
They have learned how to embrace customers and trading partners in
ways that reduce costs, seek efficiencies, and improve
relationships. The dream of "faster, better, cheaper" didn't die
with the dotcom dogs. Now it's in the hands of cash savvy, fiscally
responsible, and management capable organizations who are using it
to reinvent themselves.
The dotcom dogs tried to defy the laws of gravity, claiming that
whole businesses could be displaced overnight by universally
connective technology. (Unfortunately they didn't last long enough
to witness the era of collaborative computation). Maybe it would
have happened over time except for one excruciating detail. The
value of the Internet is exactly it's open universal nature. There
is no barrier to entry except that of fear, ignorance, and
arrogance. And the high flying stock market values of the dotcom
dogs proved to be the trigger that pushed brick and mortar
companies into the transformation breach.
Now that these old economy companies have seen the exponential
value of web DNA regeneration, there is no turning back. But
neither are there reasons to race forward unawares. The vicious
barking of dotcom hounds at your heel no longer echoes through the
rust belt chasms. Now the race is with old economy rivals wielding
new DNA tools, but tools available to everyone.
The value of the global info grid is in it's openness. The
principles of open standards, openly shared methods and
technologies, and open means of collaboration dominate the lowest
"grid" levels of the Net. It's only natural that these principles
will creep up the integrated stack, first infecting operating
systems, and then applications. Most importantly, openness will
drive the next generation of globally collaborative web services.
Where it was okay for tools of personal productivity and personal
computation to be platform specific, globally collaborative apps
must be based on open principles. Otherwise, there is no way to
reach global scales of highly interactive and inclusive use.
Particalization & the beginning of the Virtual
There is another fortunate aspect to the failed charge of the
dotcom dogs. They barked loud, but they had no teeth. One is left
with the lasting impression that the dotcom dogs believed they
could gum their prey into submission. They never took on their
established prey where it really counted. They didn't get to the
bone behind why there are consumers, producers, supply chains, and
trading partners actively engaged in any particular market
Instead, the dotcom dogs fed entirely on their own technology
edge. They went where the connectivity took them, disregarding
obvious marketplace rules along the way. They focused on the
customer because that's all they had! It wasn't some stroke of
evolutionary business genius as some would have us believe. They
thought they could use their interactive connectivity to get
between customers and providers. Once in that position, they
thought they could demand the fabled bookies vig from producers and
suppliers alike. Trying to skim the cream, they got much of the
technology right and let the dirt and grime of real business pass
What they did was to research, describe and create technologies
that would help real producers better service consumers. No doubt a
hard lesson to learn, as an open platform of universal connectivity
and collaborative computation, the Internet has no barrier to
entry. At great cost to investors, the dotcom dogs figured out
where real producers of products and services could best apply
emerging web technologies. They figured out where the first round
of dramatic savings and efficiencies could be had by real companies
with real products.
Maybe they should have charged consulting fees. Instead, they
probably set back ten years the newly emerging phenom of global
investor financing. And I was just beginning to believe that never
again would I have to stand in front of a bank loan committee.
Linux and IT:
Personally I don't believe any of this helps IT. Let's face it, IT
squandered their funds on Y2K nonsense and useless Windows
installations and upgrades. They totally missed the mark with
Internet technologies. With 60 day business cycles becoming the
norm, why wouldn't savvy CTO's start outsourcing their DNA problems
to people who know how to make universally connective and globally
distributed things work? The whole idea behind collaborative
computation is one of engaging customers, partners, suppliers and
whole corporate divisions in ways that harness the vast reaches of
computational silicon dust to perfect new and instant trading
Still, to their credit, no one from the IT community has come
forward and blamed Linux for the economic slump. At least not
My guess is that IT is heading in three directions separated by
a great webification middle layer of outsourced services. At the
low end IT will be over run with "local" maintenance issues for a
distributed environment of countless devices trying to connect to
who knows whose stack for reasons impossible to track. At the high
end, IT will be expected to provide key advice and critical
decision making concerning all aspects of the corporation. Hiding
behind a wall of tech jargon won't cut it at this level either. The
middle webification area is filled with the difficult "referee"
task of integrating the corporate stack with layer upon layer of
web services begging for code level connectivity to mission
Keeping the stack open and having direct access to the
infrastructure source code may well be the integration challenge
marking the difference between those who erect their own boundaries
(build their own cage), and those who ride the wind and cross the
The outsourcing of infrastructure and applications isn't the
half of it. I predict that entire corporate divisions will be
outsourced as highly distributed collaborative computing takes
hold. Unless something is a core corporate profit center, why not
outsource it? If the software and connective infrastructure can
bear the load, why would any corporation want to keep costly
operations in house? Sure there was a time when it was critically
important to have an accounting division, a human resources
division, a marketing division, a legal division, an advertising
division, a supply chain management division, etc. But the essence
of collaborative computing means that these cost centers can be
outsourced through software to efficient experts, without any
collaborative loss. This level of collaborative services isn't
available today, but it's coming. And when they arrive, corporate
resources will come to be more focused than ever on profit centers,
while the competitive advantages of cost centers are certain to be
reevaluated against these new alternative services.
There is a key difference between "software as a service" (M$)
and "services as software" (Sun). M$ misses the whole point of web
services. Where they want to sell software, Sun wants to enable the
delivery of highly collaborative, outsourced services, through
software. One is a leased application, and the other is a valued
corporate service where an expert company who does nothing but
accounting (for instance), remotely but intimately, handles the
At the end of the day the economic downturn will accelerate the
shift already under way in IT. Webification has hardly just begun.
And the dotcom dogs are already finding their way into the next
generation of collaborative computing. For sure some very familiar
names are going to show up promising investors the next new new
"collaborative" services thing. And one other thing is certain. The
incredible value of open standards and openly shared technologies
has more than survived the economic downturn. Open Source has
become the foundation of the global info grid, and now it is
certain to creep up the stack, eroding anything and everything in
its way. The new frontier is that of collaborative computation and
I would wager that openly shared methods and technologies have
already won on that front too. Thankfully that is a rant for
by Dan Neel
'Gray market' for used computer gear growing.
"ECONOMIC UNCERTAINTY, AN increase in network complexity, and
the demise of many a dot-com is fueling the "gray market" for used
servers and other secondhand computer equipment."
by Meg Walker
"Need Networking Equipment? Try The Auction"
Thanks to failing dot-coms and CLECs, the prices for nearly new
networking equipment have never been better, analysts and resellers
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