“Let’s face it: if the end of 1999 was the peak for Linux pure
plays, the end of 2000 was the zenith. Both VA Linux and Red Hat
Software — arguably the leading Linux pure plays to reach the
stock market — were chugging on all cylinders at the end of 1999,
only to see their stock prices continually fall through the end of
2000. A score of other companies, including TurboLinux, Linuxcare,
and Lineo, abandoned plans to go public in face of a skeptical
stock market.”
“More ominously, there seems to be little on the horizon that
would lead these stock upwards — at least according to many
analysts that cover the Linux stock sector. Anyone familiar with
the Linux world knows that one of the eternal debates is how
companies will make money selling something that’s given away for
free. Yes, it can be done, but value needs to be added. (Water is
the most plentiful substance on the planet, and somehow or another
Evian convinces folks to pay extra for its mineral water.) Red Hat
Software and VA Linux are both attempting to add this value by
focusing on the enterprise, but enterprise sales are really
difficult for newcomers.”
“However, for those companies who are already established in the
enterprise, Linux is a way to add some value at a time when margins
are tightening and budgets are decreasing. IBM, Dell, Compaq, and
Hewlett-Packard have all embraced Linux as an enabling technology
for their clients. By enabling technology, I mean that Linux is a
base technology that makes other things possible, such as scalable
Web serving or clustering. Want to get new life from that old
mainframe? Install Linux as an OS and create 2,000 Linux machines
on one box. Want a clustering technology? Then pony up for a Linux
cluster. In these cases — and many more — sales are made because
of a specifically technology feature that Linux can deliver at a
more cost-effective basis. Let’s face it: It’s cheaper for an IBM
to push Linux than to maintain a large staff of AIX coders. But
IBM’s customers are not using Linux because it’s a magic
technology, and what many Linux-oriented firms need to realize is
that Linux’s strength and marketability lies in this enabling
capability.”