LinuxWorld Speakers See Money in Linux
Jan 24, 2003, 14:30 (3 Talkback[s])
(Other stories by Thor Olavsrud, Bob Liu)
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Whether you're talking about potential revenue or the cost
savings that can be realized by Linux implementations, keynote
speakers at the LinuxWorld Expo on Thursday were eager to dispel
the popular notion that the open source software means unviable
IBM, which used Sam Palmisano's keynote at LinuxWorld 2001 ago
as an opportunity to trumpet a $1 billion investment in Linux, said
it is already seeing a return. On Tuesday Big Blue said Linux
accounted for $1.5 billion in revenue in 2002, and noted that its
Linux business overall is profitable.
Steve Mills, senior vice president and group executive of Big
Blue's software group, told a packed auditorium at his keynote
Thursday that IBM projects Linux will continue to grow as a revenue
generator for the company, with expenditures on Linux growing at an
average annual rate of 35 percent through 2006.
That is because the opportunity with Linux does not so much lie
in the core technology itself but the services and products which
support that technology.
"The size of the opportunity around it is far, far larger than
the core," Mills said. That's the logical model of open
As evidence of the company's confidence in the platform, Mills
said it continues to invest heavily in Linux, and at an increasing
In fact, Mills said IBM's foray into Linux was a response to
customer demand for open standards and architecture.
Those customers range from financial services firms like Morgan
Stanley and Germany's Dresdner Kleinwort Wasserstein, to
telecommunications titans like Deutsche Telekom, to retail giants
Big Blue has also made inroads in selling its Linux products and
services to governments. Mills trotted out its project with China
Post, the Chinese post office, for which it installed a Linux-based
system in 1,200 branch offices in a Chinese province. Big Blue also
trained unskilled workers to manage and maintain the systems, and
Mills noted that China Post wants to expand the infrastructure to
In all, Mills said IBM has more than 5,000 employees working on
Linux in research, services, development, porting centers, and
sales and marketing. The company is also "eating its own cooking,"
running more than 1,100 Linux servers. Mostly those servers are
xSeries servers or zSeries mainframes, typically replacing legacy
OS/2 servers or Windows boxes.
"Linux is clearly here to stay," he said. He added, "We've been
writing operating systems at IBM for 40 years. We know a good
operating system when we see it."
Meanwhile, on the cost side of the equation, Dell's CIO Randy
Mott told attendees of the afternoon keynote speech at LinuxWorld
that the Austin, Texas-based hardware vendor has seen success by
practicing what it preaches. Internally, Dell has migrated from 14
different proprietary systems mostly based on Sun Solaris to Linux
boxes running Red Hat and Oracle9i. (Of course, running them on
boxes made by Dell certainly doesn't hurt the bottom line.) By
reducing duplication of common systems on a global scale that have
grown out of Dell's own hypergrowth mode of previous years, the
company been able to realize cost savings of 41 percent thanks to
Linux, Mott explained.
"UNIX is dead," Mott read from one of his slides.
And, as a result of the cost savings, Dell has been able to
divert as much as 55 percent of its IT spending toward research and
development--or what Mott described as "innovation"--as opposed to
a mere 20 percent, despite overall reductions in IT budgets.
In fact, Mott highlighted the lack of innovation investment as
one of the main pitfalls for IT professionals in general. During
his keynote speech, entitled "Planning for Obsolescence," Mott
compared the IT industry to the railroads or airlines, which also
once showed tremendous promise but have now become obsolete.
"The thing you have to ask yourself is: can you be a great
obsolescence planner?" Mott told the crowd. "By 2010, IT
organizations have to be much faster; they have to practice extreme
integration; and they have to apply 85 percent of all resources to
Mott said that about 85 percent of IT spending is currently
dedicated toward investing in the status quo--that is, spending to
maintain current legacy systems. By sharp contrast, only 15 percent
is being spent on innovation. But instead of settling for the
status quo, IT professionals in general have the opportunity to
avoid the same trap that has beset the aviation and railway
"We have an opportunity to really move the bar," he said.