LinuxWorld Speakers See Money in LinuxJan 24, 2003, 14:30 (3 Talkback[s])
(Other stories by Thor Olavsrud, Bob Liu)
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 business models.
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 systems."
As evidence of the company's confidence in the platform, Mills said it continues to invest heavily in Linux, and at an increasing rate.
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 like Sherwin-Williams.
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 other provinces.
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 development."
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 systems.
"We have an opportunity to really move the bar," he said.