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|Originally Published: Monday, 13 December 1999||Author: Ronny Ko|
|Published to: columnists/Ronny Ko||Page: 1/1 - [Std View]|
Betting It All on Linux and Choice
Thanks to the declaration of Microsoft as a monopoly, corporations, investors and consumers alike have been looking for alternatives. One such alternative is Linux. Linux is a Unix-like operating system that runs up to 50% or more of all Internet services, including Web services, dial-up services, Usenet and others. As a consumer operating system, Linux still has a long way to go....
Investors are betting that Linux will become almost as dominant as Microsoft is today. This week we saw investors flock towards Red Hat Software, Corel, and all smaller supporting Linux companies that write software for the operating system.
With so much money flowing into Linux, Red Hat is using its growing capital to expand its business operations beyond the operating system. As much as Microsoft owns Windows, Linux cannot be claimed by Red Hat as its own. Today, Red Hat is betting its entire business by forming strategic partnerships with industry players such as IBM, Dell and Intel. Red Hat wants to ensure that these companies will aggressively sell and ship Red Hat Linux.
The business model is simple. Red Hat wants its brand to be synonymous with Linux as much as ketchup is synonymous with Heinz. With a larger installation base, Red Hat can benefit from charging for technical support.
But it's a very risky business. We all remember how Netscape gained 90% of the market by simply giving away its browser in the early 1990's. Today, Netscape has more or less lost its dominant position to Internet Explorer.
Much like Netscape, Red Hat can lose its dominance as easily as it is gaining it today. Linux is freely available. This means that anyone can use the code and create new and better distributions. Companies like IBM or Dell won't hesitate to move away from Red Hat if someone makes a better product.
To protect and deliver shareholder value, Red Hat acquired Cygnus Solutions for under $700 million in stocks. Cygnus makes compilers that compile applications to run on Linux. There were rumors that Red Hat was interested in acquiring Corel Corporation. If this were true, Red Hat would have gained immediate access to the consumer because it could have leveraged Corel's consumer reputation to sell and gain wider acceptance at the home consumer market.
What about Caldera? Caldera has been avoiding Red Hat because it is building its business plan on embedded products such as home appliances and other consumer devices. It's a more narrowly focused business.
Can Red Hat become synonymous with Linux? It's not easy. No one owns Linux, which means Red Hat cannot claim Linux, and thus use the operating system as an asset. Any modifications made to the operating system much be made freely available. On the same token, any potential competitor can use that same code to build their own distribution.
Then again, I'll enjoy my different brands of ketchup.