The Waiting Game

To put it mildly, the Linux market is a bit bizarre. For an OS that for now remains primarily relegated to edge servers, it more than its share of attention. Typical case in point: Auto Trade Center, an online wholesaler of cars, uses “Lintel” (Linux on Intel) for its web farms but continues relying on Windows for the accounting, CRM, and other internal apps.

So why is this OS reshaping the industry?

The draw for Linux isn’t the open source model (most organizations don’t want their system admins wasting time hacking source code), but the fact that it’s cheap and comes available from multiple sources with 24×7 support. But “cheap” isn’t “free.” Red Hat charges $1500 per Lintel server for 9 -5, and $2500 for 24×7 support, comparable to Windows or UNIX.

Linux doesn’t compete with Windows because it requires UNIX skillsets, but it does because it comes in at similar price points. IBM loves the chaos that Linux stirs up because it offers platform and services options that impose a secure umbrella, and because Linux seems to throw other players off balance.

It’s prompted Sun to reappraise its core value proposition. They’ve responded by reinventing Solaris with a vengeance, adding the virtualization and performance tracing capabilities typically associated with mainframes. It’s raised the bar on UNIX, one that will take Linux 3 – 5 years to meet. And it’s forced Sun to level the playing field on pricing and platform. Today, Solaris x86 on AMD Opteron is price competitive with Enterprise Red Hat. The question is whether Sun can make money in volume-driven, low-margin markets.

As for HP, it’s found itself with the largest base of Linux servers. Not by deliberate strategy, mind you, because Microsoft has been its prime focus. Yet today, HP plays second fiddle to Dell as Windows reseller. HP’s Linux presence is attributable to the Compaq acquisition. Their trump card is OpenView, which continues to lead the distributed network node management market. Consequently, HP should actively push “manageable Linux.”

Linux will never amount to much if it’s just running edge servers. Yet, a recent study from Peerstone Research gives a clue that the other show may finally drop. In a poll of SAP, PeopleSoft, and Oracle ERP users, 15% said they would migrate to Linux servers in three years, and up to 25 – 30% in five years. Not surprisingly, the gains come out of UNIX, which currently owns about two thirds of the ERP back end. But more importantly, the growth of Linux stops Microsoft in its tracks, keeping Windows stuck in its 30% share.

However, the enterprise market is a lagging indicator. Unlike web servers, nobody in their right mind swaps out SAP servers unless they’re in an upgrade or end of lease cycle. The real question is skillsets. Even if Microsoft were to give away Windows licenses, there would still be a cost of transition to the two-thirds of ERP customers that are UNIX shops. That’s why Linux is an attractive option for enterprise data centers.

Maybe Linux won’t need all of Solaris’s capabilities, but it must get “good enough.”