The idea of free software for all may not hold the greatest appeal tothat's rapidly gaining in popularity. But where does this leave the traditional software channel and how can Vars hope to make a profit? the average dealer trying to make a profit through traditional sales outlets. But open source software (OSS) in general and the free operating system, Linux, in particular are becoming increasingly important alternatives to bought-and-paid-for programs.
While hardcore proponents of open source may not place entrepreneurial opportunities at the top of their list of priorities, that's not to say there aren't profits to be made within this area. On the contrary, vendors and resellers of both software and hardware have decided they can no longer afford to ignore the business implications of this growing phenomenon.
For software companies the keyword here is mindshare: the rationale being that the more users a product picks up, the greater its total value - outside of simple sales revenue. It's the same philosophy Microsoft falls back on when worried about the high level of piracy and grey imports from which its products suffer. The software giant will never publicly admit it, but a PC running Windows 98 is infinitely preferable to a PC running a rival OS - even if the Microsoft product is not strictly legal and has not produced direct sales revenue.
Of course, the idea is even more relevant within the context of the internet.
Here, the user interface is a shop window where banner advertising, click-throughs, subscription and sponsorship provide endless earning potential.
This was Microsoft's reasoning when it began giving away Internet Explorer and inadvertently kick-started the current freeware trend. In March last year, browser rival Netscape followed suit, but with an important distinction: it also made its product open source, providing free access to the Communicator program code and setting up a dedicated team and Website - Mozilla.org - responsible for the open development of the software. In November, Netscape saw its strategy pay off when the company's flagship product retook the number one position as browser of choice.
Dusan Rnic, UK product marketing manager at Mozilla.org, says the open source model improved the quality of the browser and helped Netscape increase its share of the internet community and Net-related sales. 'On click-throughs alone, the company generated $50 million in revenue in the six months leading up to December 1998,' says Rnic.
In the meantime, Sybase, Oracle and Informix have all announced the availability of their commercial databases on Linux, while Canadian software vendor Corel has sold off its Java development arm, jBridge, to embrace the Linux platform and an OSS development model.
Nick Blommesteijn, recently appointed Linux product manager at Corel, says the company is committed to putting all its products on Linux. It has also assembled a team working with Wine - a toolkit for porting Windows sources over to Linux - and a program loader which allows unmodified Windows applications to run on the platform. Look out, Microsoft.
Hardware manufacturers are also taking action. Rumours are circulating that Linux will be bundled with Apple's next PowerPC in an attempt to woo the education market.
Compaq, Dell, Hewlett Packard and Silicon Graphics have all recently advertised the release of Linux-based servers. Dell said it made its decision 'in response to demand for the platform'.
The move was a timely one. Last month, PC vendors were unpleasantly surprised when an Australian customer who chose to run Linux on his computer succeeded in gaining a refund on his Windows OS, having insisted that he had no use for the pre-installed software. The terms of the user licence agreement revealed that it was the PC manufacturer and not Microsoft that was responsible for picking up the bill. The Linux community has now set up a special Website detailing the procedure for obtaining a Windows refund and organised a mass refund day only last week.
The open source trend is forcing the industry to rethink its whole approach to software. For example, IBM has confirmed that it is about to formalise its open source policy. Its Java operation, AlphaWorks, is already conducted as an open development project and IBM programmers contributed code to Apache - the market-leading (and free) Web server software.
Tony Occleshaw, European marketing manager at IBM, says the company would officially 'come out' at the Linux world user conference in San Jose, being held during the first week of March. 'The announcement will encompass IBM's official policy with regard to open source, our overall strategy and what we intend to do in this evolving market,' reveals Occleshaw.
He would not say which of IBM's products would be offered to the developer community and indicated that there are still questions about what kind of support infrastructure will be put in place for IBM's business customers using these products. The corporates are apparently concerned by the perceived lack of accountability that free software carries with it. Nor is there any formal accreditation for Linux systems specialists.
'There is still a huge gap to be filled in terms of support,' says Occleshaw. 'I don't think the IT manager of a hospital or bank would want the upkeep of his IT system to depend on an anonymous community of developers.'
But despite these reservations, the rate at which the open source culture has taken hold has been enough to convince the world's largest computer company that it was time to act. 'What amazes me most is the amount of market share that Linux has already eaten up,' he says. 'According to the research we have conducted, more than 17 per cent of operating systems shipped last year were Linux. That's equivalent to more than half of the volume of total NT shipments during the same period.'
As well as last year's 212 per cent increase in shipments, Occleshaw was also surprised by the variety of uses to which the Linux platform is now being put. 'My view was that Linux was being used almost exclusively by academics and other specialists for technical tinkering. This may have been the case, but the research IBM has completed in the US has shown that the user base has broadened dramatically. For example, we found that up to 40 per cent of commercial Websites run on Linux. And that number is growing.'
Most analysts agree that the server market - particularly dedicated Web servers - is where Linux and other open source offerings are the greatest threat. While the reputation of NT Server and related Net applications have failed to improve in terms of performance, price and reliability, free counterparts such as Linux and Apache are becoming the de facto systems for internet-based computing.
The open source phenomenon, which has swept through the US domestic market, is now starting to have a real effect in the UK. The first UK Linux and open source conference, OpenSource 99, took place at the Commonwealth Institute in London last month. In attendance were more than 400 representatives from the world of IT - a broad cross-section of industry figures, including analysts, consultants, programmers, vendors and resellers.
The conference was organised by NetProjects. Eddie Bleasdale, its founder and director, is one of a different breed of open source advocates who are promoting the philosophy and practical superiority of software that is essentially free.
A follow-up conference has been scheduled for 11 May, where the business opportunities for resellers will be more fully addressed.
Bleasdale is evangelical in his support for open source and believes that the future success of the computer industry, no less, will be determined by the rate at which open computing systems are adopted. He claims the current state of the industry is characterised by a chronic short-term attitude and that without open standards the common objective of Net-based global trading will never be realised.
'I designed and built the first Unix computers back in the 80s,' says Bleasdale. 'But I failed to realise that Unix would be screwed up by an industry intent on creating proprietary systems. The most important defining characteristic of open source is that any code changes must be placed in the public domain. This way, any modifications which are a genuine improvement will then become part of the program.'
The advantages of having your products tested and amended by a vast community of technical experts sounds great in theory. And in practice, both programmers and users attest to the superior functionality and stability of open source products, for which updates and fixes are available on demand and for free.
But where does this model leave the traditional software channel? How can Vars generate profits from products that carry no price tag? Bleasdale says it's simply a case of embracing change and focusing on service opportunities.
Open source allows Vars to customise products to a far greater degree.
Furthermore, this flexibility will increase a reseller's ability to compete in a software market where, by 2001, 95 per cent of new applications will be internet based.
He is certain that the Net is where the future of the computer industry will be fought and won: 'The industry has messed around users for 20 years.
Companies, such as Microsoft, have put in place a business model that is morally wrong. They are geared towards making more money at the user's expense. A universal infrastructure for global trading will never be achieved with vendor lock-in.'
Bleasdale is confident this that vision of a single, open standard for internet computing will not render software resellers redundant. On the contrary, the role of the value-added channel is crucial: 'Over the next decade we need to find the people to build and support open systems which will allow electronic business to develop unfettered. System integrators and Vars will play a central role in both distributing and servicing these systems, and training and educating users.'
Eric Raymond, keynote speaker at OpenSource 99, author of The Cathedral and the Bazaar and publisher of the annotated version of the infamous Halloween Document (see right), is the self-proclaimed leader of the open source movement. He has made it his prerogative to promote the commercial case for OSS. He agrees with Bleasdale that the channel should embrace the inevitable.
The business case Raymond proposes emphasises the increased reliability, security and faster development process for OSS. It also identifies lower overheads for software designers (as work is effectively outsourced), a broader market base due to the increased platform range on which the products will run and a closer relationship between the seller and user/customer.
As Raymond sees it: 'There's a belief that open source software is not professional, shoddily made and more prone to fail than closed software.
The internet's infrastructure makes the best possible refutation. Consider DNS, Sendmail, the various open source TCP/IP stacks and utility suites, and the open source scripting languages, such as Perl, that are behind most live content on the Web. These are the running gears of the internet.'
He goes on to identify two specific business models which have already proved successful and promise to pave the way for the large-scale adoption of open source at a commercial level.
The first is the loss leader, where open source is given away as a market positioner for closed software and internet mindshare revenue. This is essentially what Netscape is doing with its Communicator suite.
The second is the classic value-add model, where the actual product is still essentially free, but distribution, branding and after-sales services are paid for by the customer. 'Increasingly, the value is in service and integration, rather than the software itself,' says Raymond.
This is how companies such as Red Hat, Cygnus and Caldera have secured their respective fortunes in the US. They distribute packaged CD versions of the software at a fraction of the cost of commercial alternatives to a growing channel of resellers which generate revenue through installation, configuration and sales of related hardware.
At least one UK reseller has followed suit. Var Digital Networks UK (DNUK), based in Cheshire, started reselling Red Hat Linux in September, alongside its NT products. The four-man team turns over about #1 million a year and Linux-based workstations already account for nearly half the company's sales. DNUK sells the packaged software, complete with manual and 90 day's technical support, for #30.
Under the General Public Licence (GPL), the software can be copied and distributed ad infinitum.
Lee Chisnall, Linux design and support specialist at DNUK, says that once customers understand the technical as well as the cost advantages of Linux, the choice of platform is an easy one. 'You can boot up a Linux system once and never have to do it again. Some customers ask for dual-boot systems because they are still unsure of how the free platform will develop. But very soon we will be selling more Linux than NT.'
Chisnall also explodes the myth that Linux is the exclusive tool of university boffins, hackers and geeks. DNUK's clients include Macmillan Publishing, Vodafone and DERA - part of the Ministry of Defence. It also designs systems specifically for the home office user and PC games player.
What all these customers have in common is their insistence for tailor-made, low-cost computers. And at #538 for an Intel 300 desktop system with monitor and Red Hat Linux installed, DNUK is happy to deliver.
He says the official number of Linux users (about 10 million) is a gross underestimate and not just because of the difficulty in measuring how many copies have been downloaded. He claims that Dell, for example, will install Linux on new hardware if the customer asks for it. 'You won't find that on the Website,' he says. 'But if you want it, Dell will do it.'
And according to Chisnall, there's another reason why Linux may not appear as pervasive as it really is. 'IT managers are installing Linux on corporate systems and because it looks and feels just like NT, the chief executives don't even know. They are given a budget to work with, "spend" it on Linux and then pocket the saving.'
Now if that doesn't encourage a mass migration by clued-up corporate customers, nothing will.
BRINGING IT OUT INTO THE OPEN
Eric Raymond is the founder and director of the Open Source Initiative, a non-profit organisation dedicated to marketing open source software. The Cathedral and the Bazaar is Raymond's original argument in support of an open source approach to software development and is credited as being the prime motivator behind Netscape's decision to release the Communicator 5 source code.
At the end of October 1998, Raymond published the Halloween Document, an analysis of a leaked internal report written by Vinod Valloppillil, an engineer at Microsoft. The report reveals that the software giant sees OSS as a real threat to the company's hegemony, particularly with regard to NT Server. It also offers a frank analysis of the strengths of open development practices.
In the report Valloppillil said: 'The ability of the OSS process to collect and harness the collective IQ of thousands of individuals across the internet is simply amazing. More importantly, OSS evangelisation scales with the size of the internet much faster than our own evangelisation efforts appear to scale.' Raymond is at pains to emphasise the practical rather than political nature of his support for OSS. He stormed out of last month's OpenSource conference when one journalist suggested he was motivated by communist ideals.
Infrastructure provider says international sales now make up 51 per cent of its revenue
Suzanne Chappell of TMS plans sailing venture after selling Oxfordshire-based TMS to acquisitive Chess
Withdrawal of credit insurance by some providers a 'reflection' of current challenge facing IT sector, according to MD Steve Soper
SMART's UK managing director joins Lenovo to boost SMB business