Linux Saves Money and the Numbers Prove It

Cybersource recently released a study comparing operating costs of businesses running Linux with those running MS products. Here the CEO explains how the study was designed and what it means.

A few days ago, Cybersource, the company I work for, released a study undertaken on the relative operating costs of running a mid-sized business on Linux and free software on the one hand, and Windows and Microsoft applications on the other. We've had a significant response to this study from many industry news organisations, industry players and individuals. What I'd like to discuss here is both the context within which this study originated and the methodology and results which precipitated.

First, a little history. While our firm has been using Linux for almost the entirety of its ten-year history, (preceded by a stint with Minix no less), we have been recommending Linux server and network infrastructure solutions for only about six years and line-of-business desktop solutions for about three years. In all circumstances, we want to know that Linux could solve the business problems of a client before we proffer a solution recommendation. The Linux server solutions business has been going strongly, but uptake of Linux desktops among business customers has been slower. The past nine months, however, has seen a dramatic increase in the number of existing and potential new customers, indicating that they are looking seriously at large-scale, non-infrastructural deployments of Linux desktops and terminals. Many of these customers approached us with the question: "How much will we save if we move groups, departments or the whole company to Linux?" We didn't have an answer for them then. We do now.

One of the other prime motivators in our undertaking this project was as a response to Microsoft's claims that the cost of software licensing was a virtual non-entity in the overall calculation of IT budgetary expenditure, accounting for a mere few percent. Our experience with many clients indicated otherwise. We began with our first study, released late last year.

This study looked at the differences in software license costs between Linux and Windows, for 50, 100 and 250-user organisations. We included the types of core applications that most organisations need: workstation operating systems, office productivity, network infrastructure servers, file, e-mail and database servers as well as intranet, internet and e-commerce systems. As you can imagine, Linux easily defeated Microsoft's platforms and applications in a license cost comparison. This study was well received, but some of our readership recommended we look beyond just software license costs. We agreed. To gain the attention of financial and non-IT managers, we needed to provide a holistic 'real world' model, encompassing hardware, networking, staff, consultants, internet fees and sundry other cost components. Thus, this new study provides such a comparison.

We opted to base the costs on the IT needs of a 250-user organisation. We believe this would provide a reasonable indicator and gnomon from which to calculate IT costings for larger enterprises, as well as smaller firms. We decided to run two models, representing organisations that are buying everything from scratch and organisations who will use their existing hardware and cabling. For our green-fields model, we specified the servers based on our experience with equivalently sized customers' sites. We set the per-node network connection cost (inclusive of all cabling, switches and hubs) to a set figure and specified the workstation hardware on current generation business-class systems from a name-brand vendor that supports both Linux and Windows. We applied this same total hardware and cabling cost to both the Linux and Windows platform models.

For all the prices upon which we based our final calculations, we provide full details for the configuration of the hardware, a vendor-sourced URL, as well as a method by which we arrived at costs. We wanted to make sure that our own results could be verified or repudiated, thus enhancing the study. This theme ran throughout our work in general. We avoided all instances of cost incursion for factors that we could not provide complete verification for or that were at all disputable. We believed this would tarnish the overall results and weaken the paper's impact. We also wanted to run the model over the industry-accepted norm of a three-year IT equipment purchase/deploy/use and decommission cycle. This will hopefully allow the vast majority of enterprises whose own processes follow this cycle to apply the study's results directly to their IT-budget spreadsheet projections.

Other cost factors included in our calculations are staff wages, consultants' fees, costs for line-of-business software, the purchasing of specific technical applications, internet connectivity and a miscellaneous costs category as a final "catch-all". The figures we arrived at (based on re-using existing equipment) were $733,973 US for a Windows/Microsoft solution and $482,580 US when using Linux and free software, a saving of $251,393 US or 34.26%.

When the model requiring totally new hardware was computed, the Microsoft-platform solution cost $1,042,110 US, and Linux came in at $790,717 US. This implies a 24.69% reduction. It also shows that outfitting and running an organisation with brand new servers, networking, workstations and choosing Linux software is comparable in cost to keeping all the old equipment and purchasing a Windows platform solution. In view of the forthcoming licensing changes that Microsoft will soon bestow upon its customer base, whereby most organisations will need to repurchase all their existing Windows systems and applications at non-upgrade retail prices, this scenario will become very common.

The other interesting factor that came out in our research, is that IT professionals who have solid Linux skills appear to be paid a premium over correspondingly attired Windows-platform specialists--obviously good news for those who are presently on track towards Linux Professional Institute or RHCE accreditation or who have a strong leaning toward professional Linux and free software services. It must be remembered, however, that even with this cost disparity, the organisaton that opts for a Linux solution will manage to slash instantiation and operating costs severely.

In fact, it is this final point that now needs to be expounded. If, as the study has shown, many, perhaps most, organisations can accrue substantial financial benefits through the partial or total adoption of Linux and open source software, what remains to convince this group to move wholesale to Linux? Are existing implementors of IT within these organisations the remaining roadblock? Are they concerned about, as Australian art historian Robert Hughes famously pronounced during a corresponding period within the art world, "the shock of the new"? Would faster progress be made if these results were presented to financial and non-IT executive company officials, in the language and format they know and understand, rather than an IT staff? Would many of the businesses worldwide presently suffering economic hardship (and shedding staff) benefit financially from such a move to Linux? I welcome your responses.

Con Zymaris is CEO of Cybersource Pty. Ltd., a long-standing IT and internet professional services company.

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Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

Erm, your assumptions betray your total ignorance of how licensing works.

Large organizations use Microsoft's model for determining how many licenses they buy, and at what cost. The EULA specifically forbids large companies from using shrink-wrapped retail licenses, like those you can buy when you grab a hard drive...

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

I don't know what type of license the original poster is talking about but here is what I know:

There are only four types of OS licenses from Microsoft:

1) Full retail

2) Upgrade retail

3) NewPC OEM

4) Volume license (i.e. site license)

The full version is ~$300 U.S. dollars

The upgrade version is ~$90 U.S. dollars

The OEM version is ~$90 U.S. dollars

The volume license varies but is ~$50 U.S. dollars

Now, the types I've seen for sale on the Internet with a hard drive are usually the OEM version. This is not legal acording to Microsoft and my distributor. I personally contacted Microsoft to see what would constitute a new PC. The reply was: motherboard, CPU & hard drive. You have to buy all three togeather. This is the same thing my distributor told me.

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

The orginal poster assumed $300 per license since that is what is mentioned on the Microsoft website. They mention discounts for volume purchases but the don't give numbers. Assumming you are correct and can get liscenses at 50$ a peice the savings would be less.

It saves you about $60000 if you can get windows XP for $50 a peice but it still is cheaper with linux. ~$189 000 cheaper than a similar Windows install with existing hardware.

You may want to check out the report yourself to see how accurate you think it is.

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

That is simply not legal. Call Microsoft and tell them what you did. I'm sure they would love to hear from you.

Re: Linux Saves Money and the Numbers Prove It

cosjef's picture

First a hearty "thank-you" for putting a quantitative face to this issue. Some thoughts on your questions...

1) Linux has been a beneficiary of the recession. Firms are looking to cut costs, and Linux has provided the means. Timing is everything.

2) Linux is still considered in the realm of the "gearhead" by the mainstream (read: non-technical) person. Its benefits need to be distilled down for the folks in Finance and Management. Your paper is an important first step.

3) Linux needs migration guides to kick-start adoption. I am currently writing an "IIS to Apache" migration guide for anyone wanting to move from the world's true "patchy" server (IIS and its neverending stream of hotfixes) to the almost "patchless" world of Apache. We need more guides like these.

4) Linux needs a course on basic Marketing 101 More specifically: "sell the sizzle, not the steak." What if you saw a billboard while driving home tonite that read: "Get Linux, and turn your pager off for the weekend!" That's what people respond to, not the fact that a ReiserFS filesystem handles small files more effectively than an EXT3 filesystem.

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

Would be really interestedin seeing your Paper on IIS to Apache migration.

Rgds

Andrew

andrewhatton@hotmail.com

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

Your Number 4 point reminds me of a poster I saw from Microsoft last week.

It went something like -

"For all of the students who want to spend their money on other things - get Microsoft XP at the student rate of only $395 (nz) - saving $205"

I think that next to the poster another one should be there, something like.

"$395 = Lots of Beer

Buy Beer , Use Linux"

Fran.

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

Those pdf files are really nasty slow to view.

Re: Please MIRROR!

ConZymaris's picture

If you find that our site has become slow, please feel to mirror this link, and make it known to the world.

http://www.cyber.com.au/cyber/about/linux_vs_windows_tco_comparison.pdf

i've tried but i cannot recover the document!!!!!

Anonymous's picture

i've tried a lot of times to download that document at the link http://www.cyber.com.au/cyber/about/linux_vs_windows_tco_comparison.pdf but i cannot download it because it says that it doesn't exist. i'm desperately searching for it to mirror it over my site: may i have another link to download it?

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

In paragraph six, you write "We wanted to make sure that our own results could be verified or repudiated." What is that supposed to mean? You want people to confirm or debunk the results? The concept seems redundant to me.

Re: Linux Saves Money and the Numbers Prove It

Anonymous's picture

Read this study. The only differences between Windows and Linux TCO are software licensing costs and employee salaries (the latter slightly higher for Linux). Simplistic at best.

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