Just Add Linux: The Union of Commercial and Open-Source Software in Existing Business Models

by Scott Handy

Open-source software combined with commercially licensed software has become a market reality, as open-source technologies like Linux and Apache, already tremendous market successes, are combined into business models by vendors who want to win in the marketplace. It's happening today and will continue to flourish, and here's why: Linux Market Penetration.

Linux is already a solid platform for servers, and it is growing the fastest of any. The impact that Linux is having in the market is significant. According to analyst firm IDC, Linux is the fastest growing server operating system in the market and is second in volume only to Windows NT/2000.

With the projected growth of Linux on the server, spurred on by killer-apps like Apache and Samba, a market opportunity is born. The industry is now taking the next step to deliver commercial software on the open-source platform. According to IDC, the market opportunity through 2005, in revenue, for software sold on Linux is now projected to be in excess of a 100% compound annual growth rate.

It's still all about business, business models and value added to the customer--just add Linux. Linux has changed a lot of things in the IT industry already, but it has not changed the fundamental way customers buy value--and the value net that they buy it from. What is this value net? It is the network of players, including the IT vendors themselves, independent software vendors (ISVs), value-added distributors (VADs) and value-added resellers (VARs) that deliver value to customers in the form of solutions. All of these players are already incorporating Linux into their business models and solution portfolios. And they're doing it by mixing and matching the value-add they provide, often with commercially licensed software, on top of Linux, Apache and other key open-source technologies.

IT vendors are doing it. The industry's largest IT vendors have embraced Linux and other open-source software. IT vendors are not randomly open-sourcing commercially licensed software, but they are enabling open-source software on top of Linux and using Apache, where appropriate. In some cases those same IT vendors also open-source their own technology to help make Linux more robust. Examples are when vendors contribute journal filesystem implementations to the Open Source community or when vendors help accelerate the adoption and implementation of standards like XML by contributing an XML parser.

ISVs are doing it. ISVs are rapidly turning to Linux in order to capitalize on the number of Linux-based solutions being sold. They are supporting multiple hardware and software platforms, all while minimizing their development costs. IBM, for example, saw a growth rate of over 40% in the number of new Linux applications created last year.

ISVs have created robust e-business solutions running on Linux in every major industry and solution segment, including financial, retail, customer relationship management and mid-market accounting. In general, ISVs are selling their commercially licensed software for use on Linux just as they do on any other operating system.

The channel is doing it. VARs and VADs are riding the Linux wave as well. At IBM alone, the number of business partners actively enabled for Linux grew 800% since the beginning of 2001. These VARs and VADs have not changed their business models to incorporate Linux; they provide value to customers mainly through services and the specific solutions they provide. Adding Linux support is a quick and easy way to increase their market reach.

The market is doing it. The key pieces of the value net are in place around Linux today. While business models have been a hot topic of debate in the Open Source community over the last year, it is clear that a successful business model hinges on the ability to provide value-add to customers. Even more important is that everyone can participate in that environment--the Open Source community, IT vendors, ISVs, the channel and ultimately the customer.

Scott Handy has been with IBM for 18 years and is currently the director of Worldwide Linux Solutions for the IBM Software Group. He is based out of Somers, New York. He is responsible for solutions enablement and marketing for IBM's DB2 , WebSphere, Lotus and Tivoli software on Linux.

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