Geeks on Bikes: The SCO Group/Caldera Product Development Plan

by Jeff Gerhardt

Yesterday, I wrote about some initial reactions I had to the announcement that Caldera had changed its name to The SCO Group. Today, I'm going to explore some of the repercussions of the announcement.

The change by Caldera to leverage the SCO brand and SCO products has a sound foundation but some short-term problems. These problems revolve around the fact that neither Caldera nor device manufacturers are spending much in the way of resources to support SCO Open Server or UnixWare products. The bottom-line is it's an old OS. It's going to take time for the new SCO Group to re-assess and then come out with a new version of the main SCO products. So, what does a company do to get its channel re-invigorated and its house in order?

Well, if you are Darl McBride, the new CEO of The SCO Group, you use Harley-Davidson as a model. The famed maker of road bikes fell on hard times after being sold to AMF. H-D management and some of the old Harley family bought back the company in 1980, but they faced a tough battle to save the company and the brand.

Darl has adopted a business resurrection model similar in many ways to the one used by the H-D team: generate revenue from the brand, improve the core product and be more responsive to the needs of the people who sell your product and the people who buy your product. Simple concepts, but they're harder to do than they sound.

Harley launched their corporate resurrection with the surprising step of creative licensing and announced a brand name based primarily on clothing. The SCO Group does not have this type of opportunity, but they do have a significant wealth of intellectual property. McBride was at Novell when they purchased SCO/AT&T Unix for a little over a billion dollars. A few years later, Caldera purchased SCO from Novell for a little over $100 million. "In theory", stated McBride, "there should be some value to that property--somewhere between a million and a billion [dollars], right? I just wanted to know what real, tangible intellectual property value the company held."

The then-Caldera legal team was appointed the task of coming up with a review of the history of Caldera's intellectual properties and their status. The review turned up a stack of license agreements that had gone uncollected for years. To date (remember, McBride has been on board as CEO for only a few weeks), Caldera has already come to agreements with holders of these old licenses that will generate $600,000 in recurring revenue.

The intellectual property fishing expedition has provided The SCO Group with the legal due diligence to now lay claim to UNIX itself. According to Opinder Bawa, new Senior VP of Technology, "we own the source to UNIX; it's that simple. If we own the source, we are entitled to collect the agreed license fees."

To my fellow folk in the Linux community, you need not fear. I specifically asked if, in making that broad a statement about UNIX, The SCO Group was making any legal claim to Linux. According to McBride, "obviously Linux owes its heritage to UNIX, but not its code. We would not, nor will not, make such a claim."

So while the legal team is working on new intellectual property revenue streams, what is going with regards to improving the core product? That is a tougher subject, one that, like re-engineering the Harley motor, will take time. What does the new SCO Group intend to do in the meantime to pump up the troops? What else--they're starting a dot-com business.

This move both makes sense and is a huge gamble. The core of this new business is a service called SCO BIZ, a partnership with and their e-commerce development platform. It will put a product into SCO dealers' hands that allows them to offer an ASP/VSP service to their clients and potential clients. The concept is the e-commerce engine is capable of harvesting data from an existing SCO Open Server product, allowing the dealer to sell a new service to an existing client. With the new version of SCO Open Server being released in the fourth quarter of 2002, the service will be an aid in selling new SCO products.

But are people even considering buying SCO as a new or replacement solution? According to financial information released this week, this past quarter was the first up-tick in sales for SCO in the last five quarters. So, yes, customers will buy new SCO products because of their reliability. But, the jury is still out regarding the numbers in which they will come to buy the product.

The risk is significant. Dozens, maybe hundreds, of ASP-style services already are selling very good e-commerce solutions on the Internet. Even with a high quality, already successful partner such as Vista.Com, it remains to be seen if this gamble will work or if it will dilute the existing efforts of their dealer group.

It should be noted that The SCO Group is not making this service offering without analysis. This kind of service is exactly what the channel partners have been asking for as a tool. The SCO channel must not have experienced (suffered from) the dot-com bust.

Jeff Gerhardt is the host of The Linux Show.

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