MESSAGE
| DATE | 2005-08-14 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [NYLXS - HANGOUT] IBM and Free Software - good news for a change
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Profiles
IBM's Open-source Army
IBM, the company that pioneered direct sales, is now the leader of the
world’s largest indirect sales army.
August 15, 2005 Print Issue
In January 2005, a judge ordered IBM to turn over 2 billion lines of
code to SCO Group so that the small, Lindon, Utah-based company could
examine it for evidence that IBM had included copyrighted Unix code in
Linux. At that moment, the open-source movement suddenly lost a bit of
its swagger.
The billion-dollar lawsuit threatened to dampen open source’s mounting
momentum by scaring off potential customers, software developers, and
investors. It also raised the specter of miring IBM—Linux’ rich and
powerful benefactor—in a distracting legal battle.
The lawsuit was a peculiar situation. The open-source movement—the free
and open antithesis to Microsoft’s world-dominating, closed operating
system—was rooting hard for a victory by a company that bears one of the
world’s largest patent portfolios.
More than 100,000 developers call IBM their primary partner. It is
probably the largest and most diverse partner channel ever assembled by
a high-tech company. Both Microsoft and Novell have built extensive
reseller channels, but neither has been able to attract the many
multibillion-dollar companies, such as Lockheed Martin and SAP, that top
IBM’s partner list. While the relationship between IBM and its
open-source partners is not without its rough patches, in many cases
it’s a bond that has been forged over many years.
‘We don’t ask our partners to stop
doing Windows and do Linux. We say,
“Keep doing Windows or Unix or
whatever you are doing. Do Linux for
incremental revenue.â€â€™ – Scott
Handy, IBM
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Consider AbSoft, a company based in Rochester Hills, Michigan, that has
compiled and debugged application software for 25 years. For the past
five years, it has worked on Linux software. Others are more recent
partners that have signed up with IBM because the brand lends it the
credibility they need to sell Linux into the corporate world. It’s safe
to say that without IBM, Linux would not be where it is today.
SCO’s lawsuit notwithstanding, dispatches from the open-source movement
paint a pretty rosy picture. In the first quarter of 2005, Linux server
sales grew 35 percent, according to a report from IDC. That pace is
three times faster than Windows’ growth. The report also says that Linux
server shipments are expected to increase more than 20 percent over the
next five years, compared to only 10 percent for Windows. Linux still
only holds a tiny sliver of Windows’ market share, but it is growing.
According to Gartner, 45 percent of midsize businesses are already
building some applications with Linux. That’s up from virtually nothing
a couple of years ago. IBM is responsible for at least some of that
growth.
“IBM has basically backstopped Linux. It allows the corporate customer
to even consider Linux,†says Dan Olds, a principal analyst with the
Gabriel Consulting Group. “Knowing that IBM is standing behind Linux
with the full weight of the company is something that can really help IT
executives sleep at night.â€
Big Blue pays a lot for those restful nights. The company spends about
$1 billion a year on channel programs and incentives, and its largest
partners absorb much of the expense. In return, many of those
partners—such as Lockheed Martin, SAP, SAIC, and Unisys Services—move
millions of dollars worth of products.
At the other end of the spectrum, many of IBM’s partners sell very few
products. They are small companies with special skills or a single set
of products. They take advantage of IBM’s many incentive and training
programs, and port their applications to IBM’s myriad platforms and
processors. In return, they give IBM access to the small- and
medium-sized business (SMB) customer—a market the company needs.
“Big companies are good at fulfilling a purchase order for 500
computers, but if that same company would issue 500 purchase orders for
500 different users, they would have problems with that,†says AbSoft
CEO Wood Lotz. “We can cut across all of the internal politics pretty
quickly. We sell into situations where IBM is not comfortable selling.â€
IBM has a number of programs that address channel partners that sell
into the SMB market. The SMB Advantage program, for instance, affords
partners sales and marketing support. As with most of its programs, IBM
adds specific Linux incentives, offering mostly free training, support,
and—most importantly—customer leads.
“We don’t ask our partners to stop doing Windows and do Linux. We say,
‘Keep doing Windows or Unix or whatever you are doing. Do Linux for
incremental revenue,’†says Scott Handy, IBM’s vice president of
worldwide Linux. “They are reaching customers that they would not have
reached without the Linux solution.â€
IBM posts its partners’ applications to a directory called the Global
Solutions Directory, which currently houses about 6,000 applications for
Linux. IBM’s customers can then find Linux applications it needs in the
directory.
One of the customers that has taken advantage of IBM’s incremental Linux
business is Journyx, an Austin, Texas-based company that markets a
web-based timesheet solution that automates billing, payroll, and
project management.
Journyx has built a small but successful business either selling its
application to customers of all sizes, or hosting customers at its
application service provider site in Austin. The nine-year-old company
expects to make a little more than $6 million in revenue this year. Its
six-year history with IBM reflects Big Blue’s changing attitude toward
its smaller partners.
“IBM has not done a great job in the past of bringing us into their
existing customer accounts, but I can see that they’re starting to… go
more in the direction of opening things up,†says Journyx CEO Curt
Finch. “IBM’s partner program is moving in the direction of encouraging
people who support their platforms, not just encouraging people who are
big resellers of IBM’s software.â€
By offering both training for partners who add Linux to their roster of
skills, as well as putting its weight behind the technology, IBM is
assisting its smaller customers in establishing control of their
accounts
“Linux training is great for a reseller or software partner. It allows
them to go in and talk to their customers about Linux, which is
something they are hearing a lot about,†says Mr. Olds. “If they can go
in and intelligently discuss the pros and cons with the customers, it
promotes them to the status of trusted advisor. If they can go in and
say, ‘We have received this Linux training and we are being supported by
IBM,’ that’s pretty powerful.â€
Open-Source News
It’s not just IBM that is giving Linux a boost and adding power to the
open-source movement. Many governments in Asia, South America, and even
Microsoft strongholds in Europe are embracing Linux. The technology may
have established its first major beachhead in Brazil, where the
government has fully endorsed open source and sent Microsoft clear
signals that it need not apply for business.
Earlier this year, the Brazilian government launched a populist campaign
called PC Conectado, or Connected PC, which is designed to drive PC
ownership deeper into Brazilian society. If the government has its way,
PC Conectado will bring PCs based exclusively on open-source technology
to low-income Brazilians.
In an effort to stay in the game, Microsoft has promised significant
price cuts on its products, but the government seems unimpressed. The
government hopes to offer PCs in the program for about $509, about half
the going price of PCs in Brazil. Microsoft declined to comment for this
article.
The program is part of a larger transition to open source that has been
inspired by President Luiz Inácio Lula da Silva, who has instructed all
government ministries, agencies, and state-run companies to begin the
switch to open-source systems like Linux. President da Silva has also
mandated that companies, or research institutes receiving government
funding, develop in an open-source environment and offer their code for
free usage.
This is good news for IBM. “Microsoft is in deep trouble in countries
like China and Brazil,†says Mark Hanny, IBM’s vice president of
independent software vendors (ISVs) and developer relations. “In Brazil,
all of the top ISVs have rebuilt their applications from the
client/server base. They are now built on Linux.â€
Linux’s Red Carpet
While the Chinese government continues to impose tight restrictions on
most foreign software and the companies that create it, Chinahas
embraced open source in a big way. After a relatively slow start in
Linux, the government has now created the China Standard Software
Company and the China Open Source Software Promotion Alliance. The
former is a collection of state companies licensing Linux-based software
products and initiatives; the latter works with Western vendors such as
IBM on development projects.
But the world’s most populous country keeps tight control of its
software market. It has imposed regulations—designed to protect Chinese
firms by giving them preferential treatment in government
procurements—that make it difficult for foreign software vendors to do
business in the country. The proposals categorize software vendors as
domestic, non-domestic, or preferred non-domestic.
Under the draft proposal, government purchases of non-domestic software
would require special approval. Vendors hoping to win preferred
non-domestic status would have to demonstrate annually that their
investment and operations in Chinaremain above a certain level. For
instance, companies meeting the preferred standard must show that at
least 50 percent of their development costs are spent in China, and must
invest an unstated proportion of their Chinese revenues in China to
train local software staff and transfer core software technology into
the country.
“Those rules are a direct slap at Microsoft, because the one exception
the government had was anything based on open standards,†says Mr.
Hanny. “The Chinese had very serious concerns about security flaws, and
Microsoft failed that test.â€
Last year, Beijingannounced a phase-out of Microsoft Windows and Office
products in government offices, to be complete in 2010. Other Asian
countries, including South Korea and Japan, have introduced similar
programs or announced open-source initiatives.
Convincing Large Customers
Open source may have found a home in developing countries, but it has
had a difficult time gaining acceptance among large corporations. To
help combat the corporate aversion, IBM recently launched a testing,
marketing, and sales support program designed to assist open-source ISVs
in building enterprise-ready applications that can meet the rigorous
demands of large customers.
The program, called Chiphopper, allows open-source ISVs to port to
multiple platforms more efficiently, and perhaps more importantly, helps
them generate leads and close tough deals by using IBM’s reputation and
resources as a calling card.
“Chiphopper creates a framework where IBM’s Linux developers who have
existing x86 Linux applications can run them through Chiphopper, and
they can be ported to work on any of IBM’s server platforms,†says
Charles King, a principal analyst with PundIT Research.
The company continues to roll out programs loaded with incentives for
ISVs to develop applications that incorporate Linux and run on IBM’s
hardware.
“It’s that kind of classic bridge-building model, and IBM has the size
and the financial wherewithal to go in there and make the investments
knowing that if they put $1 million into it today, they have a good
chance of making $10 million down the road,†says Mr. King. “IBM gets
criticized by its competitors because they are a large company and they
act the way large companies do. If you are an 800-pound gorilla, what’s
the point of acting like a 75-pound chimpanzee?â€
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