SuSE rolls ahead despite Linux shakeout
By Stephen Shankland
Staff Writer, CNET NEWS.COM

Wall Street may be cautious on Linux these days, but that's not discouraging Dirk Hohndel, chief technology officer of German software and services firm SuSE.

"Yes, we are planning a public offering," Hohndel said in an interview with CNET News.com. Though he declined to offer further details, such as when the IPO might take place, SuSE spokesman Carter Kohlmeyer said in an earlier interview that an offering likely would be structured to take advantage of stock markets in both the United States and Europe.

The move is bold, given the troubles experienced by support firm Linuxcare, layoffs at TurboLinux and the overall cooling trend affecting Linux firms.

Although SuSE wasn't profitable last year, it was in 1998 and garnered a substantial $21.4 million in revenue for 1999.

SuSE is one of the traditional Linux companies, like Red Hat, TurboLinux and Caldera Systems, selling a version of the freely available and cooperatively developed operating system. SuSE, with 460 employees, is one of the top four companies, according to market researcher International Data Corp.

Linux, though once a Wall Street darling, hasn't proved to be a panacea for the troubles of SGI, Santa Cruz Operation or Corel, each of which has seen its stock price plummet despite announcing major Linux initiatives.

A clone of Unix and a competitor with Windows, Linux has passed through the difficult stage of winning respect from major computer sellers such as Hewlett-Packard, Dell Computer, IBM and Compaq Computer. But investors now are more demanding. Linux companies are no longer assumed to be an easy path to riches, and most of the new crop of Linux companies focus on specialty areas such as cramming Linux into tiny devices or making it suitable for crash-proof servers.

Not SuSE.

In an interview with News.com, Hohndel described his company's plans for making money the old-fashioned open-source way, selling service and support. Selling services for free software has been widely espoused in the open-source world, but while SuSE and Red Hat embraced it, Caldera Systems and TurboLinux opted for other strategies.

CNET News.com: How is SuSE different from other Linux companies?
Hohndel: The key point is what you are offering. We see ourselves as one of the leading technology providers, with a strong focus on our customer needs.

In practice, that's obvious, but we have key differentiating factors. You need to have a very big development staff actively involved in the open-source community. You can't simply sit there and wait for the open-source community to do something. You need staff with in-depth knowledge in order to provide excellent service and support.

We see Linux as the future operating system in the server space and a very strong contender in the desktop space...It's not just the operating system, it's the services and support you're able to offer around them.

Some people have said that since the departure of Marc Torres to Atipa Linux Solutions, your management in the U.S. market has been weak.
I don't think we're weak in the U.S. at all. We have very enthusiastic customers (such as) Oracle and SGI. Of course, there's always room for improvement, and we are actively trying to improve our market communication. If you are the first company to arrive and you don't provide the service you promise, you aren't going to succeed.

What are SuSE's revenues?
We (were) profitable in 1998. We started very aggressive growth in late 1998. Aggressive growth obviously means that your revenues are somewhat behind your growth on your cost side. We currently are not profitable, but we are optimistic to become so again. Our revenue was 23 million euros ($21.4 million) in 1999.

How serious are you about the services business?
Obviously we are very serious about this. Services is one of the key business areas for SuSE. No one actually buys an operating system in a commercial environment.

People in a company are looking for solutions, and an operating system is a tool to provide a solution and nothing more. Without providing services, there is not much point in addressing a commercial market.

We're rolling out services on a global basis...using a staged approach. Usually we start new services in the German-speaking countries (Germany, Austria and Switzerland), which is our home area. The next step is the United States, further to the rest of Europe, and then the rest of the world.

So you now offer around-the-clock support?
You can purchase 7-by-24 support in German-speaking countries. You can purchase contracts...depending on the response times you need. The categories of support are silver, gold and platinum. Silver costs 4,200 euros ($3,900) per year. Platinum costs 36,800 euros ($34,200) per year, with a one-hour response time.

Is there any competition for Linux services in Europe?
At this point, there is no real competition. I expect established hardware vendors like Hewlett-Packard or IBM are going to offer similar services at some point, and I expect some other Linux players are going to do that.

What about services in the United States?
We have professional services out of our Oakland (Calif.) office for things like consulting and implementation. There are half a dozen people who are exclusively working in consulting and professional services and have another dozen working in areas of support and engineering.

How hard is it to hire Linux personnel?
Linux is a very, very hot topic. A lot of people like to work in the Linux industry, so hiring people is easy compared to traditional business. But Silicon Valley is an extremely competitive job market.

What's SuSE's position with helping open-source programming efforts, in particular the XFree86 project for a Linux graphical user interface?
The desktop is a very important area for Linux. Ignoring the desktop is one of the major mistakes the Unix vendors did in the Unix wars. We are investing a lot both in sponsorships and manpower.

Four of the XFree86 members are on staff, me being one of them. In the desktop environment, we have four of KDE's top developers on staff as well.

What do you think about the lack of a settled standard for Linux desktop user interfaces?
I'm very happy to see the competition between Gnome and KDE. Monoculture and monopolies...strangle innovation. But an important part is to make sure interoperability and standardization is not left out of the picture.

Are you interested in Linux on embedded devices?
We are actively involved in this area. But finding a solid revenue model around the embedded market is not easy. We currently focus on the server space and the desktop space.

How important to you is Itanium, the first generation of Intel's IA-64 family?
Itanium is a very important project. We made available our Itanium distribution three weeks ago. It will be ready when the processors ship. Linux on IA-64 is already remarkably stable.

Will Linux on Itanium provide SuSE minor or significant revenue?
It's hard to say. It depends on Intel's ability to get volume shipments out this year. I'm certain once Itanium ships in volume, Linux will be the key operating system used on there.