Even as the recession continues to cool CIO appetites for software purchases, Linux is bucking the trend, according to a new IDC report.
IDC is projecting Linux revenue to expand at a compound annual growth rate of 16.9 percent from 2008 to 2013, topping $1.2 billion in 2013.
As IDC notes, this growth will comprise just 4 percent of total software market revenue by 2013, up from 2.2 percent in 2008. However, for the second time, IDC has also examined nonpaid deployments of Linux, revealing some troubling data.
I've always assumed Red Hat's primary Linux competitor is Novell. And based on IDC's numbers, it does appear that Novell is increasingly a real threat to Red Hat.
But it is the nonpaid usage of Red Hat's software that may well pose a bigger risk.
Novell has 27.9 percent market share of paid deployments and 20.1 percent of the total paid and nonpaid market. This doesn't look so great at first glance; after all, more people use Red Hat (including Fedora) for free than pay for Suse Linux Enterprise Server.
However, in growth, Suse stands out. On paid shipments, Red Hat's 2007 to 2008 growth was 1.9 percent, while Novell's Suse was nearly double that at 3.5 percent.
On revenue, Novell comes in at 29.8 percent market share. That represents 50.3 percent growth in market share, versus Red Hat's 14.8 percent growth. Granted, Red Hat has a much larger base of revenue from which it's growing ($319.5 million compared with Novell's $112.6 million in 2007), but Novell's Linux revenue growth has outpaced Red Hat's since 2007.
I don't particularly like Novell's partnership with Microsoft to promote Linux, but it does appear to be paying off for Novell.
If Red Hat could elect to eliminate one competitor tomorrow, though, I'm wiling to bet that it would not choose Novell's Suse. It would choose unpaid Red Hat Enterprise Linux (RHEL), which accounts for a big chunk of the overall Linux market.
This may seem trivial, given that Red Hat earned a 62.2 percent share in the overall market for new license paid shipments/subscriptions, measured by deployments, or 64.7 percent, measured by revenue.
Sounds great, right?
Maybe. Intriguingly, Red Hat also claims 28.6 percent of the nonpaid market...for RHEL, its Linux distribution that should only be available to paid subscribers, but which many companies dishonestly use without paying (e.g., they may violate their contract by running more RHEL servers than they actually pay for).
Add Red Hat's paid and nonpaid deployments together, and Red Hat accounts for 47.6 percent of the global Linux market, whether users are legitimate customers or pirates.
It gets better (or worse, depending on your view). If one adds in the RHEL clone CentOS and Red Hat's own community distribution Fedora Core, Red Hat and its offspring dominate the global Linux deployments market with 57.1 percent market share.
This might not be so bad, if the trend were toward more paid Linux adoption, but it's not. While paid Linux server deployments will grow at an impressive rate, nonpaid deployments will grow even faster, nearly reaching parity with paid deployments in 2013.
Why this growth in nonpaid Linux?
Undoubtedly some of it stems from enterprises wanting to get something for nothing. Rather than pay for value, they attempt to cheat the system, leaving less money to help develop Linux.
But it may also be that the longer the world uses Linux, the less it feels the need to pay for it. Noted technology CTO Jon Williams once posed a dilemma to me at the Open Source Business Conference. He indicated that the longer his team works with an open-source project, the less need it has for support and maintenance from a vendor.
In other words, the minute the customer becomes profitable to the vendor is the same minute the customer no longer needs that vendor.
We could be seeing this in Linux. Still, the fact that they seem to be stealing RHEL rather than adopting Ubuntu or another "community-led" Linux distribution suggests that we're seeing enterprise IT attempt to cheat vendors rather than do without them.
All of which may mean that the world increasingly recognizes that Linux is a superior server operating system...and doesn't want to pay for it.
How comforting...and alarming. It's not as if Linux development costs nothing. Red Hat pays over $100 million each year to develop Linux, and it's not the only company making such hefty investments.
UPDATE @ 11:03 PT: For the reading-impaired: When I talk about "stealing RHEL" I'm in no way referring to CentOS or Fedora, as my post clearly states. I'm talking about using RHEL without paying for it. Not CentOS. Not Fedora. RHEL. Red Hat has a fair number of companies that actively underpay on RHEL: that is, companies use more RHEL than they are legally allowed to use as per their contract with Red Hat.
So, please read the post, and don't get worked up by the word "steal" and "CentOS" in the same post. I'm not referring to CentOS or other legitimate uses of Linux. I'm talking about theft of RHEL (which is what IDC is talking about, too. Maybe you should buy the report and read it before commenting so that we can have an informed discussion.
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For years, the analyst community has largely ignored open source or, worse, has actively advised against it. While there are exceptions--Forrester, The 451 Group, Redmonk--the general mood in the analyst community seems to be one of steadfast denial of open-source's impact on computing.
Ignoring open source is a bit like denying gravity, however, and even open-source agnostics like IDC and Gartner are now stating the obvious:
Open source is having a massive impact on enterprise computing, and it's becoming big business.
IDC, for example, significantly revised upward its estimate of the market size for open-source solutions, now projecting a 22.4 percent compound annual growth rate (CAGR) to hit $8.1 billion by 2013. The firm suggests that the revision is due to the surprising growth of open source through the economic downturn. It's unclear why this should have been a surprise, especially given that it was already calling out Linux as a big winner in the recession but...we'll take it.
Gartner, for its part, started warming up to open source in 2008 when its conversations with chief information officers revealed 85 percent enterprise penetration. In 2007 the closest it came to recognizing open source's impact was to suggest that open-source solutions would cannibalize proprietary software products.
But now it has done the unthinkable: it has actually included an open-source vendor (GroundWork) in its Magic Quadrant, and in a positive way.
Gartner Magic Quadrant for IT Event Correlation and Analysis
(Credit: Gartner)Granted, Gartner has included open source before (e.g., Liferay has featured in two Magic Quadrants), but it has also ignored obvious candidates, as it did in the business intelligence market.
This is positive movement from Gartner and reflects a new pragmatism. I consider Forrester a leading indicator--at least, among the big analyst firms--of where technology is going, and its open-source predictions bear this out. Gartner and IDC tend to be lagging indicators of technology adoption.
The good news? For open source, leading and lagging indicators now say the same thing: "Open source is having a major impact on computing and will continue to shake up the industry."
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Open source has become big business, suggests an article in the Investors Business Daily, but it has done so by becoming more like the proprietary-software world it purports to leave behind.
The article cites recent research from IDC indicating that CIOs allocated up to 24 percent of their budgets to open-source software in 2008, up from 10 percent in 2007--a finding that jibes with recent data from Forrester. This open-source growth is propelling Red Hat to grow "at two to three times the rate of the broader software industry over a multiyear horizon," according to research from Piper Jaffray.
Red Hat is an example of "free done right," following analysis from TechDirt. We've moved beyond the business models that insist that every line of software be open source: they couldn't scale and tended to treat openness as an end in and of itself, rather than as a means to an end.
Today, if you look at the most successful open-source businesses, none of them pass the ideologues' unrealistic and counterproductive "100-percent freedom" litmus test. Not a single one of them.
And that's OK. Google does a tremendous amount of good in the open-source world, yet took a beating last week for not being open source "enough" on the Open Source Initiative's osi-discuss mailing list. Google's open-source program manager, Chris DiBona, responded:
Yes, I can see how people would think that Android and Chrome aren't 'real' open source. *rolls eyes* Damn foolish assertion, if you ask me.
DiBona is right to refuse to be goaded into a walk down an inaccurate and ill-conceived open-source memory lane. That "give-away-the-software-and-sell-support" model was always doomed to scale poorly and consign its adherents to minimal relevance to the wider software market.
Fortunately, the software industry has been embracing a broader definition for "open-source business" that includes many different ways to contribute to and profit from this interesting development and distribution model.
Those who persist in trying to shove the genie back into a crippled container are doomed to fail.
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Most vendors are already preparing for a tough Christmas.
Those selling Linux-based solutions, however, can expect to spread plenty of holiday cheer, according to a new report from IDC, "The Opportunity for Linux in a New Economy." (PDF)
Even as Red Hat recently talked up its impressive quarterly results, it's important to recognize that not all of Linux's success can be seen in corporate financial results. Much of the benefits of Linux comes from unpaid deployments, which continue to account for a healthy margin of total deployments:
Of course, as noted, there remains plenty of revenue growth in Linux, as IDC notes, though most of it is still not coming at Microsoft's expense:
- Linux is set to outpace the larger market, with customer spending on Linux expected to grow year over year by 21 percent in 2009. The larger software market, meanwhile, will struggle to deliver 2 percent growth in 2009. And from 2008 to 2013, the Linux market is set to grow $12.3 billion to $35.5 billion, representing a 23.6 percent compound annual growth rate.
- Even so, it is important to note that the size of Linux versus, for example, Windows, is telling: the Microsoft software ecosystem was $149 billion in 2008. IDC rightly points out that "even with a sub-10 percent growth rate through 2013, (the Microsoft ecosystem) will add $56 billion in spending.
- Virtualization is expected to be a big driver of Linux. While cloud computing is also expected to drive Linux and open-source adoption, the real money is coming from increases in Linux adoption--from 13 percent to 18.6 percent--for more traditional workloads like ERP, database, etc. Most of this growth in traditional workloads is coming at Unix's expense.
- IDC finds that 53 percent of enterprises it has surveyed are planning to increase adoption of Linux on the server and 48 percent expect to increase adoption of Linux on the client (desktop, laptop, etc.) "as a direct result of the economic climate."
- Perhaps not surprisingly, while Microsoft has been attempting to make Windows an inviting platform for open-source vendors, IDC expects no movement from Microsoft to make its software available on Linux. This is war, and Microsoft for all its talk about interoperability, apparently sees interoperability as a one-way street on which other vendors interoperate with it, on its terms, to its advantage.
All of which bodes well for Linux, but suggests that longer term, Linux vendors are going to have to start stepping on Microsoft's toes to grow, as Linux growth is starting to slow. The way forward may be to complement Linux offerings with other open-source solutions:
The good news is that the more CIOs buy into Linux, the more they tend to invest in other open-source technology, as well. So Red Hat, Novell, and Canonical have ready-made buyers if they choose to extend beyond core Linux. (Red Hat, of course, also offers JBoss middleware, and Novell has a range of other products, but neither of them has taken the steps to build a full open-source ecosystem.)
It's a good time to be in Linux, as IDC's data suggest. But there's room to improve.
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Linux long ago became the "furniture" of open source: essential infrastructure to most of the Fortune 500 and somewhat mundane in its predictable, ever-increasing adoption.
Despite its impressive rise, however, Linux still has a long, long way to go. While results of an IDC survey published this week found that 55 percent of the 300 IT executives surveyed already had Linux systems in use, a full 97 percent were running Windows.
IDC: Linux adoption in a global recession
Linux, in other words, still has a long way to go to reach full adoption and, importantly, the vendors that sell it have even further to go to effectively monetize its popularity.
Novell, which commissioned the IDC survey, stands to benefit, as do Red Hat and Canonical (Ubuntu). Indeed, unless the vendors royally screw up, each should benefit handsomely, as the planned adoption of Linux is significant, as IDC found:
- More than 72 percent of those surveyed are either actively evaluating or have already decided to increase their adoption of Linux on the server in 2009, with more than 68 percent making the same claim for the desktop;
- More than 40 percent of respondents say they plan to deploy additional workloads on Linux over the next 12 to 24 months, and 49 percent indicated that Linux will be their primary server platform within five years;
- Perhaps because of the desire to go "all Linux," only 22 percent of those surveyed identify "Interoperability" as a top-three consideration when choosing a server operating system. This could also help explain why Novell's partnership with Microsoft may be stalling, as ChannelWeb recently wrote.
Interoperability is important, but it pales in importance when compared to performance and cost for most CIOs. When asked which factors would accelerate new deployments of Linux, only 24 percent cited greater interoperability with Windows;
- Surprisingly, nearly 50 percent expect to accelerate adoption of Linux on the desktop, especially for basic office functions, technical workstation users, and higher education/K-12. Along with ZDNet's Dana Blankenhorn, this is one that I'll believe when i see it;
- Nearly 50 percent stated that virtualization is accelerating their adoption of Linux. Eighty-eight percent of recipients plan to evaluate, deploy, or increase their use of virtualization software within Linux operating systems over the next 12 to 24 months.
While much of this Linux adoption will come at the expense of incumbent Unix vendors, I would suspect that an increasing percentage will cut into Windows, particularly in the server market but also for specialized desktop applications, like in the retail sector (63 percent of respondents in retail are looking to accelerate their Linux adoption).
Regardless of the market, however, Linux stands to gain. But for Novell, Red Hat, and Canonical, I would argue that their biggest competitor, at least in the short term, isn't Microsoft or any of the Unix vendors. No, their biggest competitor is unpaid Linux adoption.
For Red Hat, CentOS is likely its biggest competitor. For Novell, after Red Hat, I would imagine that Ubuntu is its biggest hurdle to monetizing Linux adoption. And for Canonical/Ubuntu? It is its own biggest enemy, when it comes to turning downloads into dollars, because it does such an effective job of encouraging downloads.
Regardless, these are good problems to have in a recessed economy. I wouldn't want to be selling proprietary, expensive Unix right now. Microsoft Windows offers a compelling value proposition in a fiscally prudent environment, but for those chief information officers interested in performance, Linux is going to win more competitive bids against Windows than it loses.
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According to a recent IDC report highlighted by ZDNet, Linux is booming. At just 9.4 percent of the overall server market in terms of revenue in 2007, Linux has now climbed to 13.4 percent of the overall server market, with Unix at 7.7 percent and Windows at 36.5 percent. If Linux server vendors want to continue to grow, at some point they're going to have to come to grips with Windows, rather than eating into the low-hanging Unix fruit.
The big winner in the quarter was IBM, with 33.2 percent of the market. Hewlett-Packard is not far behind, but is moving the wrong way on market share:
(Credit:
IDC)
Despite the healthy 6.4 percent growth in the overall server market, however, IDC suggests a softening in the server market, as The Wall Street Journal points out:
...(T)he growth came, in part, because manufacturers cut prices on popular product lines. That worries IDC because cutting prices is how companies typically react when faced with softening demand. With economic conditions showing few signs of improvement, price cuts "are a concern, as they may foreshadow a slowdown in market demand," said Matt Eastwood, an IDC group vice president.
Perhaps this softening is one reason that while Linux server growth topped 10 percent, Unix only grew 7.7 percent and Windows struggled to achieve 1.7 percent growth. I actually would have expected a stronger showing from Windows but then, HP, IBM, and Dell all have a vested interest in getting out of Redmond's shadow. Linux points the way to greater independence.
It will be instructive to see if Linux server growth will continue to outpace the rest of the market and, in particular, Windows server growth. In a down economy, Linux may find its direction is up, up, and away. Red Hat and Novell will be the beneficiaries, and perhaps a bit more Ubuntu?.
Forrester just released a new survey, one that begs the question: Who paid for this rubbish?
I generally like Forrester's work, but this survey flies in the face of every piece of research on open source that I've seen in the last five years...including research from Forrester. Also, as the research itself finds, often its survey respondents are using open source even when they don't know it: Nearly half of those surveyed by Forrester who are using open-source frameworks (e.g., Spring) still claim they are not using open source.
Forrester's newest research finds:
- Seventy percent of decision-makers responded that they don't have interest or have no plans to adopt open-source software;
- Only 23 percent of respondents said expanding their use of open-source software was a priority;
- Security is the main concern around adopting open-source software. Eighty-eight percent of respondents said it was an important or very important concern.
Amazing how open source's greatest strengths are now being used against it. Security? I'm not suggesting that open source is perfect here, but it's one of the primary reasons that people are dumping proprietary software for open source. This is a classic Microsoft spin, and directly contradicts Forrester's own, earlier research that open source offers security advantages, not disadvantages.
Fortunately, if CIOs care to spend even a nanosecond checking Forrester's claims about tepid adoption of open source, there is a wide array of contradictory evidence, including from Forrester:
- Earlier this year, Gartner's Mark Driver noted the following: "By 2012, 80 percent or more of all commercial software will include elements of open-source technology."
... Read more
Sometimes our beloved analysts get things dead-on...and sometimes their predictions as to where IT trends will take us are very, very off.
In an excellent article, ZDNet traces the non-demise of Windows and UNIX that analysts predicted, the continued dominance of Microsoft on the desktop (which was supposed to have been supplanted by open-source alternatives by now), and generally blisters our inability to predict the future with regard to open source. It's everywhere, yes, but without the expected dominance that was to come with ominpresence.
One thing it has brought us, however, and that is a significant shift in how all companies engage open source:
...[Apache, Firefox, and Samba] are token victories that mainly offer new options for home users and small businesses. No other open-source application has enjoyed anywhere near the massive commercial success of Linux through its creation of an entire services and support ecosystem.
Instead, they have served as game-changers - motivators to encourage for-profit vendors like IBM and Microsoft to up their game and offer extra value in their respective products.
... Read more
We are or shortly will be in a recession. While perhaps not cause to celebrate, it's also not cause for alarm as the best companies will emerge all the stronger for the experience.
Good open-source companies will be primary beneficiaries of a downturn, as Stephen Elliot of IDC points out with regard to open-source system management vendors like GroundWork:
With economic uncertainty building on IT organizations, we are seeing enterprise IT organizations tightening their belts when it comes to IT budgets and initiatives. As open source management solutions continue to mature and increase their functionality, they will see more opportunities on the enterprise scale.
I single out GroundWork because I had the opportunity to talk with Dave Lilly, CEO of GroundWork, in advance of next week's Open Source Business Conference 2008 (March 25-26, San Francisco), and got the inside scoop on how the company is doing. GroundWork exemplifies the "unfair advantage" that open-source vendors have when IT buyers actually need the software to work at a reasonable price.
... Read moreIDC is reporting that Windows server growth hit 6.9 percent in Q4 2007, bringing it to 36.6 percent market share. Linux trounced Windows' growth at 11.6 percent to hit 12.7 percent market share. Microsoft owns the market, but Linux owns the future.
Therein lies the rub of the tale behind much of Microsoft's fear and loathing of open source.
As Jim Zemlin suggests, developers want to write software to a winning platform. Microsoft's Windows has long been an easy choice, but with the rampant growth of Linux, Linux is becoming an easy choice for developers, too. Given Steve Ballmer's sweaty passion for developers, this has got to be causing consternation in Redmond.
So what does Microsoft do about it?
... Read more
