Linux options took on a more costly, corporate look

The two leading sources of Linux distributions made sweeping changes in their business plans in early November, when Red Hat announced it was pulling out of the low-cost Linux distribution business and SUSE Linux got purchased by Novell. Red Hat wants to move customers by Dec. 31 who use the 7.x and 8.x distributions of Linux — an environment being considered by 3000 shops as an MPE alternative — over to Red Hat Enterprise Linux, software with higher costs in annual subscription fees and more corporate-looking support options. Version 9.0 Red Hat Linux users will lose their Red Hat support options by April of next year, too. Novell bought SUSE, the European-based distribution builder, for $210 million to get into the Linux market in a much bigger way.

The moves took steps to bring Linux into the mainstream of computer software revenue producers. Former 3000 NewsWire columnist Shawn Gordon, who after writing and selling several HP 3000 tools founded his Linux application firm the Kompany in 1999, said the RedHat changes were expected by the Linux community. But the Novell purchase of SUSE, and Novell’s prior acquisition of Linux developer Ximian, surprised him.

“When Red Hat IPO’d they ceded the desktop in their roadshow, but never quite got out of it and then came back to it,” he said. “But these ‘at retail’ boxes are for the most part a loss leader — the manufacturing costs alone on these are $10 to $20 a unit, and then they give up 50-60 percent in the channel, and the unit is selling for $40 to $80. As to 3000 customers, the RedHat move simply means they would spend more for the RedHat Enterprise Edition. If they are serious about porting, they should be going with something that is more tested and hardened, but in terms of a migration cost, you are still not looking at much money.”

Gordon said “the Novell move makes sense for Novell, but I’m rather surprised they went with SUSE, since the German government owns about 30 percent of SUSE. There is a very high stakes game being played. Part of this move is certainly meant to help crush SCO, but I think a bigger picture is to try and start to seriously hurt Microsoft. Novell tried in the past when they bought Unix and DR DOS, and never pulled it off, but Linux is something else. What really doesn’t make sense in this whole equation is why Novell bought Ximian a couple months ago. The only possible reason is for Ximian’s open source alternative to .NET called MONO — but once that is sufficiently advanced, I imagine that Microsoft will shut it down.”