LinuxWorld Reveals Maturing Market, Lagging Channel

As proof that Linux can meet all of the needs of the data center, top executives pointed to several products introduced at the show, including Novell SuSe's distribution of the first commercial Linux 2.6 server, Red Hat's J2EE-compatible application server and high-end, multiway Linux servers from Unisys and IBM.

And that includes the desktop. At the show, Hewlett-Packard announced the first preloaded Linux laptop to be supported by a major vendor--the NX5000 running SuSe Linux 9.1.

"Linux is not a boy, not a child. It's grown into an environment that can run any part of the data center," said HP's vice president of Linux, Martin Fink. "It's a stage of maturing, and we've reached a state of young adulthood."

Linus Torvalds made Linux available in 1991 with no strings attached. By 2004, the Linux server market had hit $4 billion, and is projected to reach $9.7 billion by 2008, according to IDC. The Linux desktop market still remains in its infancy, although IDC projects that Linux will run on 25 million desktops by 2007.

"It's now an IT ecosystem," Fink said. "This is where the future investments are going and if you don't participate, you'll be left behind."

Tell that to the channel. While vendors and some open source consulting firms are reaping revenue on services and support contracts, channel partners aren't taking a big part. HP's NX5000, for instance, will only be sold direct and Red Hat has yet to launch a viable channel program.

One analyst said he believes in the viability of a Linux channel, but acknowledged that the channel's maturity lags far behind that of the market.

"At the end of the game, the business decisions made by a systems integrator are going to be the same for an open-source product as for any other product," said IDC analyst Steven Graham. "But the services market around open source is still tentative."

Red Hat, the leading Linux vendor, still hasn't launched its channel program and isn't expected to any time soon. At LinuxWorld Expo, Red Hat channel chief Mike Evans said Red Hat plans to team with IBM and HP partners, and add more specialized Linux VARs and ISVs to its portfolio. As an example, HP's current reseller partners will have exclusive access to the same Red Hat knowledge base used by Red Hat's support staff.

Evans said Red Hat is not aiming to become a huge consulting company, adding that its total annual revenue remains less than the consulting practice of Novell, its chief rival in the Linux software market.

Even as Novell preps its sizable channel army to sell Linux, Evans claims that Novell--like IBM Global Services--intends to grab a fair share of the services revenues. Nevertheless, Novell and IBM do offer Linux channel programs. At the show each offered more incentives to pump up channel business.

Novell, for instance, launched special ISV incentives along with porting and migration resources to help move applications running on Windows, Unix and other Linux distributions to Novell SuSe Linux. Separately, IBM extended until Dec. 31, 2004 its Double Discount program for partners selling Linux into the small- and midsize- business market.

A few industry execs maintain the channel is slowly, if quietly, growing and will mature as more applications move into corporate use. HP's Fink, for example, said emerging vertical applications will stir up business. He cited Versaterm as an example, which offers a Linux-based record management and dispatch system for law enforcement agencies.

Last month, PeopleSoft launched the first version of Enterprise One (formerly J.D. Edwards OneWorld) on Linux, which is moving briskly through its reseller channel, claimed Michael Seymour, senior product marketing manager for tools and technologies at PeopleSoft.

"We're seeing a tremendous amount of demand in the distributor channel for Linux," said Seymour, noting he expects a channel to grow up around Linux as it has for other products. "Partners are focused on delivering a complete solution, and the [operating system], applications and database is not a complete solution. Linux partners will play a role in putting that solution together."

PeopleSoft currently has about half a dozen U.S. resellers of its one-time J.D. Edwards software.

During his keynote on Tuesday, Red Hat CEO Matthew Szulik said more than 1,000 commercial applications now run on Linux. According to Szulik, the challenge now to grow into global markets such as India, China and the Asia Pacific. "The real challenge for the U.S. and for Red Hat is to make the pie bigger," he said.

Whether globalization will translate into more channel dollars remains unclear. At LinuxWorld Expo, the general director of National Informatics Centre, India's IT consulting firm for the Indian government, claims there will be plenty of room for all service partners.

"There is an IT market and anyone can participate," said Dr. N. Vijayaditya, director general of the New Delhi firm. He said the Indian government runs a mix of Windows and Linux applications.