February 21, 2001

Eric S. Raymond speaks about VA's layoffs

Author: JT Smith

- an open letter from Eric S. Raymond -
It hit the papers today that VA Linux Systems [disclosure: VA Linux owns NewsForge - ed.] is going to have to cut
25% of its staff. The press release, as usual, was bland and neutral,
emphasizing our healthy revenue growth and our bright prospects -- the
kind of corporate-speak everybody expects, and that VA has to
generate. It's part of the game.It's no secret that I'm on VA's Board of Directors. I was at the board
meeting where the five-odd people who have the responsibility to advise
Larry Augustin told him what he had to do. I was part of that decision,
and it was not an easy one.

I'm not speaking for VA now (I basically never try to do that anyway; it's
not my job). I'm speaking for myself. It was a weird, wrenching feeling
to wander around VA headquarters that afternoon, talking with good friends
of mine, knowing in a few cases that they were likely to be canned through
no special fault of their own.

What VA is going through now is a sort of ritual bloodletting. The logic
of the market is pitiless; when you don't make your numbers, the investors
want to be appeased by evidence that you're doing things to raise your
profitability. That means making more dollars per employee, and the
fastest way to get there, the way investors effectively *demand* that
you get there, is by laying off your least dollar-yielding employees.

Otherwise, you get what is politely called "loss of investor
confidence". Companies go on life support when that happens -- they
can't get capital by selling shares, and that has ripple effects -- it
tends to make potential customers bolt. When the customers bolt, the
company runs out of money and die. Or it gets acquired, either by a
large competitor or (worse) by a slice-n-dice artist who will sell off
the assets and shitcan the company.

I went along with the 25% cuts because I understood the possible
alternative: no company. And no employees. And no possibility that
my friends will ever be able to come back to work for a company they
still love and care about.

I think VA's problems are solvable ones. The company got rocked by
the popping of the dot.com bubble and the economic downturn we're in.
But we know what we have to do to deal with that. In order to avoid
making what the SEC calls "forward-looking statements" I'm not going
to talk about our strategy or future prospects here; you can go ask
VA's corporate-communications folks about that.

But the real reason I'm writing this little broadside is larger than
VA; it's about the state of the open-source community, and the things
we need to keep in mind when times get hard.

VA, along with Red Hat, is one of the two bellwethers of the
open-source business community. Some people are going to freak out
and think this setback is a harbinger of doom, that it means our
community's game is over. Some people, especially at certain
monopolistic closed-source competitors I don't need to name, know
better -- that troubles like VA's are pretty common in a market
downturn -- but they'll use it as ammunition in a FUD campaign anyhow.
Expect to see Steve Ballmer and Jim Alchin quietly gloating at any
trade-press reporter they can collar. Brace for it.

And, as it says in large friendly letters on the back of the
Hitchhiker's Guide, DON'T PANIC! What we're seeing now is entirely
normal. It's the long, dizzy boom time that has just ended, all
smiles and champagne and venture capital sloshing around looking
for business plans, that has been exceptional. Business cycles
happen, there are layoffs and retrenchments all over the economy --
and this, too, shall pass. Things will get better.

There is actually one good thing for us about economic slumps. During
them, IT departments and software users in general feel pressure to
cut costs. That makes low-cost and free software more attractive.
Over the next few months you can expect to see a lot of submarine
Linux deployments suddenly surfacing as managers realize that they'll
look *good* on their quarterlies if they cut their licensing and
service costs, and as the techies working for them get that message
and fess up to how many NT boxes they've been replacing by stealth.

So the downturn isn't all bad news for us, by any means. We just need
to keep doing what we're doing, the best work we can. And when the
economy picks up again, we will have gained by it.

Back at IPO time I wrote an essay called "Surprised By Wealth" in
which I tried to deal with how weird it felt to have a theoretical net
worth of $41 million. Am I upset that all that "wealth" is gone, at
least until the stock bounces back? Well...yes and no. As a member
of VA's Board, it's my job to worry about our stock price, on behalf
of all of our stockholders. So I care about that.

But personally? Nah. I wasn't in this for the bucks then, and I'm
not now. Like most hackers, I do what I do for love and I thank the
gods that I can occasionally talk people into paying me money for it.
Feels almost like taking advantage of them sometimes, doesn't it?

All the corporate stuff is not, after all, the point -- the point is
to change the world, to do better software and give users more
choices. It's been a nice party, but some of us did get a little
distracted by all that easy money flowing around. If the slump does
nothing else but take our eyes off those dollar signs and put them
firmly back on the work, maybe it will have been the best thing for us
after all.

Eric S. Raymond

It will be of little avail to the people, that the laws are made by
men of their own choice, if the laws be so voluminous that they cannot
be read, or so incoherent that they cannot be understood; if they be
repealed or revised before they are promulgated, or undergo such
incessant changes that no man, who knows what the law is to-day, can
guess what it will be to-morrow. Law is defined to be a rule of
action; but how can that be a rule, which is little known, and less

-- James Madison, Federalist Papers 62

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