May 11, 2004

Yankee Group report: Bad news, good news for Linux

Author: Mary E. Tyler

Late last month, Yankee Group analyst Laura DiDio provoked some pretty
harsh rhetoric on open source community sites with a report
on her organization's survey on the major operating systems currently used in businesses. While rabid Linux advocates might not be thrilled,
realists should be jumping for joy.

The highlights of the report as noted by the mainstream media look
a lot like lowlights for Linux. "Only" 11% of Windows shops surveyed
will completely change over to Linux servers -- a market segment where Linux already has a decent percentage of the installed base. That means real growth and inroads into the Windows base.

In addition, 35% of the companies surveyed said they were either
adding Linux desktops or replacing some of their Windows machines
with Linux. Though the companies planning no changes were in the
majority, it was a slim majority of less than 10 percentage

The study looked at more than 1,200 businesses of varying
sizes, from the 30- to 50-person small business to the 100,000+ seat
enterprises. That means that it is likely the study is statistically
significant -- assuming those businesses were chosen randomly. The
survey also wasn't commissioned (or paid for) by anyone, so the data
is untainted.

A few years ago, large enterprises weren't
considering Linux at all. The climate has changed. With the burst
dot-com bubble and ensuing recession, everyone is looking for ways to
cut costs and increase
productivity. "Many of the C-level executives are extremely risk-
averse [about] making a whole, total swap of the infrastructure from
Windows or Unix over to Linux," DiDio said in a teleconference last
week. "It doesn't mean they're not looking. They are. They are
basically saying, 'If we move to Linux, what does it buy us?'"

Small- and medium-sized companies, companies in places where there
is no existing infrastructure, like the Pacific Rim, and companies in
certain vertical markets are very likely to report significant
savings from a partial or total switch to Linux. The savings in
license fees is attractive to companies with a few to a few
hundred computers and to those that have no status quo to maintain.
One company reported in the survey, "Our Linux servers take 80% less
time to manage. They just work. No rebooting." Most of the
maintenance savings comes from Linux's not having to be rebooted
frequently and in the vast amount of time spent on Windows
patch management.

Now the bad news

While the big picture is rosy, but it's not all sunsets and
champagne. For the 40-some percent of companies that run the return
on investment (ROI) and total cost of
ownership (TCO) numbers, Linux does not always show savings.

Larger companies do save money in licensing fees, but find there
are other costs. Linux may
be free, but using Linux is not. Free licenses are a factor, but
not the whole picture for these companies.

Experienced, certified Linux
professionals are in short supply and cost 20-30% more than Windows
admins with comparable levels of experience. One company said, in the
essay portion of the survey, "We use Windows 2000 servers for our
data applications and Linux for our Internet gateway. It is solid,
reliable -- 100% -- but it is so expensive to get help for."

It could be argued that enterprises are asking the wrong
questions -- certifications may not be the issue in the largely
volunteer Linux community -- but as long as companies want certified
professionals, even the most knowledgeable, long-time Linux user will
not be hired without the paperwork.

Another issue for enterprises, and also for smaller vertical
markets like legal, health care, government, and military, is the lack
of someone to sue. These companies and governmental entities are
required by law to carry coverage, whether private or from a vendor,
for event-based and copyright-based threats. Like it or not, Windows
comes with the billions of Microsoft behind it. There is no doubt
whom to sue.

Indemnification will become an increasingly large issue as Linux
(and its various add-ons) matures as a commercial operating system.
Businesses believe that current offerings are either too expensive or
too restrictive. Third-party indemnification costs about 3% of the
face value of the policy. It could easily run into the millions for
very large firms or firms with unusually high exposure. Windows comes
with these indemnifications for the cost of the license and the
negotiation of a favorable Service Level Agreement. It doesn't take
long for that sort of thing to add up.

Other forms of indemnification from the large vendors aren't
cutting it in the enterprises. IBM will only indemnify untouched
source code, which means that in order to get coverage, a company must
trade off the largest single strength of Linux -- the ability to modify
the source. There are complaints about Novell's $1.5M cap being "not
enough" to cover a large enterprise's possible exposure.

Both of the big caveats -- personnel and indemnification -- can be
fixed. As Linux becomes more common, more professionals will become certified. Yankee Group forecasts say that within two years the cost of
hiring an experienced Linux administrator will come down to about the
price of a comparable Windows admin. As for the indemnification, with
feedback from customers, the big players and
the third-party providers may find the happy medium that will be
satisfactory for their small, medium, and enterprise clients alike.


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