Open Source: The Price of Freedom

 
 
By Brian P. Watson  |  Posted 2007-05-14
 
 
 

Open source thrives on technology managers' penchant for avoidance—that is, their desire to dodge software licensing fees and vendor lock-in. Until recently, only two companies had truly commercialized the software by providing enterprise-class support. But now some of the biggest names in technology are looking for a piece of the action, betting that vendor lock-in isn't as much of a draw as it might seem. Will Red Hat and Novell continue their dominance in the open-source operating system arena? Or will support providers like Hewlett-Packard and Oracle wrench market share from the longstanding leaders?

Story Guide:

Lead Story: The Price of Freedom
Call it the democratization of software. But in this contest, open-source operating systems come down to two leading candidates with similar platforms.

Vendor Profiles

Companies looking to escape the shackles of proprietary operating systems often share the same motivations. Why break the chains? Customers point to two driving factors: cutting license costs and avoiding vendor lock-in.

Instead of using proprietary, closed-source platforms, organizations can move to open-source operating systems. Open source refers to software whose underlying code is available to anyone, free of charge. Thousands of contributors most notably Linus Torvalds chipped in to create the Linux kernel, the core of the Unix-like operating system, in 1991.

Since then, organizations large and small have made Linux their platform of choice. And vendors have been reaping more and more revenue in recent years: in a February 2007 report, Gartner Dataquest found that the compound annual growth rate of open-source software (43%) between 2006 and 2011 will more than quintuple that of proprietary software (8%). The firm projects open-source software sales to reach $4.23 billion in 2007, swelling to $13.10 billion in 2010.

So, who benefits from this growing shift? To date, two organizations have truly commercialized open-source platforms: Red Hat, which released its first enterprise product in 2002; and Novell, which acquired the popular SUSE Linux distribution in January 2004. More than 90% of the open-source deployments in enterprises involve one of those two companies, industry analysts say.

During the dot-com bust, outdoor gear retailer Backcountry.com shied away from proprietary products with closed code, according to chieftechnology officer Dave Jenkins.

In that turbulent business environment, Backcountry.com didn't want to spend thousands of dollars for software from a vendor that could go under the next day. "Whatever we go with, we need to have the code," Jenkins says.

Before joining Backcountry in April 2005, Jenkins was the consultant for Red Hat, the leading enterprise Linux vendor, who helped his new employer migrate to Linux. Backcountry currently runs Red Hat Enterprise Linux 5 on 60 to 70 servers, depending on the season.

Jenkins says his company saves between $2 million and $3 million a year by avoiding the license fees for a proprietary platform like Microsoft Windows. With those savings, Jenkins says his team questions whether or not they should invest in some closed-source products. "So, should we start cutting checks? Invariably, I come back to saying no," Jenkins explains. "With the cash we have on hand, would we rather go back to our gear vendors to buy more goods to sell online? Yes."

Next page: Cost Concern

Cost Concern

But Harry Roberts, chief information officer for Boscov's, has a different view of open-source pricing.

Since 2001, Boscov's, the $1.5 billion chain of 50 department stores based in Reading, Pa., has been running Novell's SUSE Enterprise Linux on IBM zSeries mainframes. Since then, Roberts says he's looked at the offerings from both Novell and Red Hat and he doesn't like what he sees namely, the price.

Roberts understands that vendors like Novell and Red Hat need to make money off their product, and he also doesn't mind paying for consulting services or support, provided they bring value to his investment. But he contends that those vendors' licensing fees are high for an open-source or shareware product.

Red Hat's Enterprise Linux 5 server ranges from $349 a year for two processors, which includes a year of Web support, to $2,499 a year for its advanced platform (designed for multi-system deployments), covering unlimited processors and a year of both phone and Web support, according to the company Web site.

Novell charges from $349 per server for one year, including 30 days of standard support, to $3,748 for three years of unlimited phone and Web support, according to its Web site.

On the proprietary side, Microsoft, on the high end, charges more for licenses, without support. For $999, a customer gets five licenses of Microsoft's latest version, Server 2003 R2; for 25 licenses, the price tag hits $3,999, according to a sales representative.

The Sun Solaris 10 platform comes in cheaper, with support ranging from $240 for two processors to $1,980 for three or more processors, which includes 24/7 call support, according to Sun's Web site. The software itself is free.

Roberts and his team are putting in a new point-of-sale system across all of Boscov's 50 stores. They have 100 servers running SUSE Linux two per store and 2,500 devices on the open-source platform, though he expects that to go up to 4,100 in the next 18 months.

With the expansion, Roberts says his support costs will multiply many times over. And he says other companies should more closely scrutinize pricing plans before switching to open source. "It isn't fair to charge me 100 times the distribution cost because I've deployed it on 100 devices," Roberts says. "That's a software model, not a distribution model."

Secondary Sources

Still, support contracts aren't everything.

Six years ago, right after its founding, San Francisco-based Linden Lab, creator of the Second Life virtual world, opted for open-source software called Debian. Debian differs from Red Hat and SUSE in that it's still a community creation; no company has commercialized the platform with enterprise-level support.

That was barely a concern, says studio director Aaron Brashears. Linden planned to support the platform itself, and Brashears says it has had to go outside the community for patches only two or three times.

And it's a good thing, too, because Linden wouldn't have many other support options. Hewlett-Packard is the only major technology firm supporting Debian. Others, like IBM, which supports both Red Hat and SUSE, say they've made investments in supporting Linux while not offering their own distributions.

Late last year, though, Oracle took a step in that direction. In October 2006, the vendor released Unbreakable Linux, a close variation of Red Hat's Enterprise Linux, along with enterprise-class support at half the price Red Hat charged.

Stuart Maue, a St. Louis legal auditing firm, ran into a compatibility problem between its Windows 2003 Server and new Oracle data warehouse in early 2004. Chief information officer Brad Maue (son of the firm's founder and chief executive) called his longtime vendor, Oracle, whose customer support said the incompatibility wasn't fixable with Windows. But it was with Linux. That got his attention: Maue and his team switched over to Red Hat Enterprise Linux shortly thereafter.

But they switched to Oracle after it unveiled Unbreakable Linux for about half the $1,500 Stuart Maue paid Red Hat for support, according to Brad Maue. "Why not go with an Oracle-supported platform?" Maue says. "I would no longer be in a situation where one vendor would say, 'That's the other guy's problem.'"