The Linux Business Model

[anacron]

I was just speculating on the future of Linux, and thinking about the different business models out there. (The problem being: How do you sell something that is available at no charge?)

 

Some are focusing on support & training, some are focusing on hardware bundling, and some (Mandrake comes to mind) are depending on the Linux community to keep them going.

 

It occurred to me that if there were Linux OEMs on the shelf at major PC resellers, and if the machines were priced lower than the Windows PCs, Linux with its recent ease of use upgrades, would start really making a dent. I then went so far as to think, "What if a low end PC manufacturer, say Emachines, purchased Mandrakesoft, and then began putting their PCs on the shelf with Mandrake OEM? Hmmm. The PCs would be a bargain, they would appeal to younger, more adventuresome shoppers and bargain hunters, and before too long, Linux would actually start to get some market share on the home desktop front. And, maybe more importantly, Emachines would see their profits increase due to Linux.

 

So, in the end, I guess I'm thinking that IBM & Sun are on the right track with their bundling of computers & Linux software. Now I'd just like to see that extended to the shelves of major PC retailers.

 

Thoughts?

Edited April 30, 2004 by anacron

[Darkelve]

Here's a thought, the logic behind it is very simple. It may be flawed, but then again it may be not.

 

With Linux, everyone can make more profit, except for Microsoft

 

While I agree this statement is overly generalized, I still think there is a large chunk of thruth to it.

 

Also, I think there might be opportunities with Linux to bundle certain hardware or software with it, or to use it as a specific-purpose (instead of generic purpose) machine. Or added value, like Linspire does with its Lsongs application bundled, from which you later on will probably be able to buy music. Of which a certain percentage goes back to Lindows...

 

I don't think it is so difficult to make a profit from something that is free. True, you cannot just take it like canned food and then try to sell it as a complete product. I think it is sometimes more a case of marketeers being fixed in a particular mindset they have. E.g. "if it is free, it cannot be good" or similar FUD.

 

Having all source code and packages readily available gives a lot of room for creativity. I think it is that creativity business people find hard to handle, since in their business, everything is done 'by the book' and the book is always right.

Edited April 30, 2004 by Darkelve

[gmac]

"Having all source code and packages readily available gives a lot of room for creativity. I think it is that creativity business people find hard to handle, since in their business, everything is done 'by the book' and the book is always right."

 

I think you miss a fundamental point there. Unless the business you are talking about is computing then what matters is what the computer does for them not how it does it. Most will stick with windows because it is familiar and its cheaper to train staff becauise so many companies offer courses on excel etc. things like star office are every bit as good but unfamiliar enough to be offputting. If you are putting in a system for a company whether it is windows or linux won't matter so long as the end user can use it without too much retraining. Actually its a mistake to think companies actually train their staff properly, especially small business. Don't talk about linux talk about wehat they want to do.

 

I'm self employed, I started mucking about with linux for reasons I won't bore you with. Right now I am at hiatis with experimenting, firstly because I'm skint otherwise I think I would buy the components and have a go at building my own box. But also because it is a distraction form my main business so realistically I am quite likely to pick up a phone and ask one of my clients to do it for me. Tell him what I want what I need to be able to do and let him get on with it.(he's al;so the one that handed me a mandrake cd rom) This is a tool I am using not really something I spend hours playing with-except I enjoy this forum so skive off to look at it.

 

I don't know how mandrake make money but marketed properly they could probably do quite well.

[Ixthusdan]

Ok, a business plan.

 

The areas that generate capital are software, hardware, deployment, tech labor, and training of that labor, as well as training users. The only area that is a major difference for linux is software. Every other area is still left pretty much unchanged. Linux should be marketed cheap. Even though it is free, people will pay a reasonable price for convenience. Where Microbubbles wants $200 for an os, linux should stick to under $100, like $69. Training is still a premium, as is technical ability. The real advantage in linux is that people make a difference in its use. A linux techie can manage it for several small companies. With microstuff, all you need is someone to call the phone number, which anyone can do. (Oh, and pay the subscription fee!) With linux, the tech has to keep themselves up to date, and a good tech will be in high demand. That means more real jobs, and money going to salaries rather than that dubious "development" department at microgiggles. It seems to me that linux is better free enterprise than micronobules. B)

[iphitus]

It occurred to me that if there were Linux OEMs on the shelf at major PC resellers, and if the machines were priced lower than the Windows PCs, Linux with its recent ease of use upgrades, would start really making a dent.

Here in Australia, HP are offering Mandrake with their computers instead of windows. IBM and Acer also offer Linux

 

And Linux is already making a dent. More people use Linux than Apple now.

[anacron]

Can you buy them off the shelf at a retailer? Or do you have to know where to order them? That's a big difference, IMO. Only the computer saavy will hunt down a Linux box on the web, but a lot of people would buy it off the shelf (especially if it were priced right).

 

Once Linux is available OEM off the shelf, the tide will start to turn.

[Pzatch]

I can't see why linux can't be sold by anyone who wants to. To explain it a little further. If you think you can get a few clients to start using linux contact a few distro's and see what kind of reseller deal you could make. It's not like there are 1,000,000's of linux certified techs out there. I don't think they are going to be to picky about who resells their stuff. (As long as you don't have a bad Better Business Report)

I can see a lot of offices switching to linux. Ask your doctor what software they use and see if linux has an equivalent. The same with your local lawyers office. Many small schools are looking to save money.

All of these places will need a little retraining and hand holding. Basicly just showing them how to use OO, some few specialty apps and the new icons. Work that cost into the final price. Work in monthly security updates. The fact your local and available for a free phone call is a big advantage you have over the big guys.

If you get a someone who is curious big still unsure. Offer to switch one of their old computers over to linux as a working demo. Most small places still own their equipment and prefer it to leasing so there is probobly one sitting in the back some place. They are probably still running 98 for this same reason. Let linux sell itself. It will after the first few crashes of that other OS.

 

As for looking a little more pro when you do this. Its not hard to change the splash screens and backgrounds to reflect your companies name. Make it a small overlay in the corner of the origional splash screen and I don't think anyone from KDE, Gnome or Mandrake would mind much. Making new icons is easy. You can make all these changes and then rewrap it up into easy to install iso's.

 

If one new reseller starts up in every city linux will explode on the local business market. Buisiness owner frequent the same places and clubs and they do tell each other about things. They help each other out alot. Saving a few thousand a year in software leasing and service calls really impresses them. Small local companies also love to help other small local companies.

 

Selling linux is the one place being a computer geek is a real help.

[ral]

Well like all software companies Linux developers will need to make money from one of the (1) sale of software (so Linux cannot be free license forever), (2) sale of support or (3) sale of supporting services (like Lindows).

[Ixthusdan]

Well like all software companies Linux developers will need to make money from one of the  (1) sale of software (so Linux cannot be free license forever), (2) sale of support or (3) sale of supporting services (like Lindows).

Yes, but I think the sale of software has caused a reliance upon non-human elements in tech, which is actually odd. So, not as much money is made from thesoftware, and more from the training and services.

[Darkelve]

"Having all source code and packages readily available gives a lot of room for creativity. I think it is that creativity business people find hard to handle, since in their business, everything is done 'by the book' and the book is always right."

 

I think you miss a fundamental point there. Unless the business you are talking about is computing then what matters is what the computer does for them not how it does it.

Ok, bad example.

 

being able to access source code is an empowering factor, of course it is NOT a goal just by itself.

 

Just what I am saying is that there are a lot of ways to make a decent business model. Only people have to connect the dots to get the full picture. I know it's hard to see something tangible in all those dots, or even people don't even see the dots.

 

Don't know if I'm coming through here... Let me try an example.

 

- You have things Windows can do (well) and Linux cannot

- You have things Linux can do (well) and Windows cannot

- You have things they both can do (well or not)

- You have things they both can't do (e.g. I think real-time systems are often cited as examples)

 

There is need, there is demand, there is opportunity.

 

Need

Say you are a marketing company who has a client that wants you to develop a kind of 'spy' game, where you have to find clues and do stuff to 'find the treasure'.

 

Now you know about this Linux stuff and it has just what you need. You make a LiveCD tailored to the needs of the 'game' and accompany it with a USB memory card (with encrypted filesystem, or not). You only put the programs on there they need to play the game and solve different riddles. Say something similar to UpLink.

 

Now they can take it in the "real world" and be mobile with it between different "targets". Heck, there can even be scripted or Live chat at key points in the game. I think it would not even be to hard to code it so they can only chat with certain persons/on certain conditions.

 

Now as a marketing company, I may not have programmers in-house. But nothing prevents me to contact a FLOSS hacker and have him write it for a very competitive price.

 

Demand

You haven't got a client (yet), but you know there are a lot of clients who would be interested in such a concept

 

Opportunity

You realize the demand and decide this is appealing enough to start writing already even though you don't have a client yet, because the idea is so sellable and because the price of development is not very high.

 

Is it original? Depends. A LiveCD with a USB disk by itself is not really original. The whole concept which is built around it, is probably already a bit more original. The combination of the two can be called creative, I guess. Connect the dots.

 

It doesn't matter it IS Linux, it matters what you can do with it. Which is a lot. Which is why I don't see why people shouldn't be able to make money out of it.

[zero0w]

There is business who should work on customization now that you have the source and a set of management tools (albeit still configuring text files).

 

For example, if you deploy Linux on Desktop in libraries or internet cafe, you should customize, say if you set it up as KDE, that users are not allowed to use console (so those Ctrl-T shortcut in Konqueror should be disabled); Or that he is only limited to browse the /home/username directory. If you have seen those customized IE (probably by Microsoft Technical support team), you cannot get new instance (by Ctrl-N) in IE as it is disabled, and in this way you can ensure cafe customers only do what you allow them without messing up the system.

 

These are just examples, and perhaps you may not agree with such policy, but the point remains there is a lot of customization to be done for different sets of environments. Customers want things that work at an acceptable price. Pushing fancy and bloated features is probably for home users, but in many working environment users do not really need that, or prefer not to have that.

 

There should also be new jobs for firms who have expertise in cross-platform development. No one is going to leave Windows market anytime soon. It is better, if possible, to manage the same codebase for two platforms (Windows and Linux). Bruce Perens is still using Quicken on Windows (the only application he needs on that platform), but to Quicken developers, maintaining two ports could be costly without revenue justification. If cross-platform toolkit and expertise is there, I see you can get a business from them (they are probably doing internal evaluation on Linux port right now).

 

If you really think about how Linux can meet customer requirement, I am quite sure you can find business somewhere. Now, there is still some problems to be solved in internalization, otherwise Linux is able to gain support in multi-national enterprise. It just need to meet their demands on getting the job done.

[arthur]

Well like all software companies Linux developers will need to make money from one of the (1) sale of software (so Linux cannot be free license forever), (2) sale of support or (3) sale of supporting services (like Lindows).

Could you elaborate on number 1 please?

 

Linux is not JUST "free as in beer" but "free as in freedom". That's what I like about it. My copy is actually mine. Normal software only gives you permission to use the software and not do anything else. It could be free in price, but only as a binary. But GPL'd software can be modified, improved, copied - anything you want. You can even sell it, but with the source. It's still "free" that way.

[anacron]

Well like all software companies Linux developers will need to make money from one of the  (1) sale of software (so Linux cannot be free license forever), (2) sale of support or (3) sale of supporting services (like Lindows).

Could you elaborate on number 1 please?

 

Linux is not JUST "free as in beer" but "free as in freedom". That's what I like about it. My copy is actually mine. Normal software only gives you permission to use the software and not do anything else. It could be free in price, but only as a binary. But GPL'd software can be modified, improved, copied - anything you want. You can even sell it, but with the source. It's still "free" that way.

You've given us some of the reasons why Linux users love Open Source. But ral's #1 reflected a problem facing companies that spend money developing Linux software, not the end users (or people that develop Linux software with no intention of ever making money from their work).

 

For those companies, Linux being free is problematic. How can you convince people to pay for something that they can always get for free? And if they won't pay for it (which is usually the case), how will the developing firm recoup their expenses, much less make a profit? And if they can't make developing Linux apps profitable, or even recoup their R & D expenses, why should they bother to develop at all?

[sitor]

With Linux, everyone can make more profit, except for Microsoft

 

Well, I do not agree with that one. There are dozens of companies that make profits in the slipstream of M$. They way I see it is that with Linux, anyone that can offer a real added value can make more profit, but not the ones that rely on monopoly. That means that the companies surfing the M$ monopoly wave (and there are a lot of those) will get into trouble (unless the pull themselves together). But on the other hand, M$ is a big company, with loads of money. So it would not wonder me that if one day revenues from Winbloze start to go down because the added value compared to Linux has become too small, they will make sure to find another way to offer added value. They are looking to other routes already (like MSN, X-box, etc.). Like the renounced the Internet at its beginning and then embraced it when their business plan become positive on it (when they were forced to?), they might in the future come to embrace Linux (and probably they will again try to suffocate it, but will fail again in it. One thing is for sure: they will not just stand at the side and watch!

 

Ciao,

 

Sitor

Edited May 4, 2004 by sitor

[Gowator]

Another way to look at this is like a traditional business.

 

Linux is the base, not the be all and end-all to a software development co.

 

You dont need linux to cost money to seel a product that runs on it any more than you need roads to cost money in order to sell a car to run on them. Sure in the UK we pay for the roads and we only have one supplier.

 

In France you dont pay for roads though you can if you want (some highways). The paid roads are better supported and in better conditions but no-one forces you to use them.

 

However the same car runs on both roads ....

 

Linux is like an infrastructure and the business model of companies doesnt need to bother except that an infrastructure is provided. Also you can buy breakdown insurance or not as you wish. Some models are actually sold with free insurance and some models are free but the insurance costs money etc.

 

This leaves scope for the roadside assistance firms... do you take a manufacturer warranty or the 3rd party bells and whistles 24hr call out.

 

Most winBlows wave surfers are competing with MS as well as riding the wave. Everytime MS see good technology they rip it off .. (the list is long but stacker/qdos/windows itself) therefore MS cannot be trusted as a business partner. Theyhasve a proven track record of ripping off partners ...

 

Who are their 'partners' ?

Well

1) the PC suppliers ... who are bullied and dont like MS

2) Adobe , Macromedia etc. who MS tends to have a record of shi$$ing on like it diod with wordperfect, lotus etc.

3) Symantec/Norton ... (see stacker)

4) ???

 

It also has competitors

Sun (now passing the vaseline)

Oracle (now taking back the jar)

IBM ... never did ...

 

And it has customers....

Home users...

Small Office

Corporations.....

 

and opportunists... AMD,INTEL etc. 3COM.

 

MS survives by stopping the customers talking to its partners and by threatening its partners.

Slowly the 'partners' realise they will be screwed long term and are looking for alternatives and the 'customers' especially big co's are already being screwed over...

So what is left is the big co's to go to the competitors and ask for non Windows machines and let the big customers demand of the opportunists the support.