The Downward Spiral Of Linuxcare?
starvo pointed us to a ZD Net story about the recent trouble at LinuxCare. It's got a fair amount of details about all the problems that led to both the CEO & CIO jumping. Linuxcare has been pretty mysterious about the whole thing, so it's nice to finally get some meat to chew on... the article is relatively fair.
Less support != no support. Going back to the oft-used "would you buy a car with the hood welded-shut?" analogy, of course a dealer who has monopoly control over servicing a car will make more money than a garage mechanic when anyone who is able to is allowed to service cars. And indeed, people who do know how to service their own cars can do so. But that doesn't mean that you can't make a living being a car mechanic. It just means that you won't be able to become the worlds richest man like Bill Gates using that kind of strategy.
The reality is that most people still need to purchase support for their products. Whether that support is paid for honestly via a yearly contract, or via forced upgrades to the latest version of MS-Office due to incompatible file-formats, you're still paying support/maintenance fees for your software, one way or another. And for those people who can't fix their computer problems on their own, or who could fix it, but don't have the time to do it themselves, there'll always be room for support plays.
Don't forget, companies like IBM make far more money off their professional service department than they do off of selling hardware or software. This doesn't change whether you're using Linux or some propietary software. What does change is the quality of the software, the quality of the support, and the fact that it's easier to support OSS. However, "easier to support" still doesn't mean that any random liberal-arts student is going to be able to support the software. That's why garage mechanics aren't going out of business, even though anyone could (in theory) learn how to fix their own cars.
Let's examine your argument: better engineering means better stability and reliability. Better reliability and stability means less support.
Oops! Assumption that support needs are due to un-reliability or un-stability. Not necessarily true. Many support issues relate to: planning, installation, operation and maintenance of stable, reliable systems. This is the nature of complex, full-featured operating systems and applications.
Sure, a web browser doesn't need a maonthly support contract (or, shouldn't), but a web server might. Why? Is the web server a piece of junk? No! The web server is complex, with thousands of configuration options and optimizations. Add a dynamic and growing work load and there may be a need for expert tweaking to keep up with your business's success.
The point is, complex yet reliable systems may need support not due to engineering shortcomings but due to the inherent flexibility of quality software.
If "one size fits all" you can be sure that "no size fits anyone well". A tailored suit is more expensive and needs much more customization (especially for dynamically expanding clients) but the engineering is doubtlessly the best.
-- @rjamestaylor on Ello
And right now the V.C.s are getting cold feet. It could be a bad time for LinuxCare to get a boost from outside. On the other hand, they've been around for a couple of years--hardly a random startup.
My subject question about lack of focus has to do with the increasing market visibility of particular brands of Linux versus that of generic Linux. I think that potential buyers now think of things not in terms of Linux--Linux itself is a given--but in terms of Red Hat vs. Caldera vs. SuSE vs. Turbo vs. Debian blah blee blah bloe. Saying you support Linux anymore is like saying you repair cars, when what cautious car owners want is to go to their manufacturer or dealership and get their service done there. Car is the commodity; Lincoln is the brand.
I don't know much about who LinuxCare sells its services to; would it be possible for LinuxCare to improve its revenue stream by becoming a support subcontractor to the companies who have the brand names and market presence? Say they started handling Red Hat's support calls. Red Hat is a known and trusted name at far as Linux goes; companies seeking support for their Red Hat systems would probably want to get support from Red Hat than a third party. Even if they knew the support call was transparently being re-routed somewhere else, there is a certain sense of security when the phone is answered "Red Hat Support Services, can I help you?"
Both companies could win big on an arrangement like this: LinuxCare could handle 99% of all calls themselves, and only bring Red Hat into the situation when things have gotten really obscure.
--
This is not my sandwich.
I'm surprised by how many posters discount LC's basic business model. The fact is we are in the very early stages of the adoption curve for Open Source technologies (and that's probably even true of Apache, whose 62% market share could easily climb to >90% in the next five years.) In the future there are going to be tons of companies who want (need) some legal entity to stand behind their systems. The fact that the source is open and HOWTOs are plentiful only means that the support will be easier to provide than for proprietary apps, so customer satisfaction should slowly rise. Unfortunately, LC has bungled the whole thing.
I hate to quote scrip-cha but I think Eric Raymond and Tim O'Reilly are right on regarding the viability of the business model. (Granted, TOR is arguing for a much more expanded services offering, but it's still a services offering.)
I love to see a place as biased as Slashdot comment on how fair or biased another news organization is. (Actually, I shouldn't say another... since Slashdot gets all it's content from others - they aren't a real news organization.)
It's great when Slashdot calls something biased or unfair... talk about the pot calling the kettle black!
Hmmmm... let's see:
1 A new CEO w/23 years exp in a successful but slow moving hidebound bureaucratic company
2 Lots of pressure to go public before the VC cash runs out
3 An untested business model
4 Few if any internal process or business controls
5 A new CIO 3000 miles from the home office developing a business critical function on his own
6 Building a tech support/CRM application from scratch where many components probably already exist. And oh yeah - no real customers to verify any of the basic assumptions or development requirements
Do I have this right? Is there any reason to suppose that success would have been possible? Nope.
Don't forget, companies like IBM make far more money off their professional service department than they do off of selling hardware or software. This doesn't change whether you're using Linux or some propietary software.
That's the point, it does. Let me ask you this, do you think that there is a market for selling Apache support? Selling support for Open Source Software doesn't work as an exclusive business model because unlike proprietary software most people who have jobs working with OSS have a clue and they have the source or at least have access to people who have the source. This means that unlike IBM and MSFT who can rest assured that if there is a problem with their software their users will have to call their expensive support lines, users of OSS can simply fix the code or ask on a newsgroup and get a faster and sometimes better response from some enterprising hacker than from some tech support flunkie. I see selling Linux support being like selling toys online, anyone can do it but the market will only support one or two major players while the rest will flounder and die.
I think VCs == suits by definition, and Kleiner Perkins is one of the big VC firms, yes?
Worth starting a thread on the topic of what makes a good suit in a geek world -- not all VC firms are this control-oriented. Cheers
I am quite civilized, and I should be brought a beer immediately. -- Bruce Sterling
I spent many years working for a company offering specialist technical support on a number of platforms to many UK companies.
This was before the internet was popular, when the only resources we had were the manufacturer's technical bulletins, patch release notes, and our own experience. We flourished, because no-one else offered such a proficient service. We must have had 60+ customers, logging fairly technical support calls.
We'd have some very obscure problems to resolve, but always acheived a resolution.
Later we'd get a few other resources to work from, such as messages posted on Compuserve (remember them!).
Then in 1995, customers started to get internet access. Gradually customers use us less and less, as they were able to post to the relevant newsgroup or mailing list, or search dejanews.
No-one would use us any more to obtain patches or fixes. A savvy sysadmin could avoid using us at all, except when things went really wrong and Guru type calls were needed. For the last year there, most of my calls were of this nature.
By the beginning of 1998 we only were still going as we had gained a number of customers from our rival, as they had already decided it was no longer paying. By the end of the year we had one major customer left, and a couple of smaller sites. The company moved into facilities management and bespoke software to stay afloat.
What we've seen recently is two things
Yes, LinuxCare doesn't have guaranteed success right now, but neither does Red Hat, Caldera, etc. Most Linux companies are in growth/bleed mode., which is always tricky.
I believe that if LinuxCare can focus on providing a high quality core product, and that is support, they will do fine.
-josh
Also, E*Trade had been a viable company with substantial infrastructure before he arrived.
Remember, he was hired for an air of legitimacy, not for any actual skill. ::rolls eyes::
_Deirdre
Hint: name FIVE large, publically traded, software-services-only companies. Now, name FIVE large, publically traded software publishers. Name FIVE large, publically traded computer hardware vendors. Why do you think it's harder to find examples in the first category?
The issue, though, is that there's a fundamental economic issue: it's relatively easy to get a group of skilled Linux people to do support, at least on a small scale. With easy entry and exit from the market, there's no real barrier to competition. Thus, in this industry, the tendency toward profit is ZERO. It has nothing to do with whether or not it's OSS.
I don't care what ESR says, he obviously skipped first semester microeconomics.
Having been the financial manager of a business in another industry with similar competition constraints, I can say that cost management is quite critical. Linuxcare didn't get this. They still don't.
_Deirdre
Lots of tech folks (non-suits) have made money. If they decide to fund a start up that they havn't founded (in exchange for stock) that is suitless VC.
So if you shop a start-up around, and, say, get Eric Raymond intrested in it, that doesn't make him a suit (I'm assuming you didn't think he was one anyway). If he is intrested enough in it to give you money in exchange for stock, and a say in how the compony is run, he still isn't a suit either, is he?
It has happened before (not with Eric that I know of). I have no doubt that it will happen again.
Granted most people who give venture capital are suits. But that isn't part of the definition.
"...nebulous 'knowledge center'..."
And that's putting it kindly. I saw references (I don't remember where) to Linuxcare's vast storehouse of Linux-related problem resolutions and so I used it a couple of times. Total crap. I would guess that less than 10% of the top 5 items returned were on target. And that 10% seemed to be cut 'n' pasted from Usenet postings and mailing lists.
An LC employee is quoted as calling the "knowledge center" a "simple search engine", but even that is giving the tool I used more credit than it deserves.
--
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"The stock-market instability got to us," says Linuxcare's interim CEO Pat Lambs, who usually runs the firm's services unit.
Such an irresponsible comment. As any student in business school will tell you, stock market prices reflect expected FUTURE economic value. They shouldn't blame the market for their poor business decisions or choice of management.
I think the article makes a good point about Linuxcare being too soon into the support-only market. Right now, Linux is being used in a lot of shops in various roles, and it's usage can only grow. But I imagine at most places that do use Linux, they look for support from 3 sources:
- Existing Unix/other guru's they may have on staff.
- Hiring 1 or 2 new people to handle it for them.
- Many distributors like RedHat and Caldera would like to sell you support options as well. If a business deals with Redhat, they're more likely to go to Redhat to get their support if they need it.
Consider how this sort of thing working in the Windows world. Only in the past few of years did the concept of outsourcing your support needs to a major company become widely used. Before that, support was taken care of in-house. It's not unreasonable to think that Linux will go through a similar "in-house only" phase.
Eventually, however, the proliferation of Linux on desktops and servers throughout the business world will reach a critical mass, where it will make sense for a business to hire someone like a Linuxcare to come in and save the day. Here's hoping companies like Linuxcare can survive the rough times and prosper later on.
tcd004
Here is my Microsoft parody , where's yours?
Yeah I agree, but I meant the *firms* not individual investors when I said "VCs == suits". Although (If we're taking ESR as an example) some investors are more individual than others (ahahahah couldn't resist). But seriously, I also think that there are serious capitalists out there who understand geekism; and while they are suits they are not bad suits. But, it seems that linuxcare did not find these people to be their execs and funding sources.
I am quite civilized, and I should be brought a beer immediately. -- Bruce Sterling
strange switch, from company to people. companies aren't people.
//rdj
No one can understand the truth until he drinks of coffee's frothy goodness.
--Sheikh Abd-Al-Kadir, 1587
I am going to miss kerneltraffic. But not linuxcare.
The only way to get rich, quickly or otherwise, is to put in the leg-work necessary. A fancy name, a few scraps of vaporware and egos that could fill a Black Hole aren't enough to do anything but look stupid.
IMHO, 9 out of every 10 Slashdotters could have done better, with a tenth of the funding, on their own, over a weekend!
If LinuxCare want to have a management team that could get the respect of employees and the markets, they should print out the Linux kernel CREDITS file and find the top 10% (karma-wise) posters on Slashdot. These are the people who understand what is involved, who have the skills to comprehend what is possible, and who could guide LinuxCare in that direction.
(Most people who'd qualify, though, would probably turn their noses up. Anyone that smart would be, by definition, too smart to walk -onto- a sinking ship. If not, anyone want a job bailing water for the Titanic?)
It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
Yet Another Case of Extrapolating the Specific to the General
I'm surprised nobody has commented on what appears to be the central theme of the article -- the whole geeks vs. suits dialectic is held responsible for the company's problems. According to the article: Rather than focusing on the technology, the high-powered excecutives brought in to make the company profitable in the competetive business community concentrated on personal perks (cell phones, parking spaces), and making money on the stock market. Would have done better if they'd left the geeks in charge for a while longer. IMHO Linuxcare need a Jobsian (Jobsesque? Gasseeoid?) suitgeek who at least has a love for the technology and a knack for the sales pitch. Remember what happened to Apple when the suits squeezed out the geeks from the top levels (okay flame me now, I'm gritting my teeth) -- same story here?
I am quite civilized, and I should be brought a beer immediately. -- Bruce Sterling
I have been thinking about the current marketing paradigm amongst OSS companies which is making software a commodity and then charging for support. The more I think about it, the more uncomfortable I feel. According to Open Source main proponent, ESR, Open Source is a superior engineering model than Closed Source and hence Open Source Software should be more reliable and stable than most Closed Source Software. This means that Open Source Software should need less support than Closed Source software. The upshot of this is that Open Source companies will never be as attractive to investors as closed source companies because closed source companies will always have larger profit margins, for instance, MSFT charges exorbitantly for it's software as well as for support (which is necessary with MSFT shitty software) while Red Hat charges only for support (which isn't necessary with a clueful admin or if one just reads USENET). Obviously even if they were the same size and sold the same amount of software MSFT would make more money and hence be more attractive to investors than RHAT which would eventually MSFT would grow larger than Red Hat. IMHO the recent downturn in Linux stocks seems to be based on this kind of reasoning especially since Linux stocks really became hot when it seemed like MSFT was not going to avoid being found guilty by the DOJ.
For the above reasons I have very little faith in any Linux company or other OSS pure-play ever becoming a very dominant company or even surviving for very long. The MSFT Halloween documents got it right when they regarded the commoditization of software as a death knell. VA Linux has found this out the hard way, what it sells is a commodity (a free OS and PC hardware) and now that other PC makers (who have more money, better distribution channels, more marketers, etc) now sell Linux boxes it turns out that VA Linux can't sell more boxes than anyone except Fujitsu Siemens. Now back to OSS companies before I drift way offtopic, companies that sell commodity software aimed at a market of experts then expect to sell support need to have a large source of income in the first place to create a large, well developed support network. Unfortunately, since their only source of revenue is from support but yet has to pay for both development costs and support the chances of such infrastructure being put in place is slim.
To make money from Open Source and become a successful company, a business needs to rely on more sources of income than support for software that is better engineered than its counterparts. Multiple revenue streams are required or else it is all for naught.
Go away, and come back when you've got a clue! That might be an appropriate solution for you or I, but to a company that's basing its business around Linux, it's clearly not. They need guaranteed response times, and that's where someone like Linuxcare comes in. Posting a request on a newsgroup, or emailing someone just isn't going to cut it.
"The invisible and the non-existent look very much alike." -- Delos B. McKown
First of all, LinuxCare != LinuxOne.
Second, your claim that "LinuxCare was a Ponzi scheme, it needed constant access to new investors, in order to pay its bills." is wrong in at least two ways.
A) Ponzi's don't have any output. LinuxCare did and does have a product.
B) Ponzi's are asymptotically increasing (meaning they just grow and grow, thus the vernacular "pyramid" scheme). LinuxCare was going to IPO just once and then run itself on that money + profits.
Third, geeks didn't (and don't) run either LinuxCare. Did you read the article? The founders of LC hired "Fernand", a former IBM exec (not programmer), to run the company.
--
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Hmm, let's think about this some more.
Microsoft - "Pretty Hate Machine"
LinuxPPC - "Broken"
Debian/PPC - "Fixed"
LinuxCare - "The Downward Spiral"
LinuxOne - "Further Down the Spiral"
xscreensaver - "The Perfect Drug"
the Mac OS - "The Fragile"
Amiga - "Into the Void"
-mcc-baka
i beat my machine, it's a part of me, it's inside of me
i'm stuck in this dream, it's changing me, i am becoming
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
when i was talking to the LinuxCare guys at comdex, i was wearing a shirt with binary ASCII characters on the front, and the LinuxCare guys decoded it on the spot. they knew every question i asked them. i was fairly impressed-i would hate to see this kind of talent go down the drain.