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Free Software's Star to Rise During US Recession?
robvasquez: "Surfing the web today, I see that RedHat has broke even and that Corel has shown a surprising profit (they are they still considered a linux company, right?), so I'm seeing Linux companies out of the red! Perhaps this 'recession', whether we are starting one or even going in to one, is what we need to popularize free software. Think about it: with companies laying people off and cheapening up, whats better than free software? They could lay off 5,000 people, OR quit shelling out that much in MS licenses and pay salaries!" It's a nice thought, and a good idea for established companies to look into, but quite a few Linux companies have been hit just as hard during the recent economic crunch. I guess only time will tell if the use of Free Software is as much an economic advantage as people have been making it out to be, and now is as good of a time to test this claim as any.
Even if the software is "free", the implementation and maintainence of said software is where a lot of the costs come into play. The talent pool for MS software is broader than that of Linux (or other "free" applications), so it would seem to me that hiring an equivalently competant staff of Linux gurus over MS gurus would cost a bit more. The costs of running a successful IT department aren't only those of liscencing, but of keeping the IT staff trained and up to date.
Sure, you can save your company $50,000 by using linux of NT, but that is licensing costs. If you have to hire anouther admin because it is more work for your administrators to get their job done, then you haven't saved money.
The cost to hire a compitent administrator are about the same for Linux, NT, other Unix, or anything else. The cost to train someone to do that job is about the same. It doesn't matter if you are using macs, windows, multics, Os/2, linux, solaris, or Os/390, the hard part of administrating the machine isn't learning the job it is knowing how to do it right.
Linux doesn't save any money to a IT shop due to licensing fees becuase windows licesne fees are not that much. However linux can save a lot of money if the machines are set and forget. administrators are the expensive part.
Money is not the most important thing to a bank, it is the ability to get customers their money all the time and accuratly refelect it on their statements. A bank wants to save on comptuer costs only if they are sure the ATMs are working. A phone company cares more about calls getting though then about the cost of comtpuers. I've seen several places with 2 Sun E10ks sitting right next to each other, one a hot standby incase something bad happens to the other. They have a 3rd E10 in a different city they can bring online quickly. They still wouldn't let me re-boot the master e10 despite having backups avaiable just in case. The data was far more important then considerations like computer costs. they told me that 1 minute of lost data is more then the cost of those machines.
Linux isn't a factor because it is free (beer). It might be because it is free (speech). I have seen places with custom linux kernels when they needed it, but that is rare because that same shop had to manually merge in every security patch.
1) Large companies don't always do layoffs to "reduce expenses". They do it to reduce the supply because of a forecasted reduced demand
Then what do you call layoffs at a company that supplies nothing other than the manpower to operate the parent company? I call it cutting the bottom line.
2) If we are talking about technical people being laid off, it will still happen: they don't know Linux and so have to be replaced
There will still be computers that still have "I can't log on" or "I can't get my mail" problems, and we will still need helpdesk and cable monkeys to take care of them.
3) MS licenses are not an operating expense, they are a capital expense (capital offense?). Meaning they already have money locked up in licenses
Yeah, buyiong a piece of software is a capital expense. But owning the livcenses to a piece of software over the life of the company becomes an operating expense. If I run a company with 2,000 people in it, and use Office for my App Suite, then I have to stay at either the current or the previous version to maintain support from Microsoft. Older versions are not supported, and I can't afford to support an old piece of software on my own time. Dumping the software only loses money until the point where you would have had to relicense the new version to keep you supported.
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What company are you working for, then? The last two companies I worked for both spent well over a couple of million dollars a year in OS and Application licenses for the desktop. That doesn't include things like Oracle, Notes, or whatever that ran on the servers and weren't directly visible to the user.
If I could save my company 2 million dollars a year, you better bet I'd be getting a raise and a promotion...
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Wait. With Microsoft, people pay for product and support. With Red Hat, they only pay for support.
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I'm basically a web developer now, 3 tier, database, middleware, webserver. Any or all of those tools could be free or $$$ depending on which group of developers in my office you talk to (ie. some want MySQL, some want Sybase....Apache vs IIS, etc) but the costs incurred with those choices are incidental to the hardware, the development time, testing, deployment, help desk support, training, documentation, etc. I'll bet if we were 100% LAMPS, it would save us less than 10% (but I'll still try :))
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If people reacted to automobiles the way that people react to computers they would need to be taught how to drive again when switching from a Ford to a Chevy. I can just imagine it.
I'm sure that all of you who have done tech support will identify with this. It's not that people wouldn't learn if they tried, they just won't try unless they have their hand held every step of the way._____________
I don't want free as in beer. I just want free beer.
I guess only time will tell if the use of Free Software is as much an economic advantage as people have been making it out to be.
Free Software has a cost. That cost is the risk of your IP if you are not careful.
Look at how Corel 1 and 2 had trouble 'getting it right' The risk to Corel is great enough vs the profit potentional, they are trying to sell off the Linux version they make. Free Software is not worth it.
Open Source software (something the most visable supporter of Free Software RMS wants to not be associated with. The Open Source Movement -- I do not support it.) *CAN* protect your IP. Understanding HOW you can have protection for your hard work AND work with Open Source software is the key to protecting your IP.
Free Software wants to destroy IP. IP is the backbone of the information economy. Free Software does *NOT* have an economic advantage when it comes to IP. Open Source software *CAN* provide IP protection and therefore economic advantage.
If it was said on slashdot, it MUST be true!
I've noticed a surge in interest in the open-source foundations of my projects at work. We'll be presenting on Linux, Apache, Tomcat and Cocoon at an upcoming installment of the CTO's roundtable. There is considerable curiousity about how I'm funding my work in the current budget environment. The answer, of course, is that the stuff is free and runs on hand-me-down hardware.
<herb>It looks here as though your only costs are salary....</herb>
illegitimii non ingravare
For a large company the actual cost of purchasing the software may not be the most expensive part of switching. Things like retraining, time spent rolling out the software, technicial support, document convesion can add up to alot of money.
Most IT people do not know very much about writing a business case. Most management types don't know technical speak. As a result the tech who thinks it is obviously cheaper and better to use free software has a hard time convincing management.
One of the good things that Microsoft provides is business cases. If you want to move to a MS product, all the informaiton that you need is made available. (if it actually works as stated is another argument) On their website you can often find migration guides and business cases.
This is an area where free software is greatly lacking. We need to build business cases to prove our case.
I am currently taking a course that trys to bridge the gap between the tech speak and the manager speak. For my term paper for Emerging Technologies I am going to be building a business case for the adoption of OpenOffice in the enterprise. (www.openoffice.org) I will gladly donate the business case to Sun to use to help promote OpenOffice.
I would encourage anyone who has to do a term paper like this to pick a free/open source solution to try to support.
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4) 5000 people at $40k each is $200,000 per year (plus you save tens of thousands in seat licenses for your software, because there are fewer people using it.
5) Switching software platforms means you need to either hire new specialists or retrain your techies... either costs money.
Bottom line is that a company will change to open source for one reason and one reason only: if they are convinced that they will make more money using it. In every company I have ever worked for, the attitude has always been to spend what you need to in order for your people to be productive. Whether that means dumping huge cash into an Oracle database, or hiring a Postgres DBA, productivity matters more than expenses.
A CEO (or any manager, for that matter) who does a really good job of cutting expenses (mostly via layoffs) gets a reputation for being a great "hatchet man", and all of his job offers start coming from sick companies that need to make cuts.
A CEO who does a really good job of raising productivity and sales gets a reputation that lands him powerful jobs in healthy companies. Think about it: If you were a corporate executive, which type of CEO would you prefer to strive to be?
Information wants to be anthropomorphized.
With MS Turning Screws on Customers the way they are, I would imagine that many mid size company's would turn to free software, instead of being faced with up to $10,000 per unlicensed product.
It's rather ironic that business' knee-jerk reaction to situations like this hurts their chances of making more money in the long run.
... "the future" be damned, these top '400' people will be rich beyond imagination before that ever matters... the whole scheme is ready to eat itself... current Capitalist Economics are about to reveal the failure in their basic logic... this whole episode is inevitable. Unfortunately the rest of us are along for the ridiculous ride
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Its not ironic - its criminal. Were talking about real people here, people with lives, families and futures. The reason were seeing this reaction to this minor 'slow down' (whatever the hell) is because Corps are no long pretending to have any priorities other than profit. Quarterly Profit as a matter of fact. If it looks like profits may (*shudder*) decrease - then the pricks go into 'crisis mode' and start layoffs. Because the Deep Pockets on wallstreet need Big Profit Now(TM) - and they dont care otherwise... if they loose confidence in XYZ stock because this quarter is bad - they sell - if they sell, then the CEO and the top 400 people in a Fortune 500 company loose big dollars on their stock options... so they are VERY motivated to make every quarter better than the next
So, whats the Solution? Read
Today's Linux Desktops are getting more and more user friendly all the time. KDE2 and Gnome have the equivalent of a start button, and with many office suites in development there are a plethora of options for all those MS-Word mongers who happen to need Office Premium edition with the free spa day.
Seriously though, there will always be a transition period, we can't really help that, but it's worth it. I'm not just advocating Linux here, but all alternatives, Linux just happens to be a nice example. Sure, we'll see a learning curve, a learning curve softened by the millions of dollars people save with free software. There are so many advantages to using other OSs and apps in workplaces I can't even begin to list them. People are scared of change, I'm scared of change. It took me two years to move to Linux; ie. to feel comfortable that I didn't need anything else. It's to be expected. But just because we're going to need to relearn a few things doesn't mean we can't start right now!
yoink
Games: You want to play all the newest games on a PC (which is a unique market compared to the console market), you have one choice. Windows. Yes I know, MacOS has improved dramtically to the point that it is viable and Linux isn't that far behind, but face it game performance is usually better on a PC and there are more high end graphics orientated games for WIndows than MacOS and Linux combined.
Server: Here is where Open Source has a large following. Apache, Samba, mySQL, Perl, and other such OSS technologies make Bill Gates wake up in the middle of the night sweating, and for good reason too. But, there are some things they don't do as well as something like Win2K does, but in general are more flexable and certainly significantly cheaper than the alternatives.
Workstation: This is the majority market for computers and the biggest expense most businesses (and people) are going to make. Here Linux lacks some key ideas.
1. No really solid HTML editors
2. Poor application linking
3. Poor printing services
4. Its harder to update anything on Linux than Windows and MacOS
5. Poor graphics support
6. No unified GUI (KDE, Gnome, who cares, just make ONE of them work)
7. Each Linux variant ships with security holes
I could go on and on, but you get the point. Not only that, Linux has to deal with misconceptions in the workplace (its ONLY a server, its a hobbiest OS, If its free it can't be any good, It doesnt have any good Office compatible software...yadda yadda)
People want something that they KNOW for a fact will work. Windows may have its cavets (instability, high cost of maintance, et al) but at least it runs Word, it connects to a custom database, and company can call MS (or the OEM) and get help when it dies. In a word, its "simpler" to just choose something convient than it is to built a custom system from components and then deploy it to every desktop in your business.
If you want Linux to suceed, make a distributation that is NOT a server (meaning fix whats written above) that has a significantly better UI and easy to make custom install CDs (and I mean EASY), then you will see LInux being used.
Burn Hollywood Burn
Except with the smallest of companies, software is rarely a major expense for companies, especially OS's. Usually, a MUCH higher cost is associated with development and support (paying salaries, contractors, etc.). Whether the TCO of Linux is really lower than that of proprietary software is still up in the air, I think. It may be cheaper for a company to pay a few grand for Windows, then save tens of thousands by hiring a generic Windows admin.
At one time the corporate PC LAN was ruled by Novell NetWare. At it's peak in the early 90s, it had about 80% of the "LAN Server" marketshare. It wasn't the most stable or capable product, but it provided a very managable system for file and print needs, and was often expanded for departmental e-mail service or database needs. Often these Novell systems where installed under the nose of the main/mini-centric IT department in a guerilla manner by departments.
It was also pretty expensive by modern standards, costing something like $1000/seat/year.
Meanwhile Microsoft had been slogging along with about a 10% marketshare for a OS/2-based product called LANManager. Even though LANMan had some nice features like TCP/IP support, Microsoft literally couldn't even give away (and they tried).
Then, the early 90's recession hit, affecting certain corporate headquarters-heavy areas like California and the East Coast especially bad. For those of you who are relatively new to the job market, here's what during a recession: The corporation cuts costs to please Wall Street. An prime example of a "cost" here is the IT department and IT projects.
So, as new generation of IT managers took hold, what they found was a mess: dozens of different mail systems and departmentally managed networks. Different warring tech support groups backing different technology. Hundreds of little Novell servers out in closets managed by relative amateurs.
A few things happend as a result: 1) PC and PC network management was taken from the departments and centralized under the main IT department, 2) IT support was outsourced (it was virtually impossible to get a perm sysadmin job back then) and 3) Aggressive measures were taken to reduce licence costs.
Meanwhile, the Microsoft salesman was standing at the door with their relatively new Windows NT product that carried a very attractive price. If you were large enough, they would negotiate a licence costs that was less than 1/3 of what Novell wanted. No matter that the file and print was less managable and less scalable, you could also use it as an application server to centralize (say) e-mail and/or move it off of those expensive mini's and unix systems.
The result was devestating to Novell's business. Even though Microsoft's prices gradually went up, and Novell's went down, Novell was left with something like a 20% marketshare when it was all over.
So, now we have a situation where Microsoft's prices are going up even higher and IT spending is due again for another round of cutbacks and centralization. Well, those licence costs might have seemed relatively inconsequential when the budget was expanding and you had things like Y2K and webification to worry about. But in a static or declining budget, they will stand out. And CIO's who are paid bonuses to cut costs will notice. If the RedHat salesman comes calling with numbers in hand, they will listen.
It's great to hear that some of the Linux-related companies are not suffering from that dot-com disease that says, "profits don't matter -- only market share and total sales." It's like the Japanese semiconductor companies in the 1980's ("we may lose a nickel on each chip, but we'll make it up in volume"). Unfortunately, as these companies crash and burn, they're hurting other businesses in the market, too. Take servers and routers. If you're looking to expand your business right now, are you going to buy new equipment from VA Linux and Cisco when you can get close-to-new stuff from bankruptcy auctions at dot-coms for pennies on the dollar? Nope. It's going to take a while for the ripples to die out from all of the dead companies run by people who didn't understand the basic tenets of profit and loss.
"Think about it: with companies laying people off and cheapening up, whats better than free software? They could lay off 5,000 people, OR quit shelling out that much in MS licenses and pay salaries!"
1) Large companies don't always do layoffs to "reduce expenses". They do it to reduce the supply because of a forecasted reduced demand.
2) If we are talking about technical people being laid off, it will still happen: they don't know Linux and so have to be replaced. Of course, firing an MSCE for being an MSCE might appeal to some...
3) MS licenses are not an operating expense, they are a capital expense (capital offense?). Meaning they already have money locked up in licenses--dumping the software loses that money. I know, I know--it's the fallacy of sunk costs. Nonetheless, some business people work that way.
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Pretty cool thought, but it still seems like it might be a fluke. Was the recession taking place during the time span reported in the earnings reports?