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Open Source & Embedded
Embedded Geek writes "Jack Ganssle has posted a column at embedded.com pondering whether Red Hat and other open source companies serving the embedded community are due a shakeout similar to the dot com collapse. He cites Red Hat's March cuts in their embedded division and their losses of $80M to $140M a year. He admits, though, that because the embedded market is smaller and many companies are privately held it is difficult to get a pulse on what's going on behind closed doors.
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Right now, it's more like "Which company isn't having financial issues."
This stuff is getting rather old. Everyone is having a tough time being profitable and I don't believe "opensource" is the reason why RedHat is struggling. You name the company, products and services that were selling well in 97-00 are no longer doing that well. EMC and Sun which used to be very profitable at what they did are having to switch gears. Cisco is having it's share of problems. Software or hardware everyone is struggling and Opensource companies are still trying to figure out how to make a profit on a service model.
Folks this isn't news and really doesn't need to be argued over but Opensource isn't the next "Dot com bubble" that is going to burst. Opensource, Redhat, whatever... everything is having trouble right now. Let's not make this out to be more than it really is.
Open Source companies aren't really built on the hype and hyperbole of the DotComs. Having a substantial product allows for more longevity (sp?) than a web based retailer.
Think nothing is impossible? Try slamming a revolving door.
One problem with embedded Linux solutions is that developers are compelled to release their modifications as per the GPL. Whether or not this is a good thing (and there are some very good reasons for both GPL-style and closed-source software, beyond the scope of this comment), some companies just don't enjoy the thought of having to release the source code for their embedded products.
Embedded BSD is the solution to that problem, and in fact various forms of embedded BSD have been around for a long time and are going strong. Perhaps if Linux changed its license from GPL to LGPL it might help in this situation, to gain more acceptance from the business community.
Cedric Balthazar Rotherwood
Sun Certified Programmer for the Java Platform +
System Admin. for Solaris
Everyone having problems now? No, microsoft is making profit, oracle also makes profit.
Microsoft and Oracle are everybody? What he means is the economy in general, as well as most of the tech industry is experiencing a down turn. Providing exceptions doesn't change the stats quo that is happening at the moment
Think nothing is impossible? Try slamming a revolving door.
As far as I know, Cygnus was profitable, at least in the Golden Years just before Open Source more or less hit the mainstream press. There is an interview at developerWorks in which Cygnus Solutions cofounder Michael Tiemann claims that they were profitable until the venture capitalists came, since investors "give you money so you can actually accelerate the rate of spending versus revenue".
It's probably not too easy to turn back the clock for Red Hat, as there is increasing competition on the GCC customization market, where companies pay immense sums for adaption of GCC to certain microprocessor platforms and support for that GCC derivate (at least they paid these sums when Cygnus didn't have much competition!).
Red Hat's March cuts in their embedded division and their losses of $80M to $140M a year.
Do I need to explain the concept of "Goodwill" yet again? Why do people keep this shit up? Are they holding short positions in RHAT?
Goodwill is the amount of money a company pays for another company, that is above the value of the tangible assets of the aquired company. This may include brand names, patents, and other intangibles. If a company buys a company that turns out to be overpriced later on, then the buying company will have lots and lots of goodwill that must eventually be charged against earnings.
Red Hat did not lose those large amounts of "real assets", rather, almost all of that "loss" was a write down of goodwill from previous aqusitions.
Look at it this way.
1) RHAT IPOs
2) RHAT stock becomes grossly overvalued
3) RHAT makes a secondary offering, cashing in on their grossly overvalued stock in a big way.
4) RHAT goes on a buying spree, spending their money that they got for free, buying companies like Cygnus.
5) Cygnus was also pretty overvalued, so a lot of goodwill ends up in the "assets" column of RHATs balance sheet.
6) RHAT has to write off chunks of this goodwill against earnings later on.
The key is that RHAT got this money for free. Had they not made the secondary offering, they wouldn't have had the money to make the aqusitions in the first place. Sure, that money ultimately came from idiot investors that paid $200 a share for RHAT, but it didn't come from any direct business or financing activities that had an opportunity cost for RHAT (such as debt financing).
So no, they aren't losing those staggering numbers each quarter, in fact they are breaking even for the last 3 quarters or so.
Goowill can be abused. "One-time-charges" can be abused (see Cisco writing off billions of real, tangible, inventory).... but in this case... there is no money lost, just worthless monopoly money that no longer exists, and hasn't existed for years, subtracted from a column on a balance sheet.
I've had enough abrasive sigs. Kittens are cute and fuzzy.
Stuck in a small box
CPU crunches numbers:
Use Redhat or not?
I work for an (open source technologies) embedded development consultancy company. The only thing limiting our growth is finding competent personnel. Demand exceeds what we can deliver by a large factor. Linux has taken the embedded development world like a tornado grabbing a trailer. I see no bubble building up here.
Of course, other companies may have been less realistic in their growth perspectives and may have had more venture capital to burn.
In making a business plan, you will need to figure out what your differentiators and profit centers will be. It's obviously not going to be software sales - the folks who tried a royalty-based embedded system based on Linux went out of business faster, because they had free competition. In general it will be consulting services, and this is going to be a difficult business in a slow economy as businesses will try to do more with their own engineers. Businesses also have an incentive to use their own engineers for embedded work, as they don't want to be in the situation of losing the recipie for one of their own products. That can happen more easily when an outside vendor does the work.
I created the user-mode half of most Linux embedded systems - a program called busybox. It's everywhere. I used the GPL. Because of that decision, the person who put the most effort into maintaining that program, after me, is still working on it and is able to offer his consulting services on it. Had I not used the GPL, he would have had to give it up when his previous employer was one of those shaken out. I have a lot more sympathy for him than the employer. Also, had I used a license other than the GPL, the program would not have become an open standard for embedded - everyone would have been making their own proprietary additions rather than cooperating. And I didn't care that companies could not lock in a revenue capture on busybox - why should I?
I think Debian has the best "business plan" of any Linux distribution: don't even try to make money. The people who use Debian as a cost center (HP, for example) pay for its development, and they are very clear about what their profit centers are. This is why I think Debian will eventually end up on top.
Bruce
Bruce Perens.
Bruce
Bruce Perens.
Red Hat's embedded division wasn't selling Linux based solutions, it was selling the eCos product that came from its acquisition of Cygnus. A minimal eCos kernal can be about 4K of ROM and 1K of RAM. The kernel isn't a POSIX compliant API, (although they seem to have recently built POSIX/Linux compatibility layer on it called EL/IX which would put it in the same ballpark as QNX.) I agree with your main point though, many of the big system technologies (C++, Java, Linux) seem out of place for embedded system design.
surrreee they dont.
so.. does your business have a yearly contract with MS? Sun? IBM?
right. thought so.
... hi bingo
Of course, I do have my doubts that a company like Red Hat makes sense. Open source is best for specialized, highly-skilled consultants and professionals. It also makes sense for a few hardware vendors and large, established consulting shops like IBM. But companies like Red Hat and VA Linux aren't in that league.
Companies need long-term planning for their investments. Personally, I'd rather pay $1000 for software knowing that it goes to a company that is most likely going to be supporting the software for the next 2 years, than $500 for a package where this is not likely at all. Unfortunately, only very few O.S. projects come with some sort of established development process that guaratees that they're going to be "supported" (bug fixes...) in the next 2 years.
Also, the best Open Source programs are so popular and widespread that you get your support for them elsewhere (contracting...), so money spent by companies "on" these products goes to those other people. Finally, don't expect a company to donate money if it doesn't have some visible positive effect on the company itself ...
IMHO, Open Source developers need to find business models that work well together with their products, e.g. web server software developers re-selling SSL certificates (I don't care where I get mine, and I don't mind paying slightly more if the money goes to the right people), compiler tools programmers offering affiliate links to recommended books about programming languages etc. ... It's much easier to say "thank you" by chosing you as the reseller of something (not merchandise, unless it's something really useful!) you're going to buy anyway at more or less the same price, than by donating money with nothing in return.
"I love my job, but I hate talking to people like you" (Freddie Mercury)
Re-reading your comment, I noticed that you actually meant companies who included Open Source software in their commercial software packages... My rant wasn't specific to that situation, but to the use (not commercial re-distribution) of Open Source software by companies in general. So, it's just a rant ;-)
"I love my job, but I hate talking to people like you" (Freddie Mercury)
Why can't they stay in their shitty third world counties ...
Which county are you from? Hazzard County??
cpeterso
Credit where credit is due.
Erik Anderson maintains the busybox todoy.
The employer you have spoken of is/was Lineo.
--
Karma 50, and all I got was this lousy T-Shirt.