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Compaq sees Linux as selling Alpha chips
phlebas writes "Cnet news has an article about how "Compaq Computer sees Linux as a way to increase sales of its Alpha microprocessor, and the company is trying to encourage other Linux distributors besides Red Hat to support the chip." They ar also plannig to "soon introduce new pricing geared to encourage Linux users to "step up" from Intel to Alpha chips." Maybe after all i'll be able to get one those in my lifetime " I think it's pretty clear that Linux is the way for Compaq's to really push the Alpha-let's hope they actually do it.
In the Bad Old Days, "big iron" vendors wrote OSs mostly for the purpose of selling their iron. The margin on such an OS is low (perhaps negative), but the tie-in value is high.
The problem with this is that you have to spend a tremendous R&D budget "keeping up with the Joneses". If you don't, you're selling a second-rate OS and thus a second-rate platform. Realize that this is R&D _just to tread water_, not to gain share.
This problem is made worse by the fact that Linux is already ported to Alphas. The "Joneses" have a tremendous R&D budget, measured in terms of engineering hours as opposed to dollars. Compaq is likely unable to keep Digital Unix up with Linux.
The worst part is that, if they keep developing Digital Unix to compete with Linux on their own platform, they split the application base. Some shops won't be able to afford to port to two Alpha platforms. The application base splits, the user base splits, and you again lose market share.
Pushing Linux is the perfect solution for Compaq. Sure, they lose their OS revenue. They also drop a huge R&D budget, merge the Alpha Unix user base into one critical mass, and assure them that they will have a state-of-the-art OS, regardless of Compaq's corporate decisions. They can also direct their attention to selling _hardware_ versus _hardware and OS_. The OS will take care of itself. They also drop the price of an Alpha to the point where people can seriously consider putting it on their desktop _and_ their backend servers.
They can still sell support contracts at a higher rate than any other support organization, because they have the Name and because they sell the hardware. They can produce new hardware drivers cheap, by pre-releasing specs to select groups of users. And the R&D money they save can become a capital investment in chip fabricators. Intel has the big chip fab investments today, which is why they have such a price/performance ratio. If Compaq sinks money into chip fabs, and does it well, they can again drop the price of an Alpha. They can increase sales volume and margin simultaneously.
In short, Compaq loses a direct source of revenue by pushing Linux. They also lose a lot of indirect costs and market share, and stand to make more profit in other ways by pushing Linux. Trust me, the dollar signs say that they're doing the right thing.