In 1991, a student at the University of Helsinki, Finland, decided to write a new version of a popular computer operating system as a hobby so that he could run the software on his PC. It was the sort of task taken on by geeky kids everywhere and hardly a moment to concern the multibillion-dollar IT industry.
But 12 years later, the result of that hobby has become a talking point in boardrooms around the world and has the heavyweights of the technology sector engaged in public slanging matches to try to deal with this new threat. The student’s name was Linus Torvalds and, in a gesture combining irreverence and perhaps a little ego, he called his new software Linux – a play on the Unix system that is still widely used to run many companies’ large back-office computers.
At the time, Torvalds could not have imagined that in January this year Anglo-Dutch consumer goods giant Unilever would announce plans to move its global IT infrastructure to run on Linux. How did the product of a Finnish computer science project come to hold such significance in one of the most important sectors of the world?
Just a few years ago, IT suppliers were gobbling up the profits from the Year 2000 Bug, the phrase ‘dotcom collapse’ had little meaning and Nasdaq was booming. Linux was niche, useful for some non-critical technical applications, such as running websites, which for most companies were little more than online brochures.
The community of software programmers involved in developing and supporting Linux was perceived as long-haired hippies who believed there really was some truth in the X-Files TV show. They certainly weren’t to be trusted to provide systems that were critical to the day-to-day operations of important IT installations. These developers were part of the nascent open source movement, a group of programmers around the world that wanted to share the results of their work. Their guru, Richard Stallman, had devised a process that allowed programmers to contribute their ideas, help colleagues fix bugs and create software that was freely available with the software programs – known as source code – open for all to see.
Torvalds is their hero and Linux their flagship. These were the pioneers of the internet; the people who had used the web as a means of communicating and sharing information for years before it was picked up by big business as a way to make money. And the recent success of Linux mirrors the gradual way the web came to dominate our working lives. Linux was only sold by a small group of specialist suppliers that took the free source code and packaged it into a commercial product. Companies such as Red Hat and SuSe make their money from distributing Linux software and associated tools, and by providing the level of support expected of shrink-wrapped software applications.
The turning point for the operating system came in 2000, when IBM, the world’s largest IT company, decided it was going to take Linux seriously.
Really seriously – to the tune of a $1bn investment. “We are betting a big piece of IBM’s future on Linux,” said former CEO Lou Gerstner.
IBM set about building Linux support into all its important products. Big Blue’s hardware would run the operating system alongside its own proprietary system software. Its applications, such as Lotus productivity software, would be available on Linux-based servers.
IBM also encouraged the huge ecosystem of independent software companies, resellers and IT service providers that feed off the vendor’s success to follow suit. The move gave Linux a seal of approval that shifted it into the mainstream, as blue-suited IBM sales executives took the concept into the boardrooms of its customers.
Of course, IBM’s commitment was hardly altruistic. It was several years into a transformation instigated by Gerstner, who foresaw an industry where hardware and software became low-value commodity items, and the real money was to come from making it all work together and providing services that made the details of the technology irrelevant.
It was in IBM’s interest to promote the idea that hardware and software was techie stuff best left to the experts, and Linux fits into that sales pitch perfectly.
Linux also allowed IBM to compete more effectively against Microsoft – the Seattle software giant that changed the economics of the tech sector in the late 1980s and early 1990s. A combination of highly functional, low-cost software running on mass-produced, Intel-based computers threatened the old IT dinosaurs, including IBM, which made a corporate loss of $5bn in 1993. Linux represented a chance for IBM, with the added comfort of its global support and service organisation, to match Microsoft. Many experts questioned IBM’s decision, but over the past 12 months the wider implications have become clear.
Linux is moving out of the technical arena, where it has become a de facto standard for running low-cost computers used for tasks such as web servers, email and firewalls. As company websites became important to businesses, so Linux proved itself capable of supporting revenue-earning systems.
“Linux servers are ready to take on new roles as server platforms for enterprise computing in 2003,” according to analyst firm IDC. Sales of Linux-based systems grew 27% in Q3 2002 alone, says IDC, while the overall server market shrank by 5.6% over the same period. IDC predicts Linux will account for more than one-quarter of the server operating system market over the next three years, up from 16% at the beginning of 2003. The software itself has matured in recent years, as Torvalds and his fellow open source programmers have developed capabilities for running business-critical systems.
But the final factor of Linux’s crossover into the corporate mainstream has been the economic slump of the post-dotcom world. Companies can no longer justify expanding IT budgets and regular upgrades to their computer infrastructure.
In December 2002, Lastminute.com – an online retailer whose ability to trade is entirely dependent on its technology – revealed it was switching its systems to Linux and other open source software products, and expected to cut 20% from its IT budget as a result.
In January 2003, investment bank Goldman Sachs issued a report confirming its belief that Linux is an “enterprise-class operating system”. The report says that since Linux source code is freely available, software companies could contribute to its development, potentially leading to faster return on investment and greater functionality. Goldman Sachs says that for IT vendors, “A clear Linux strategy is critical to ongoing success.” But the biggest corporate seal of approval so far has come from Unilever.
It is switching from a proprietary Unix environment to Linux running on Intel-based hardware as part of a drive to reduce its IT spending by 1100m over the next three years. Later this year, the company will move its customer management systems to Linux and expects to migrate its vital business applications as well.
Martin Armitage, head of Unilever’s global infrastructure organisation, says the savings will come from reduced hardware costs and improved performance. Linux will contribute through consolidation of systems and reductions in unit purchasing costs. “We are seeing a 20-30% benefit and I expect that to rise to 30-40% when volumes increase. Ultimately in 2005, we expect our PeopleSoft and SAP systems to be hosted on Linux,” he says.
Investment bank Morgan Stanley has also taken advantage of the cost benefits of commodity hardware running Linux. One in three of the 6,000 servers in the company’s institutional securities division are running Linux, says Jeffrey Birnbaum, global head of enterprise computing. “By 2005, 80% of systems in the division will be running on commodity hardware and software,” he says.
For many IT suppliers, the success of Linux has been achieved despite, and not because of, their best efforts. The two vendors thought to be most threatened by Linux are Microsoft and Unix systems supplier Sun Microsystems.
For many years, Sun was resolutely anti-Linux, dismissing it as a minor product that didn’t overlap with its range of server hardware. But last year, Sun changed its tune and launched its first commercial Linux-based system. It is now backing Linux so much so that it plans to launch a fully supported, open source PC later this year, which it hopes will take market share from Microsoft Windows and Office products.
For Sun, like IBM, Linux is a way to reduce Microsoft’s dominance. “The idea that Linux obliterates Unix and leaves Windows unscathed is dead wrong,” says Sun vice president of software Jonathan Schwartz.
Microsoft, too, has been changing its attitude to Linux. At first it was entirely condescending. In May 2001, vice president of advanced strategies Craig Mundie called open source software “flimsy” and “flawed”, claiming it jeopardised property rights and would undermine the software industry.
“It isn’t successful in building a mass market and making powerful, easy-to-use software broadly accessible to consumers.”
By October 2002, Microsoft CEO Steve Ballmer was taking things more seriously. “Our number-one competitive threat is free software. It’s Linux,” he said.
And this year, Microsoft announced plans to let government users inspect its once sacred and top-secret source code, with the UK among the first to take up the offer. The move was perceived as a direct response to the openness of Linux and the interest shown by the public sector in low-cost, open source alternatives.
Further IT industry support for Linux came in January 2003 from an unexpected source. Oracle switched all the systems that run its in-house ebusiness software to Intel and Linux-based machines that cost just $6,000 each. Oracle CEO Larry Ellison stated, “It runs faster and more reliably.”
You may be fed up with seeing the cuddly penguin logo, but Linux is an ever-increasing consideration for corporate computing.
“We have taken advantage of the lowest cost infrastructure there is – Linux on Intel servers.” Larry Ellison, CEO, Oracle.
“Lots more people should move to open source software, in my opinion.” Nigel Beighton, former chief technology officer, Lastminute.com.
“Linux has evolved into an enterprise-class (OS).” Goldman Sachs report.
“Every time we put in Linux, we’re surprised and amazed at its speed and the reliability with which we can run it.” Colin Hope-Murray, chief technology officer, Unilever.
“The idea that Linux obliterates Unix and leaves Windows unscathed is dead wrong.” Jonathan Schwartz, VP software, Sun Microsystems.
“The cost of owning a Linux solution is greater over a period of time than owning a Microsoft solution.” Mark Greatorex, director of the .Net developer group, Microsoft.
“The movement to standards-based computing is inexorable.” Lou Gerstner, former CEO, IBM.
“It’s hard to argue with the economics.” Randy Mott, chief information officer, Dell.
“… we believe Microsoft’s dominant position will be challenged.” Brian Richardson, analyst, Meta Group.
“Linux is a small phenomenon in the grand scheme of things.” Steve Ballmer, CEO, Microsoft.
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