Canonical and Microsoft: Is Sustaining a Business Better than Turning a Profit Right Now?

The New York Times ran a piece this Sunday featuring Canonical CEO Mark Shuttleworth. Though a majority of the piece was biographical, and the rest wasn't exactly the picture of accuracy in its portrayal of Ubuntu (or Linux in general), there were a few interesting figures.

It gives pause to wonder how, in this economy, and in an ever-changing industry, profit still gets much better press than growth.

The Times reports Canonical is approaching the $30 million a year mark in terms of revenue, and Shuttleworth feels that is the point when the company will become self-sustaining.

The Times also says that that $30 million figure won't worry Microsoft. Of course it won't, at least not when it comes to the bottom line, right here, right now. It's mere pocket change. I agree wholeheartedly with Linux Magazine's Bryan Richard that it's the long-term that Microsoft needs to be very, very concerned about.

Richard pulls out one of interesting figures in the article: Microsoft had 10,000 people (the article is unclear whether these were all developers, or administrative and support staff were factored in) working on Vista for a five year period. The Times might be correct in that Canonical's approach makes turning a profit difficult, but huge profits in any given year can mean relatively little five years on. Canonical's self-sustaining revenue may not be threatening -- but it leaves one wondering how sustainable Microsoft's development process really is.

The tech industry is in a difficult spot -- the economy is rough, technology is by nature always changing, and businesses -- and business models -- are organic, evolving forms. Profits are important -- as is innovation, listening to customers, and consistently delivering and standing by a product. It might not come down to open source "winning" the most revenue -- it might be simply that it remains available, and supported when the final buzzer sounds

As much money as MS has made on that crappy OS (Vista), Windows 7 could REALLY take off. Most who have evaluated it say it is much better.

Better than what?

Being better than Vista wouldn't be a big stretch. The real test is, "Is it better than XP?"

Because that's why Vista is a lemon. It's not so much that Vista is bad. Microsoft has released much worse upon the world.

The problem Vista has is that it's not better than what came before it.

If you're going to get people to buy an OS upgrade and then upgrade hardware to make it run, or even just buy a new PC with Vista installed, you have to offer them one minimum standard.

It has to be sufficiently better than XP to justify spending the money.

And that's Vista's problem. It isn't better than XP. In some ways it is worse.

Now comes Windows 7. So far the reviews are It's Vista with a fresh coat of paint

Or...

Looks like it's OK to me, not too much different than Vista but a few new items

But the answer to the question, "Is it better than XP?" still seems to be unanswered. And the longer it goes unanswered the more likely the answer is going to be no.

Gee, the demise of Microsoft. Where have we been hearing that one? Oh, for the past 15 years form the Open Source crowd. So far, we’re not impressed.

Gee, I don't know that the OSS crowd has been crowing the demise of M$ since 1994. But it has been making steady gains. Personally, I stopped using Windows full time in 03, six years ago. My latest laptop, a T61 Thinkpad came with Vista Business. It's interesting, and aggravating. I installed openSUSE 11.1-x86_64 on it. It installed right away. No fuss no muss. Resized (shrank) the NTFS file system, and created logical volumes for Linux. Everything works (even WiFi). I boot into Vista now and then to play around with it, but that's a hassle since I'm way more comfortable in Linux now. So as soon as I get around to setting it up, I'll have Vista running in VM, and avoid the hassle of the reboots.

M$ should be worried long term. Their business model and pricing structure relies on a robust, expanding economy, with free flowing cash available for their upgrade (soft and hard) cycle. If companies are going to tighten up their spending, then companies will either stick with the systems they have, while continuing to pay the licensing and support costs, or they may start to take a more serious look to OSS and Linux, that can provide everything they need for, oh say, 90~99% of their operations.

Lets see, free OS, free Office, Free web server, free development tools.... that kind of thing is going to look awfully attractive to companies with tightening cash flow.

I'm not saying a transition would be painless and without costs, but the costs may very well be less than new MS licenses across the board for the next "upgrade cycle", especially with a large number of seats.

Oh and before you go down the too hard to retrain staff argument. I had my father running on Linux. He was late 70's at the time, and didn't have even 1/4 the computer experience that most people today have. Granted he mostly used Firefox and e-mail, and occasionally OpenOffice, but once you understand the basic workings of a GUI, learning new menu options isn't all that difficult.

M$ should be worried long term. Their business model and pricing structure relies on a robust, expanding economy, with free flowing cash available for their upgrade (soft and hard) cycle. If companiesare going to tighten up their spending, then companies will either stick with the systems they have, while continuing to pay the licensing and support costs, or they may start to take a more serious look to OSS and Linux, that can provide everything they need for, oh say, 90~99% of their operations.

Yes, but. If it happens that MS starts to actually feel gains by Linux and OSS, they have more than enough momentum to allow them to afford negotiating near giveaway license deals with corporations to maintain market share. Just making up numbers in my layman's head, it seems to me that $10 a seat for Windows and Office would go a long way towards persuading the more skittish CEO's to go with what they are familiar with vs what this IT kid is telling them.

Well hell, for $10 a seat for windows and office, I might even fork over some dough. But seriously, how long do you think they could sustain that model? Then you also have to consider, and granted this is all made up numbers and speculation at this point, that if a few (not a lot) large corporations make the switch before M$ responds, then there's a rather substantial loss. And I'm not just talking monetary loss, but more importantly, exposure. And execs talks. If Exec A says to Exec B, yea, I cut x Million from my IT budget by getting away from M$, that will get noticed. Sure they may not be able to completely get rid of M$, but if they can reduce their overall seats from 100% of their needs, to 10%.... And if they have in-house developers.. they could very well add to the OSS code base. IBM has already done it, and they're actually doing pretty well these days. But then IT is their actual business. Still, that's a pretty good contributor.

And of course there's no law that say you can't sell proprietary software for Linux. Just off hand: Oracle comes to mind.

Also, Schools here in Indy are already using a multitude of OS', Linux included. Kids are getting exposed. And they are of course free to download a distro and try it out. No cost to mom and dad.

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