Windows critic shown HP's door

The Age ^ | September 13 2K2 | Garry Barker

[rdb3]

Windows critic shown HP's door
By Garry Barker
Technology Editor
September 13 2002

If Microsoft fears anything, it is Linux, the free, open-source operating system that is challenging the dominance of Windows software, especially in network servers.

Linux has been adopted by Dell, IBM and Hewlett-Packard who offer it as a parallel solution to Windows, yet, according to those of darker mind who watch the convoluted politics of the IT industry, even the biggest companies use a long spoon when supping with Bill Gates.

About 10 days ago, Hewlett-Packard fired Bruce Perens, one of the most respected Linux experts in the US because, as he told reporters, "the thing I did that was most hazardous for HP is the Microsoft-baiting I tend to do". The parting was amicable, he said, but he was fired.

Mr Perens was hired by HP two years ago to be a senior strategist for open-source software. In the US he was described as "an evangelist and rabblerouser on behalf of a computing counter-culture that increasingly is moving into the mainstream".

Part of his job description, Mr Perens said, was to "challenge HP management".

[WOSG]

It was so cold, I saw a venture capitalist with his hands in his own pockets.

LOL .... Linux/Slashdot PING ...

[WOSG]

I first ran linux 1.1.13 on a 486 ... I ran linux on Pentium 133Mhz for years (95-99) until upgrading ... answer is "yes". (I must say tho' you can get a decent MB+CPU for under $200 that'll smoke compared with 75mhz.)

[gore3000]

Open Source may or may not be a good idea for the consumers (it depends on circumstances), but companies that depend on Open Source software for revenues have a built-in cap on how much they can make. Venture capitalists don't like that.

That may be true in the software business, but HP is a hardware business and I do not see how restricting themselves to be an MS only shop will benefit them.

Even in software, one has to wonder if the open source model is not better than towing the MS line. Too many companies have gone under playing by MS's unfair rules.

[Joe Bonforte]

Nick said:

How much money do you think Dell or HP make on a copy of Windows that they resell as an OEM? Do you think it's any different than what they would make installing Linux instead?

and gore3000 said:

That may be true in the software business, but HP is a hardware business and I do not see how restricting themselves to be an MS only shop will benefit them.

Both of you completely missed the point of my comment. I said: ...companies that depend on Open Source software for revenues have a built-in cap on how much they can make. Venture capitalists don't like that.

Thus citing Dell and HP is irrelevant to my argument. How much venture capital do you think they have to raise? That would be approximately zero.

Venture capitalists only care about companies that have the potential for very large growth rates. That's the only way they can get the kinds of returns they want, after factoring in the failures they fund. Open Source does not offer them that.

Open Source may very well be a good idea for Dell, whose competitive advantage lies in assembly and distribution. But if a company came along and said, "OK, we want to compete with Dell, and our competitive advantage is going to be our use of Open Source. We'll spend the money to jazz up Open Source stuff to really make a difference."

The venture capitalist's first question will then be, "And what prevents Dell from taking all the stuff you developed and using it competitively against you?" The answer is "Nothing...". And the VC says, "Well, have a nice day, then."

My point was that trying to create a model with Open Source that lights up venture capitalists is pretty hard, because they care so much about competitive advantage, and the very nature of Open Source prevents gaining competitive advantage with it.

This also applies to established companies in some ways. HP and Dell may well use Open Source to save some money on their boxes in the commodity parts of their business. But HP also sells high end servers. If they run the same OS as everyone else, what competitive advantage does that give them? None. (Sun, et. al., have the same problem. Linux is actually a much bigger threat to Sun than it is to Microsoft.)

I think that's the real reason HP let this guy go - because they see Open Source to be as much a threat as a help to their business. I don't think it had much to do with whether they wanted to suck up to Microsoft. It surprises me that folks who don't believe in conspiracy theories in the rest of the world are always ready to believe one when Microsoft is involved.

[Nick Danger]

companies that depend on Open Source software for revenues have a built-in cap on how much they can make.

That isn't true. Even for a pure software play like Red Hat, there is no 'cap' on the revenues they might earn by selling services and support. Red Hat itself is still struggling, but the world is full of service and support companies, from IBM's Global Services Division to Accenture, and many of them are highly profitable and quite large. It is certainly no cakewalk to start one of these things and grow it, but there is nothing in principle that prevents a firm from making money doing this. The selling, or even reselling, of software license fees is a tiny component of revenues for these big support firms... it is just not true that removing license fees from the equation makes their business model impossible to execute.

if a company came along and said, "OK, we want to compete with Dell, and our competitive advantage is going to be our use of Open Source. We'll spend the money to jazz up Open Source stuff to really make a difference."

That in fact happened. The company was called VA Linux. I joined you in wondering what kind of sustainable advantage they could have, and predicted an early demise for them... which in fact happened. (I think the shell is still running around as a services company, but it's a shadow of what it was). However... the venture capitalists did buy in, and the company did enjoy a brief period of success, during which time it went public and a bunch of people got rich. I hate it when that happens, but I also recognize that the players at that table got rich, and I didn't participate. If people insist on being Greater Fools, perhaps it is our duty to take their money.

the very nature of Open Source prevents gaining competitive advantage with it.

But only in software development. It is still possible to gain competitive advantage by building nifty things around it. If IBM can slough off a big part of its operating system development expense on some willing volunteers, this leaves it more resources to build things like silicon-on-copper processors, and figuring out how to make little tiny transistors out of carbon nanotubes. IBM does not lose competitive advantage by embracing open source software, it gains a cost advantage. It can now show up on its customers' doorsteps with faster, cooler-running machines that cost less money to make. It has in fact been doing this, and cleaning Sun's clock with the results.

But HP also sells high end servers. If they run the same OS as everyone else, what competitive advantage does that give them? None.

That is not an argument against open source. That is an argument in favor of every hardware vendor having their own proprietary operating system. Been there, done that, the market was brutal in punishing vendors who tried to stay with that. You might as well just stuff that argument back into the box, because that's where we came from, and no one is going back.

I don't know why HP fired this guy. Maybe he's a loose cannon who says things that embarrass the company. They have Windows customers too, and they don't need an employee who publicly insults them. If he did that, he had to go. That's still worth points in a linux shop though, and their competitors will still use it on them. It would have been smarter to appoint him Country Manager of Albania and let him leave on his own, quietly.

[dheretic]

because they see Open Source to be as much a threat as a help to their business

There is about zero difference between a HPQ box and a Dell box. You aren't comparing the differences between a PowerMac and a SPARC workstation here. You know the free market is dead when the seller holds the buyer hostage. The government granted monopoly called copyright has a lot to do with that....

[Joe Bonforte]

That isn't true. Even for a pure software play like Red Hat, there is no 'cap' on the revenues they might earn by selling services and support. Red Hat itself is still struggling...

I rest my case. They are the Open Source poster child, and they can't seem to make money from it.

However... the venture capitalists did buy in, and the company did enjoy a brief period of success, during which time it went public and a bunch of people got rich.

Yes, venture capitalists did try out Open Source companies at one time. The lessons have been learned, and I don't think they'll be going back to that segment, for the reasons I outlined earlier. They understand better now what the limits are on growth for Open Source-based companies.

As far as services go, venture capitalists have a bias against service companies, and there's a very good reason why. If the service is based on having people perform it (as almost all consulting is, for example), then there is a built-in limit on how fast a company can grow. Namely, how fast can they find and train qualified people. Product-based companies are much less subject to that limit, so venture capitalists prefer them. That's not to say venture capitalists never fund service companies (they obviously do in some special cases), but that such companies are much less likely to be interesting to VCs.

[Joe Bonforte]

One last point about Red Hat just to get it off my chest. I used to be neutral about them (and all the rest of the Linux distros). Now I actively detest Red Hat. The reason is that they ran whining to the government of California trying to get a law passed to restrict their competition. Anybody who does that automatically sucks in my book.

[SauronOfMordor]

My point was that trying to create a model with Open Source that lights up venture capitalists is pretty hard, because they care so much about competitive advantage, and the very nature of Open Source prevents gaining competitive advantage with it.

There are ways to make money in an Open Source environment. If you create original application (not derivative from an Open Source app) that runs on Linux, you can copyright it and charge what you want and not have it be Open Source. Or, you might have an Open Source app for which you have written proprietary software that customizes it for a particular customer.

[martin_fierro]

(I must say tho' you can get a decent MB+CPU for under $200 that'll smoke compared with 75mhz.)

Yeah, I just have an old 75 mhz Pentium laptop sitting around that I'd like to squeeze a little more life out of.

Windows CREAKS on it.

[Joe Bonforte]

If you create original application (not derivative from an Open Source app) that runs on Linux, you can copyright it and charge what you want and not have it be Open Source.

So you're saying that the way to make money on an Open Source platform is to get away from Open Source for your own stuff. I completely agree. But then you're not making money from Open Source software, are you? No more than a company selling application software on Windows makes money on Windows.

[dyed_in_the_wool]

Now license .NET for HP/UX.

Bwwwwwwwaaaaaaaahhhhhhhhhhaaaaaaaaaahhhhhhhhhhaaaaaaaaaaaa.
Whew. Good one.

[Bush2000]

It will be interesting to see if IBM picks him up as a Fellow. In better times, the VC's would grab him as a "celebrity executive" for one of their start-ups, but things are pretty cold in that sector right now.

Nah, his new title is "unemployed".

[Bush2000]

Anything I should know before I download Linux?

Yes, have a drill handy and a target on your forehead when you get tired of editing configation files.../SATIRE

[altair]

I don't know why HP fired this guy. Maybe he's a loose cannon who says things that embarrass the company.

I met Bruce a year ago at Linux World in Tokyo. "Loose cannon" is an accurate description, but I sure wish I could have (what used to be) his job.

[Bush2000]

That isn't true. Even for a pure software play like Red Hat, there is no 'cap' on the revenues they might earn by selling services and support. Red Hat itself is still struggling, but the world is full of service and support companies, from IBM's Global Services Division to Accenture, and many of them are highly profitable and quite large.

Service-related companies don't have the potential for profitability that software companies do. They are highly labor-intensive; whereas, once software is developed, it continues to generate profits. VA Linux failed miserably to exploit a service-based revenue model. And the only reason that IBM continues to trudge along is that it sees services as an adjunct to selling hardware -- services aren't an end unto themselves.

However... the venture capitalists did buy in, and the company did enjoy a brief period of success, during which time it went public and a bunch of people got rich...

Which proves at least one thing: That there are some extraordinarily stupid human beings on this planet.

It is still possible to gain competitive advantage by building nifty things around it. If IBM can slough off a big part of its operating system development expense on some willing volunteers, this leaves it more resources to build things like silicon-on-copper processors, and figuring out how to make little tiny transistors out of carbon nanotubes.

True. And that's precisely what Sun is trying to do now. They want free labor to replace Solaris on cheap boxes. But I doubt that it will work because they don't have nearly the economy of scale that Intel and AMD provide.

That is not an argument against open source. That is an argument in favor of every hardware vendor having their own proprietary operating system.

Yes. And as long as that high-end box combined with that proprietary advantage provide enough value (and reasonable compatibility), people will continue to buy it.

[Bush2000]

I forgot to add one point. Let's say that HP comes up with some optimization -- let's say a kernel or a device driver or a clustering change -- it isn't in HP's interests to release that optimization to the rest of the world. For one thing, it may be patentable and (therefore) valuable intellectual property. Secondly, the optimization is what sets HP's product apart. Once that advantage is gone, the only thing which separates one OEM from another is hardware and drivers. That's it. And that's not enough to keep some of these companies in business.

[Bush2000]

There are ways to make money in an Open Source environment.

Fine, I'll call your bluff. Name a few companies that are selling (profitably) open source software.

[Bush2000]

Now I actively detest Red Hat AOL, Sun, and Netscape. The reason is that they ran whining to the government of California trying to get a lawsuit passed to restrict their competition. Anybody who does that automatically sucks in my book.

Funny how you can change a few words and arrive at the same result.

[narses]

Microsoft's office is essentially free. If I buy a copy Office Professional, what is the list price (400+ dollars)? What would I pay for a new computer with office installed (400+ dollars)? Why linux when I can Microsoft for free?