Linked by Thom Holwerda on Tue 20th Dec 2005 18:37 UTC, submitted by Robert Escue
IBM Unix isn't a flashy market. But what distinction there is has been going to Sun Microsystems lately, by making its Unix-based Solaris operating system available as open-source software. Last week, IBM moved to put its AIX Unix operating system back on everybody's radar by revealing plans to create a development center on its Austin, Texas, campus to speed up AIX development.
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RE[6]: One size fits all?
by Simba on Wed 21st Dec 2005 01:31 UTC in reply to "RE[5]: One size fits all?"
Simba
Member since:
2005-10-08

"ther's they have to buy boxes sets and they do actually fork over for that, but the real money flow is in commercial support."

Sure. and those businesses that to pay for commercial support are supporting all the ones that don't. Hence why Red Hat's lowest level of support contract is more expensive than Sun's higest level of support contract.

"The reason they don't pay for support is because they cannot afford it, in which case were they to use any other OS they wouldn't be paying much if anything for that either."

That's not true. A lot of them don't buy support simply because they don't think they will need it, even though they could easily afford it.

"Companies can still make a profit from offering something(s) for less than the competitors,"

They can. But as I aid, Red Hat doesn't. Red Hat's lowest level of support is more expensive than Sun's highest level of support.

The vast majority of Linux distros running on servers, are not paid for. If they were, then Red Hat should have a lot more market capitalization value than they do considering how popular Red Hat Linux is.

Reply Parent Score: 1

RE[7]: One size fits all?
by Celerate on Wed 21st Dec 2005 04:35 in reply to "RE[6]: One size fits all?"
Celerate Member since:
2005-06-29

"Sure. and those businesses that to pay for commercial support are supporting all the ones that don't."

It's obvious you're going to argue this all week just for fun, so this is my last answer and after that you'll be arguing with yourself.

Companies build business models around providing a product for free and then making money off the services that people then pay for to accompany the free product. In this case the free product is a Linux distribution and the service people pay for can be any combination of the following:
- Access to a special package repository
- Priority access to new software
- Service by phone and e-mail
- Early access to new versions

People and companies will often try a free product before paying anything, this introduces them to the product and gives them a good chance to find out that they like it. If they do like it they'll often pay for some subscriber extras if they can afford it, if not they'll often pay for a boxed set to reward the company for making a good product. The fact that the product is available freely for an indefinite period of time doesn't stop people from paying for it, if anything it encourages them to keep using the product and increases the already good chances that perspective customers will pay for it.

If people don't pay for the product other costomers don't pay extra to cover for that. Free versions are given away through low cost means, usually as a download which by being hosted on several third party mirrors and costs very little compared to income.

"That's not true. A lot of them don't buy support simply because they don't think they will need it, even though they could easily afford it. "

Saying "A lot of them" isn't true either. Sure some people can afford to pay for support but don't because they don't need it. Either way, as I've stated above the ones who don't pay don't cost the company much either, and they could easily become paying customers when presented with the bonuses of what a marginal amount of money can get them. Even if people only buy a boxed copy of the distribution with printed manuals, extra software on a CD, and nice looking profesionally made CDs that's still enough to support the company and please the customer.

"They can. But as I aid, Red Hat doesn't. Red Hat's lowest level of support is more expensive than Sun's highest level of support. "

Actually that proves what I've said, Sun is trying to make more money by selling for less than Red Hat, and assuming customers feel the product is worth the price they'll bite. If Red Hat offers more features, better support or some other bonus with their higher price then they can price higher and still have lots of customers. The point is that most people care more about what they are getting for the price than what the price itself is.

"The vast majority of Linux distros running on servers, are not paid for."

Actually the vast majority of comercially run Linux servers are on payed support contracts. I've spent a long time looking at different commercially run web hosting services, all the ones that offer Linux also have contracts with the distributiors that offer support contracts.

You're saying that looks like nothing more than a wild assumption, or at best hearsay.

"If they were, then Red Hat should have a lot more market capitalization value than they do considering how popular Red Hat Linux is."

Again this either a wild assumption or hearsay.

You think you know how much Red Hat is making off sold support contracts, as well as how many people use Red Hat Linux on servers? I highly doubt that.

Red Hat also isn't the only distribution providing Linux, they wouldn't get payed for people using Novell Linux, Novell would. The same goes for people using Linspire, if they want support they don't pay Red Hat, they pay Linspire.

Reply Parent Score: 1

RE[8]: One size fits all?
by Simba on Wed 21st Dec 2005 05:14 in reply to "RE[7]: One size fits all?"
Simba Member since:
2005-10-08

"It's obvious you're going to argue this all week just for fun, so this is my last answer and after that you'll be arguing with yourself."

Translation: You know you can't win the argument, so you are going to get the last word in and then try to convince me not to respond because you won't be looking. Nice tactic.

"Companies build business models around providing a product for free and then making money off the services that people then pay for to accompany the free product. In this case the free product is a Linux distribution and the service people pay for can be any combination of the following:"

Sounds great in theory. In reality, it rarely works. JBoss converts only about 3% to 5% of their users into paying customers. And that is on the high end. The typical rate of conversion is even lower. That means if you give your software away for free, only about3% of the people who use it will actually buy support contracts. You have to have a truely massive user base for that to be sustainable... Or you have to do one of the following:

A: Overcharge the customers that do pay to make up for the ones that aren't. This is why Red Hat's lowest level support plan is more expensive than Sun's highest level support plan.

B: Cut your development costs by relying on volunteer developers to do most of the development for you. And like outsourcing, this plays a big role in reducing developers to commodity status who's skills are not worth very much monetary value (and that's for the ones that can actually get jobs).

"If they do like it they'll often pay for some subscriber extras if they can afford it, if not they'll often pay for a boxed set to reward the company for making a good product."

As I said, on average, the people who actually pay for the extras is about 3% to 5% of the users. Make no mistake about it. Human beings are cheapskates. They are much quicker to punish then reward.

Saying "A lot of them" isn't true either.

Yes it is true. When the average conversion from free user to subscriber is only 3%

"If Red Hat offers more features, better support or some other bonus with their higher price then they can price higher and still have lots of customers."

But they don't offer either more features, or better support. Sun's support is superior to Red Hat. The reason Red Hat is so much more expensive is what I have already said. Only a very small percentage of their users are supporting the entire Red Hat company. I don't know what Red Hat's conversion rate to paying customer is. But as I said, the average is only 3%

"Actually the vast majority of comercially run Linux servers are on payed support contracts."

Novell operates at a loss. So does MySQL and JBoss. In other words, it is a myth that businesses are making money off the "open source / service and support model". Novell is losing money on SuSE, MySQL is losing money on MySQL, and JBoss is losing money on JBoss. Red Hat managed to finally make some money after 10 years of losses. But nearly half of it was from investment income. And it is also after having closed several offices and laying off quite a bit of its staff after the Linux FAD burst and its stock value crashed. VALinux also had to lay off over 35% of its staff after its stock value crashed.

"You're saying that looks like nothing more than a wild assumption, or at best hearsay."

So then don't take my word for it:

http://www.forbes.com/intelligentinfrastructure/2005/06/15/jboss-ib...

Now matter how much the open source people want to deny it, making money off the service and support model is the exception, not the rule. It took Red Hat 10 years to make any money at all. And even then they only made $20 million after you take out investment income.

SuSE was losing money, and so is Novell. Turbolinux went bankrupt. So did Mandrake (And Mandrake was outselling Red Hat for awhile). MySQL operates at a loss, so does JBoss. And Red Hat and VA stock crashed bigtime, causing investors to lose billions of dollars. The stock value of Red Hat today is worth only about 1/10th of what it was during the peek of the Linux hype. VA Linux stock is worth less than 1/100th of what it was during the peak of the Linux hype.

Edited 2005-12-21 05:19

Reply Parent Score: 1