Mandrake 8.1 - The Sweetest Thing

[Warren Togami]

----- Original Message -----
From: "W. Wayne Liauh" <LiauhW001 at hawaii.rr.com>
To: "Linux & Unix Advocates & Users" <luau at list.luau.hi.net>
Sent: Thursday, September 27, 2001 10:36 PM
Subject: [luau] Re: Mandrake 8.1 - The Sweetest Thing


> Thanks, Warren.
>
> Just a side note.  Most corporations can easily absorb the cost of
> licensing fees (in the form of boxes) at the level charged by Mandrake.
>  However, it is next to impossibility for a corporation to make a
> donation, even to a non-profit organization (legally speaking, this is
> something called "ultra vires"--a corporate officer has no power to give
> money away unless authorized by its shareholders).  Since Mandrake is
> not a non-profit organization, this makes it even more difficult.

Huh?  Mandrake isn't giving money to any non-profit organization.  However
because Mandrake is a for-profit company, we cannot get tax write-offs for
making donations to Mandrake.  That's fine.  Just look at is as your payment
for their excellent product development.

>
> Many in luau--or whatever we may want to call it--criticize the per-seat
> licensing model by Caldera.  But if we consider the legal ramifications,
> this (per-seat license for commercial use) is, unfortunately, the only
> way for Linux companies to survive.  For system integrators, you can
> typically charge a markup rate based on the cost of the product.  If you
> are selling Mandrake distro based services, because the cost of the
> product is zero, your markup, at least theoretically speaking, wil also
> be zero.  Microsoft was able to achieve such a dominating position
> partly because it has an army of well paid system integrators.
>

I wholeheartedly disagree that Caldera's business model will be the only way
for Linux companies to survive.  On the contrary, I believe that Caldera
will be the next victim of the sagging economy.

Red Hat - Breaking even two quarters in a row after adjusting for one-time
costs.  They feel secure enough financially that they have even announced a
stock buy-back program to combat their low share price and instill more
confidence in the market in their ability to remain in business.  In the
wake of the poor economy, Red Hat has focused their core business on large
enterprise customers.  They provide the service of management and
development for thousands of workstations and servers at large companies who
are their customers.  They continue to make big wins with more and more of
these large customers signing up for their services in multi year contracts.

Red Hat Network subscription - Essentially a small fee per-seat license paid
monthly.  These workstations and servers get the automated upgrade
management tools of RHN.  RHN subscription is OPTIONAL.  If you don't pay,
you can still login to your RHN account and see which of your machines need
which update packages, and you can update those packages yourself through
other means.  This is the key difference between Caldera and Red Hat's
business model.  With Caldera you MUST pay per-seat licensing.  With Red Hat
you can OPTIONALLY pay per-seat licensing.  Large customers may choose to
buy the RHN service, because it greatly simplifies the task of updating
thousands of workstations and servers.

Red Hat also makes a significant amount of revenue on their software
development and platform development services.  Their acquisition of Cygnus
(an already profitable service based company) brought a large amount of
cross-platform development technology with the GNUPro development tools to
Red Hat.  I was surprised by the quality and usefulness of GNUPro
development tools, allowing you to develop software for several target
platforms, including Windows, Linux, and several of the commercial Unix
platforms.  They recently went into the embedded services market, developing
Linux and eCos based solutions for Taiwanese embedded device manufacturers.
Another recent venture is their "Red Hat Database" product and support
services, presenting themselves as a low cost competitor to Microsoft SQL
and DB2.  It remains to be seen if they will profit on these new ventures,
but I expect they will do well at least on the embedded services.

Mandrake - If I recall correctly, Mandrake was profitable a long time ago,
though I am not at all familiar with their business model.  Deven may know
more about this.  Mandrake has much lower operating expenses than Red Hat,
and their product cycles are much quicker.  (Albeit you see far more
Mandrake security updates and bug fix patches for Mandrake, I'm blaming this
on less Q&A and a greater willingness to use bleeding edge packages in their
official distribution.)


What I think about Caldera is that per-seat licensing was a smart move at
least on the short term when they have a serious need to generate any
revenue possible.  However, they are shooting themselves in the foot in the
long term and they must think of another way of keeping their current
customers from being enticed by lower cost competitors like Red Hat and
Mandrake.  The majority of Caldera's current customers are the traditional
users of commercial SCO (now called OpenUnix), many of which are being
transferred to OpenLinux.  OpenUnix and OpenLinux are now made to be
complementary and compatible products, running the same software without
even needing to recompile.  These traditional customers are used to paying
higher prices for quality products, they need to maintain compatibility with
their existing SCO systems that they have been running for many years, and
they are perhaps distrustful of anything that is "free" like Red Hat.

However, I feel that this business model will ultimately fail for several
reasons.
1) As competitors like Red Hat gain more market recognition, they will
eventually jump ship for cost reasons.  Per-seat licensing for Caldera may
work in the short term because these companies want to save money NOW, and
put off restructuring or migration costs until later financial quarters when
the market is not as negative for their EPS.  Everything must be done to
increase the EPS and make shareholders happy NOW rather than later.
2) In the long term Caldera will lose because competitors like Red Hat and
IBM custom engineer migration plans away from commercial Unix.  While
migration services cost money, long term costs are promised to be far lower
than the commerical Unix that they replaced.  The majority of the large Red
Hat enterprise customers have leaving their SCO, HP-UX, AIX or Solaris
platforms in favor of Red Hat Linux.  On the recent RH investors conference
call the CTO described migration away from commercial Unix to Red Hat as
"Very easy."
3) Caldera may keep many of their current customers for a while, but they
will not gain many large, new customers.
4) Caldera's financial situation is very grim.
5) Caldera is completely alienating the Linux community in general.  Schools
and the education sector will be the next BIG THING in Linux deployment
across the country and the world, and I don't see any of these initiatives
using Caldera.  Instead they are using Red Hat, Mandrake or Debian.  The
tech people leading these educational Linux intiatives across the country
(like me) are freedom (as in liberty) Linux advocates themselves, and we
turned off by the Caldera licensing model.  No matter how nice their
technology may be...  OpenUnix and OpenLinux are GREAT products, but the
cost is not worth it compared to their competitors.

When I say schools will be the next BIG THING in Linux, I mean it.  Recently
at Mid-Pacific a decision was made to freeze spending in the wake of
uncertainty of the economy.  As a result, we cannot afford the dozens of
additional computers that we need across the campus to fill educational
technology needs.  I told them that I could launch 50 Linux based desktops
across the campus with full web browsing and office applications at near
zero cost.  Ever so suddenly, the Principals are realizing the power of
Linux, and they have approved test runs of these systems.  The desks for the
Linux computer lab are being modified RIGHT NOW, and we will be able to
launch that within two weeks.

(Note: We need some volunteer help when we install the computers in the
computer lab.  One weekend we will spend a few hours carrying up all the
hardware and plugging everything in.  Please e-mail me if you can help.)

Brian Chee at the University of Hawaii ICS department is currently comparing
prices on Linux workstation hardware, as a low cost way of giving their
graduate assistants low maintenance, low cost but USEFUL workstations.

Budgets are being tightened in companies and schools across the nation in
the wake of this economic bubble burst and terrorist attack.  In many places
around the world Linux is now seriously being looked at due to budget cost
effectiveness reasons.  This is an unprecedented opportunity for Linux.

> That said, you are providing an excellent service (to the LInux
> community and to us) by giving out LM8.1 CDs and/or making available a
> mirror site to "individual" users.
>
>

Sorry I wasn't able to make a mirror tonight.  Too much homework...

Could someone please post a few links to mirror download sites that aren't
clogged?  That should help out folks on the list in the short term.  In the
long term, I'm soon moving a permanent server into the UH ICS department
where I will run a high capacity Linux mirror.  If you want me to mirror
your favorite distro, then buy me large hard drives to store them on the
server.  I currently plan on mirroring Red Hat and Mandrake, and all of
their development packages (Rawhide and Cooker).  Also will mirror KDE and
Cygwin.

Warren Togami
warren at togami.com