Is There a New Sheriff In Town?

Entrepreneur, April, 2000 by Mike Hogan

It's getting close to high noon at the OS Corral.

If you're thinking about adding PCs and software to your business, it's a given that those programs will be running on Microsoft Windows, right? Not anymore.

There's a new operating system in town and, while it isn't about to topple Windows, it's definitely punching a few holes in its foundation. In fact, if Bill Gates needs another argument to persuade the antitrust court that the PC industry isn't really his own personal sandbox, he can point to the success Linux is having against the keystone of his alleged monopoly.

Developed by Finnish programmer Linus Torvalds back in 1991 and maintained by a slew of volunteer code slingers around the world, this low-cost OS has reached critical mass during the past 12 months. Long the darling of counter-culture (meaning non-Windows) programmers, Linux has lately developed quite a following among corporate IT managers and Web masters who find it a good alternative to Windows NT for local area networks (LANs), Web servers and other multiuser and/or Internet-oriented applications. The most recent Comdex trade show--where Torvalds shared top billing with Bill Gates--also demonstrated how popular Linux is becoming: You can now buy Linux server software off the shelf at CompUSA.

The next target is the huge desktop-applications market serving the Microsoft Office-bound workers in your company. This is Linux's weakest link, but not an insurmountable hurdle to deploying Linux-based computers in your company.

Linux has legitimate hopes of attracting packaged software developers not only because it's free of licensing fees, but also because it's free of Microsoft's economic vision, which often seems at odds with the interests of those dependent on a Windows license. Linux appeals to developers by virtue of it's sleekness, its modularity and its ability to run on undersized or even ancient PCs. Then, of course, there's the whole anti-big-business, anti-Gates energy of a movement committed to global teamwork and code sharing.

What's it mean for your company's productivity? Perhaps a more complex computer-purchasing decision with higher interim support costs. But possibly more bulletproof multiuser computing solutions at lower prices.

REVENGE OF THE NERDS

It was demoralizing enough when Bill Gates became the world's richest man. But the success of Linux really demonstrates just how far geek chic has progressed. Wall Street is snapping up the IPOs of Linux companies even more quickly than it did the dot.com IPOs of last spring. Come-out prices have rocketed to triple-digits in early trading, and VA Linux Systems' IPO set a first-day market appreciation record before ending the day at $239 1/4 a share.

Even private placements attract a Who's Who of venture capitalists. San Francisco-based LinuxCare's recent $32.5 million second round was subscribed to by Patricof & Co., Kleiner Perkins Caufield and Byers, Sun Microsystems, Dell Computer, Oracle and Motorola. In other words, some of the best and brightest minds in Silicon Valley are betting that Linux has legs, and it's starting to look like they just might be right.

In 1998, Linux was the third most popular server operating environment after Windows NT and Novell Netware, according to data from IDC. Paid Linux shipments held 16 percent of the server operating environment market. By 1999, Linux had grown enough to take the No.2 position behind Windows NT. IDC's preliminary data shows that paid Linux shipments held 25 percent of the market for server operating environments, says Dan Kusnetzky, program director of operating environments and serverware research services for IDC.

Overall, IDC expects the Linux environment--both client and server applications--to log a 26 percent compound annual growth rate through 2003, compared to about half that for Windows. Linux companies aren't likely to threaten Microsoft's unit shipments for years, but Linux is becoming a highly regarded back-office OS for small-business Web servers and office LANs serving eight to 12 clients, explains Kusnetzky.

COMMUNAL CODE

No one company owns Linux the way Microsoft owns Windows. Torvalds wrote the OS to look and work like the Unix he loved, but then put it in the public domain, keeping only the Linux trademark for himself so no claim-jumper could steal it. Today, dozens of different flavors of Linux are being maintained communally over the Net by tens of thousands of volunteers.

This development methodology has led to concerns that different Linux flavors will become Balkanized like the Unix variants before them. Not a chance, says Kusnetzky. While Unix companies intentionally made "better-but-incompatible" versions of the OS to gain commercial advantage, no one profits from participation in public-domain Linux projects.

Linux execution modules, complete with source code, are made freely avail-able over the Internet to any programmer or distributor willing to play by the Open Source Organization rules--meaning all changes to the code base must be shared freely over the Net, where it is subject to exhaustive peer review. The thousands of developers who critique Linux code have an interest in working toward universal compatibility; and that's creating a pretty bulletproof OS.