Linux Inc. - Article in Businessweek

Someone pointed out this article to me. Just thought I would pass it
along. Very good read.

...Kevin



-------- Forwarded Message --------
Subject: Linux Inc. - Article in Businessweek
Date: Fri, 11 Mar 2005 14:33:29 -0800


http://www.businessweek.com/magazine/content/05_05/b3918001_mz001.htm

COVER STORY

Linux Inc.
Linus Torvalds once led a ragtag band of software geeks. Not anymore.
Here's an inside look at how the unusual Linux business model increasingly
threatens Microsoft

Five years ago, Linus Torvalds faced a mutiny. The reclusive Finn had taken
the lead in creating the Linux computer operating system, with help from
thousands of volunteer programmers, and the open-source software had become
wildly popular for running Web sites during the dot-com boom. But just as
Linux was taking off, some programmers rebelled. Torvalds' insistence on
manually reviewing everything that went into the software was creating a
logjam, they warned. Unless he changed his ways, they might concoct a rival
software package -- a threat that could have crippled Linux. "Everybody
knew things were falling apart," recalls Larry McVoy, a programmer who
played peacemaker. "Something had to be done."

The crisis came to a head during a tense meeting at McVoy's house, on San
Francisco's Twin Peaks. A handful of Linux' top contributors took turns
urging Torvalds to change. After an awkward dinner of quiche and
croissants, they sat on the living room floor and hashed things out. Four
hours later, Torvalds relented. He agreed to delegate more and use a
software program for automating the handling of code. When the program was
ready in 2002, Torvalds was able to process contributions five times as
fast as he had in the past.

The Twin Peaks truce is just one of the dramatic changes during the past
few years in the way Linux is made and distributed. The phenomenon that
Torvalds kicked off as a student at the University of Helsinki in 1991 had
long been a loosey-goosey effort, with little structure or organization.
Young students and caffeine-jazzed iconoclasts wrote much of the code in
their spare time, while the overtaxed Torvalds stitched in improvements
almost singlehandedly.

TURNING PRO
Today, that approach is quaint history. Little understood by the outside
world, the community of Linux programmers has evolved in recent years into
something much more mature, organized, and efficient. Put bluntly, Linux
has turned pro. Torvalds now has a team of lieutenants, nearly all of them
employed by tech companies, that oversees development of top-priority
projects. Tech giants such as IBM (IBM ), Hewlett-Packard (HPQ ), and Intel
(INTC ) are clustered around the Finn, contributing technology, marketing
muscle, and thousands of professional programmers. IBM alone has 600
programmers dedicated to Linux, up from two in 1999. There's even a board
of directors that helps set the priorities for Linux development.

The result is a much more powerful Linux. The software is making its way
into everything from Motorola (MOT ) cell phones and Mitsubishi robots to
eBay (EBAY ) servers and the NASA supercomputers that run space-shuttle
simulations. Its growing might is shaking up the technology industry,
challenging Microsoft Corp.'s (MSFT ) dominance and offering up a new model
for creating software. Indeed, Torvalds' onetime hobby has become Linux
Inc. "People thought this wouldn't work. There are just too many people and
companies to hang together. But now it's clear it does work," says Mark
Blowers, an analyst at market researcher Butler Group.

Not that this Inc. operates like a traditional corporation. Hardly. There's
no headquarters, no CEO, and no annual report. And it's not a single
company. Rather, it's a cooperative venture in which employees at about two
dozen companies, along with thousands of individuals, work together to
improve Linux software. The tech companies contribute sweat equity to the
project, largely by paying programmers' salaries, and then make money by
selling products and services around the Linux operating system. They don't
charge for Linux itself, since under the cooperative's rules the software
is available to all comers for free.

How do companies benefit from free software? In several different ways.
Distributors, including Red Hat Inc. (RHAT ) and Novell Inc., (NOVL )
package Linux with helpful user manuals, regular updates, and customer
service, and then charge customers annual subscription fees for all the
extras. Those fees range from $35 a year for a basic desktop version of
Linux to $1,500 for a high-end server version. The dollars can add up. Red
Hat, which employs 200 programmers, is expected to see profits triple, to
$53 million, in its current fiscal year, as revenues surge 56%, to $195
million.

Those numbers are dwarfed by the winnings for computer makers that sell PCs
and servers preloaded with Linux. IBM, HP, and others capitalize on the
ability to sell machines without any up-front charge for an
operating-system license, which can range up to several thousand dollars
for some versions of Windows and Unix. At HP, sales of servers that run the
Linux operating system hit nearly $3 billion during the past fiscal year,
almost double the tally three years ago.

In the Linux community, this kind of red-meat capitalism is combined with
the sharing philosophy of the open-source movement. Dick Porter, a
T-shirted coder who often works under an apple tree in his garden in Wales,
is on the same team with Jim Stallings, a hard-charging ex-Marine who
travels the world making deals for IBM. What they have in common is a keen
interest in making Linux ever more capable. The result is a culture that's
cooperative, meritocratic -- and Darwinian at the same time. Any company or
person is free to participate in Linux Inc., and those with the most to
offer win recognition and prominent roles. "Linux is the first natural
business ecosystem," says James F. Moore, a senior fellow at the Berkman
Center for Internet & Society at Harvard Law School.

STRANGE GROUND
To understand the inner workings of Linux Inc., BusinessWeek took a journey
through the fast-evolving ecosystem. The unusual trip included everything
from sitting in on gritty developer meetings to interviewing dozens of tech
execs and engineers from Germany to China. One stop was Torvalds' home,
just south of Portland, Ore. The 34-year-old moved from Silicon Valley last
summer, in part because he was hired by the Beaverton (Ore.) Linux advocacy
group Open Source Development Labs Inc. (OSDL). He spent several hours
talking about Linux as his three towheaded daughters played nearby.
Something of a rock star in techie circles, he was preparing for a flight
to Los Angeles for the premiere of Shark Tale -- which was animated on
Linux computers -- and was taking along his oldest daughter, Patricia, then
7 years old.

What's clear from these interviews is that the organization supporting
Linux has matured more dramatically than most outsiders realize. While
Torvalds remains at its center, he has ceded some control and accepted lots
of help, thanks to some prodding from individual programmers like McVoy and
some coaxing from tech giants whose fortunes have become inextricably
linked to Linux. One important step was the move by IBM, Intel, and others
to set up OSDL as the focal point for accelerating Linux adoption.

Perhaps most surprising, the legal attacks on Linux over the past year have
unified the community. There continue to be some internal tensions -- for
instance, Linux backers fret that different versions of the software will
become incompatible with one another. Yet a suit by SCO Group Inc., a
software company that claims IBM handed some of SCO's intellectual property
to Linux, gave Linux aficionados the motivation to coordinate their efforts
as never before. Tech companies have opened their checkbooks to pay for
administrative support, including a legal staff that scans every stitch of
code to make sure it can bear patent scrutiny. Even Linux' original
idealists, who have grumbled at times about the corporatization of the
community, put their complaints on hold and rallied to defend their baby.
The SCO suit against IBM is slated for trial late this year.

Put it all together, and Linux has become the strongest rival that
Microsoft has ever faced. In servers, researcher IDC predicts Linux' market
share based on unit sales will rise from 24% today to 33% in 2007, compared
with 59% for Windows -- essentially keeping Microsoft at its current market
share for the next three years and squeezing its profit margins. That's
because, for the first time, Linux is taking a bite out of Windows, not
just the other alternatives, and is forcing Microsoft to offer discounts to
avoid losing sales. In a survey of business users by Forrester Research
Inc. (FORR ), 52% said they are now replacing Windows servers with Linux.
On the desktop side, IDC sees Linux' share more than doubling, from 3%
today to 6% in 2007, while Windows loses a bit of ground. IDC expects the
total market for Linux devices and software to jump from $11 billion last
year to $35.7 billion by 2008.

In response, Microsoft has launched a counterattack against what it calls
its No. 1 threat. The software giant's "Get the Facts" publicity campaign
claims that Windows is more secure and less expensive to own than Linux.
Microsoft has notched some victories. The city government of Paris, for
instance, decided in October against a complete switchover to Linux, citing
the costs of such a change. Now that Linux distributors are charging more
for subscriptions, Microsoft figures that it can use the same cost-benefit
arguments that helped bury old rivals, such as Netscape Communications
Corp. "It's getting to be much more like the old world instead of the new
world for us, and we know how to compete with that kind of phenomenon,"
says Microsoft Chief Executive Steve Ballmer.

But Ballmer may have a tough time persuading customers that Windows is
cheaper than Linux. It often isn't. With Windows, end users pay an up-front
fee that ranges from several hundred dollars for a PC to several thousand
for a server, while there's no such charge for Linux. The total cost over
three years for a small server used by 30 people, including licensing fees,
support, and upgrade rights, would be about $3,500 for Windows, compared
with $2,400 for a Red Hat subscription, say analysts. The situation where
Microsoft can have an edge is when a company already is using Windows.
Then, in some cases, it can be cheaper to upgrade to a newer version of
Microsoft's software, rather than replacing it with Linux -- once you take
into account the retraining expenses. Analyst George Weiss of market
researcher Gartner Inc. says that Microsoft may trumpet those individual
cases, but "there's no study that says Windows will be a better total cost
of ownership in general."

Microsoft isn't shying away from brass-knuckle tactics in an effort to win
this battle. Several sources say that its executives have been warning
corporations that they're taking a legal risk by using Linux. A
spokesperson for one company whose CEO met with Ballmer says the
implication of their conversation was that Microsoft is considering suing
outfits that use the software and claiming that it infringes Microsoft
patents. Although legal experts doubt Microsoft would actually sue its own
customers, Linux supporters say such warnings are an effort to spread doubt
and uncertainty. "Our friends in Redmond [Wash.] are rattling their swords.
They're trying to scare people into not switching from Windows to Linux,"
says Jack Messman, CEO of Linux distributor Novell. Microsoft acknowledges
discussing legal risks with customers but denies trying to intimidate them.
It won't say whether it believes Linux infringes on its patents.

COMMUNAL IMPULSES
That Linux is more than holding its own against Microsoft's onslaught
suggests it could become a model for others in the tech industry. Otherwise
fierce competitors -- think IBM and Hewlett-Packard (HPQ ) -- are
demonstrating that they can benefit from embracing the open-source
philosophy of sharing work. By collaborating on the operating system, they
all get a stable foundation on which to build tech projects and save
millions in programming costs. "Much software will be developed this way.
It's especially good for infrastructure -- stuff that affects everybody,"
says Torvalds. "In the long run, you can't sanely compete with the
open-source mentality."

Linux Inc. has become so mature that it's clear it could continue to thrive
even without Torvalds. Already his chief lieutenant, Andrew Morton, shares
leadership duties and makes all the public appearances. From 1997 to 2003,
when Torvalds worked for chipmaker Transmeta Corp., putting out Linux
wasn't even his full-time job -- yet its market share in servers rose from
6.8% to 24%. Plus, this isn't the army: Programmers don't wait around for
orders. Linux' legions know how the development process works, and they
just do it. "I manage people, but not in the traditional sense," says
Torvalds. "I can't say, 'You do this because here's your next paycheck.'
It's more like we know what we want to do, but we don't know how to do it.
We try directions. Sometimes somebody disagrees and has a vision. They go
and sulk in their corner for a year. Then they come back and say, 'I'll
show you it's much faster if you do it this way.' And sometimes they're right."

This mix of commercial and communal impulses has its roots in the early
days of personal computing. Academics and corporate researchers originally
shared many of their software innovations. But that started to change in
the 1980s as the industry took shape. In response, programmer Richard
Stallman launched the Free Software movement. His answer: the GNU operating
system, modeled on Unix, to be shared by a community of programmers. It was
Torvalds who came along with a piece of software called the kernel, which
is the control center of the operating system and coordinates the work of
other pieces, such as the software that tells the printer to produce a
page. Programmers called the kernel "Linux," a contraction of Linus and
Unix, and Linux caught on as the name for the whole thing. Torvalds decided
the group's mascot should be a friendly penguin, named Tux, partly because
a pint-size Fairy penguin once nibbled his finger at an Australian zoo.

Stallman is still an evangelist for free software, but with his wild long
hair and odd behavior, he doesn't fit in with the suit-and-tie crowd. He
doesn't even speak to Torvalds anymore -- since Torvalds decided to use a
piece of software that wasn't open-source to help develop Linux. "The place
he wants to lead people is a mistake. It isn't to freedom," says Stallman
of Torvalds. During speaking engagements, Stallman often adopts the persona
of "St. IGNUcius," donning a robe and a halo made of a computer disk. Chris
Wright, a young programmer for OSDL, recalls a group dinner at a restaurant
where the trade group hosted Stallman. Wright was impressed with Stallman's
beliefs but put off by his style. "He wanted to taste everybody's food, so
it was a little awkward," says Wright.

Torvalds proved to be just the guy to lead the Linux charge. He was only a
casual programmer in 1991 when he started writing software to run on a PC.
But after he posted the first Linux code on the Internet for others to
contribute to, he got the knack for spotting quality and handling the flow
of fixes. Gradually, he developed a support organization of volunteers.

Begun as a meritocracy, Linux continues to operate that way. In a world
where everybody can look at every bit of code that is submitted, only the
A+ stuff gets in and only the best programmers rise to become Torvalds' top
aides. "The lieutenants get picked -- but not by me," explains Torvalds.
"Somebody who gets things done, and shows good taste -- people just start
sending them suggestions and patches. I didn't design it this way. It
happens because this is the way people work naturally."

One reason that Linux Inc. bears little resemblance to a traditional
company is that Torvalds has almost nothing in common with classic,
hard-driving, and autocratic tech-industry leaders. He rarely appears in
public and largely lets other people set priorities for development. Once
others come up with improvements, he shepherds them along. "Linus has
power, but he doesn't have it by fiat," says Havoc Pennington, a Linux
contributor who works for Red Hat. "He has power because people trust him.
As long as he keeps making good decisions, people won't take it away from him."

Yet for all of his seeming passivity, Torvalds is a strong leader. He stays
scrupulously neutral, never taking one company's side over another. He
focuses on the open-source development process. There, he demands
high-quality work. Things must be just so, with the least amount of coding.
As a result, Linux has few errors that can be exploited by virus writers.
That gives it an edge on Windows, which has become a favorite target of
hackers -- largely because it's so widely used, but also because it has
vulnerabilities that Linux doesn't. "He has set a compelling vision and
inspired people to follow it," says Larry Augustin, a venture capitalist at
Azure Capital Partners and an OSDL board member: "It's leadership by
example, rather than leadership by hype."

Even today, Torvalds operates in a virtual world of e-mails and Web sites.
He works almost entirely from a roomy house that sits on a wooded Oregon
mountaintop and is decorated with taxidermic specimens, including a piranha
and a crocodile. He gets up early, making strong cups of coffee for himself
and his wife, Tove, a former karate champion in Finland. Then he settles in
for hours of reviewing code and snapping off e-mail messages in his
basement office. It's lined with science fiction and fantasy books,
including classics such as Dune and the Wheel of Time series. In the
afternoon, he coasts down the hill on his bicycle to a quaint village,
stops at a Peet's coffee shop for a latte or Chai tea, and pumps back up
the hill. Then he returns to his computers.

Although Torvalds is physically near his comrades at OSDL, he almost never
sees them face to face. He visited the organization's office only once in
his first three months in the Portland area, and he rarely meets with
Morton, an Aussie who lives in Silicon Valley. "It's a long-distance
mind-meld," says Morton. In a rare encounter last summer, they shook hands
and made small talk at a picnic. The Linux community, Torvalds says, is
like a huge spider web, or better yet, multiple spider webs representing
dozens of related open-source projects. His office is "near where those
webs intersect."

The Linux development process begins and ends with the programmers. While
there are still some individual volunteers and government agencies that
chip in, more than 90% of the patches now come from employees at tech
companies. Many of those workers are formerly independent aces who have
been scooped up over the past few years. Some of these people simply submit
code, and others, called maintainers, are in charge of improving specific
functions.

From there on, it's a continuous cycle. Individuals submit patches;
maintainers improve them. Then they're passed off to Torvalds and Morton,
who review the patches, ask for improvements, and update the kernel. Every
four to six weeks, Torvalds releases a new test version so that thousands
of people around the world can probe it for flaws. He puts out a major
upgrade every three years or so. Unlike at traditional software companies,
there are no deadlines. The Linux kernel is done when Torvalds decides it's
ready.

Linux Inc. is a series of concentric circles radiating out from Torvalds.
In the first circle, you have Open Source Development Labs. The top tech
companies with a stake in Linux -- including HP, IBM, and Intel -- have
technical people on the board of directors. The board sets priorities, such
as getting Linux running better for huge data centers and desktop PCs. In
addition, the board is responsible for raising $10 million to protect
customers from potential intellectual-property claims.

TAKING THE SUBWAY
The second circle is a dozen or so Linux distributors. Spearheaded by Red
Hat and Novell, this group also includes such regional players as Red Flag
Software in China and MandrakeLinux in Europe. They pick up the latest
version of the kernel about once a year and package it with 1,000 or so
related open-source programs, including the GNOME graphical-user interface,
the Firefox browser, and the OpenOffice desktop application suite.

The distributors race one another to be first out with Linux updates, but
their engineers spend most of their time on projects they share with
everybody else. For example, Novell employs open-source pioneer Miguel de
Icaza, who is both a Novell vice-presi- dent and the leader of the Mono
project -- software for building applications to run on Linux. The
34-year-old Mexican coordinates 25 Novell employees plus more than 300
other programmers, many of whom work for other tech companies. So far, de
Icaza says, there have been no conflicts. His explanation: "Cooperating
gets you further along than screwing your neighbor."

These Linux companies have little in common with their brethren from the
dot-com boom. They're typically frugal. Matthew J. Szulik, CEO of Red Hat,
takes the subway rather than a cab when he visits customers in New York and
Boston. And rather than being motivated by big money, Linux programmers say
their goal is making Linux an ever-bigger force in computing. Red Hat's
Pennington doesn't covet expensive wheels, proudly pointing to his 2001
Toyota Corolla in the parking lot, which he jokes is "fully loaded."

For his part, Torvalds has been amply rewarded for his role, but he's no
Bill Gates billionaire. OSDL pays him a salary of nearly $200,000. In
addition, he sold initial public offering shares that he got as gifts from
a couple of Linux companies, including VA Linux Systems. That helped him
afford his house and put money away for his daughters' educations.

ALL-PURPOSE SYSTEM
In Linux society, there's no bowing and scraping before the rich and
powerful. Executives and product managers at HP, IBM, Intel, and Oracle
(ORCL ) don't even try to pressure Torvalds and Morton to further their
interests. Instead, their input goes through their engineers, who, as
members of the open-source community, submit patches for the kernel or
other pieces of Linux software.

The tech powerhouses have learned to play by new rules. You can't meet in
private, come up with new features, and then drop massive changes on
Torvalds. A handful of companies, including Intel and Nokia Corp. (NOK ),
learned this lesson the hard way when they went about making Linux capable
of running telecom gear. About two dozen of their engineers worked on the
"carrier-grade" Linux project, and then, in late 2002, they posted hundreds
of thousands of lines of code on a Web site. The response: outrage. "We
were offended by the whole process," says Alan Cox, a top kernel
programmer. The posting was quickly removed.

Still, the cultures of open-source and commercial software are melding
together. Red Hat used to scatter employees around the world, the typical
open-source approach. Now the company brings its workers together so young
programmers can cross-pollinate with gray-haired veterans. It works. Not
only did 46-year-old Larry Woodman bond with 26-year-old Rik van Riel by
teaching him how to drive a car, but the two are working in tandem on
improvements to memory management in Linux. "We complement each other,"
says Woodman.

These collaborations are turning Linux into an all-purpose operating
system. It's secure enough that Lawrence Livermore National Laboratory
loads it not only on desktop and server computers but also on
supercomputers it uses to simulate the aging of nuclear materials. "Linux
is definitely more secure than Windows," says Mark Seager, the lab's
assistant department head for advanced technology. "There aren't as many
ways to break the system." With the latest improvements, Linux now works on
servers with more than 128 processors and can run the largest databases.
The newest versions also have features, such as power management, that make
them more suitable for laptop PCs.

Linux is so solid that staid corporate purchasers are adopting it
aggressively for run-the-company applications. Holcim Ltd. (HCMLY ), the
Swiss cement giant, just switched from Unix to Linux for some of its
accounting, manufacturing, and human-resource applications. The attraction:
50% savings on hardware and 20% on software. "It was a no-brainer to go
with Linux," says Carl Wilson, chief operations manager for the company's
North American data center.

Cost isn't the only reason that companies are switching to Linux. The data
processor Axciom Corp. recently shifted some servers to the operating
system, after using Unix in the past. Alex Dietz, the company's chief
information officer, says he's thinking about replacing the Windows
operating system with Linux on the company's desktop computers. One
important reason: Axciom doesn't want to be too dependent on Microsoft.
"[Linux] has an innate guarantee that you won't be held hostage," says Dietz.

Torvalds takes tremendous satisfaction in seeing his baby grow up. "It's
like a river. It starts off a bouncy small stream and turns into a
slower-moving big thing," he says.

Indeed, Linux Inc. has emerged as a model for collaborating in a new way on
software development, which could have reverberations throughout the
business world. Its essence is captured in one of the mottoes of the
open-source world: Give a little, take a lot. In a business environment
where efficiency rules, that's a potent formula -- maybe even strong enough
to knock mighty Microsoft down a peg.



By Steve Hamm

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