Linux no open and shut case

The open source market has been around for almost two decades and while its popularity has ebbed and flowed through the years, technology pundits believe it has finally established itself as a technology norm.

There's no doubt companies are becoming curious about the open source market and what it can do for the organisation. Experts believe resellers now have customers who either want to implement open source or are curious about open source.

However, channel partners wanting to put all their eggs into the open source basket are in for a big fall. The money is finally there, but only if channel partners have the time, money and right fit with open source.

Con Zymaris, founder and CEO of Melbourne-based Cybersource, has a reputation as an open source evangelist. He believes the potential for resellers in the open source market is huge.

According to Zymaris, IBM and Novell's signing in March with the NSW Government to become a member of an open source panel showed the IT industry that the potential for state procurement is tangible. He says there is a "refreshed view" in the marketplace - the signing gave open source a refreshed view on Linux.

Zymaris notes the open source market even had its own section at CeBIT in Sydney in early May this year, which was unheard of a couple of years ago.

"I talked to at least 30 resellers at CeBIT this year, and that's quite a large number at the event."

Michael Costigan, marketing manager at Avnet Solutions, which distributes Cisco's Novell Linux product and is a Novell authorised centre, has been noticing a change in the open source market during the past 12 months. He says he has seen resellers leading the Linux solution to the market.

What has changed, according to Costigan, is the perception of Linux moving from a back office experiment to becoming a credible alternative to other solutions.

"Traditionally, Linux had no part in the mainstream environment because of issues surrounding the total cost of ownership. However, any perception about the open source market has changed over the past five years," he says.

"Now Linux is no longer seen as a technical application experiment and is considered a low-cost alternative, not only used in the back but in the front office. Teenagers who once experimented with open source are now the grown ups who apply it to their organisation."

Greg Keiser, channel manager of Novell, says if you go back a few years, Linux interested just a few enthusiastic people. Resellers, partners and vendors were not really interested in the market.

"The open source market was fringe in nature and now nothing can be further from the truth. This is no longer the preserve of a few enthusiastic technical programmers. There is a vast, overwhelming trend of people seeing the financial sense in becoming 'open'," Keiser says.

Anthony Rumble, owner of Everything Linux, has been providing open source tools and merchandise to the general public since 1998. He says quite a lot has changed since then.

"In the early days we were fighting to get people into becoming 'open'," Rumble says. "They didn't understand or believe the product could be a huge boom. Now they are taking the time to try it and accept it as another technology.

"I've spent a lot of time being persistent and diligent in pushing it. I think also people have gotten fed up with traditional software and have found the open source market to be not as bad as detractors have said. My mother runs it because I got sick and tired of fixing her machine - unless it ran on an operating system I could support. There's no better validation when your mother can run it."

No understanding

Zymaris believes resellers have not understood about the opportunities that existed in the open source market and it is now time to change. "This market gives the reseller open source rights to source code. Imagine that, in the traditional software market, if you want to buy Microsoft the end publisher is always Microsoft. Resellers were able to buy the software licence but it will always be owned by Microsoft," he says.

"In the open office there are a number of vendors and a channel partner who don't have to go on the stipulations dictated by one vendor. You can't do that in the proprietary marketplace."

Zymaris says if an open source reseller wanted to sell Linux, they do not have to go to Linux vendor, there are Linux groups instead. "In the open source a reseller never has to kow-tow to vendor. The technology you want to go with in this space can be different versions. However, if in the traditional channel space you have only one choice of vendor for a software product, they could essentially shaft you because they are the owners of the software."

Costigan says there is a big community continually contributing to the open source market. "Individuals are getting Linux and bringing it into the mainstream. I think Australian organisations are discerning over things that work; they are also quite competitive and price comes into mind when buying products. They don't want things that don't cost an arm and a leg, they want to experiment and be more flexible in their decision process," he says.

Zymaris believes this kind of mainstream attention creates a marketplace without blockages in the distribution channel. "There's enough business in open source to create enough business with a pure competitive model. There's also a lower barrier to entering because there's only a handful of vendors."

Keiser says the whole software industry is going this way and it will become even more prevalent as traditional hardware vendors from the top of the chain offer customer support. "Let's look at the alternative: the market shifts over the past three or four years for resellers aren't good. Margins are lousy and they have had to shrink services as part of a survival strategy," he says.

"I know of a number of reseller who won't even bother to sell software products. Any vendor who does on any level of commodity type business also competes with partners on the resell of products."Before resellers ditch their current product offerings and give their vendors the old heave-ho, keep in mind the open source market will not bring in the money; there is no tangible ROI in selling open source software alone.

Resellers wanting to look to open source as a cash cow need to research the marketplace.

Zymaris says resellers seriously need to consider whether or not investing thousands of dollars and time in training staff in technical issues will be worth it. After all, it will be the reseller's money and their company's time.

"In this market space you can't make your bread and butter on pure box moving, there's no value-add. If a reseller has this kind of mentality then Linux is not for them," he says.

In the open source market, resellers essentially take on the vendor role for their customer. If they only want to move software boxes, Zymaris says, then forget about it and stick to what they know best. "The problem with many resellers who come from the traditional software space is they have had vendors drip-feed them."

Some resellers are used to being provided with point of sale marketing, which hardly exists in open source. "We don't have the sales, marketing and gee-wiz campaigns Symantec and Microsoft do so well. This will be a stumbling block for resellers not willing to do their own work," he says.

Resellers need to realise they may make more money but they do need to do more work. "They really need to get their arse into gear and stop riding on the vendor's coat tails", Zymaris says.

Ross Ford, director business strategy at Open Integration, an Avnet channel partner, agrees the road to open source is not a smooth ride. "There's no pot of gold when channel partners enter this market. They have to work damn hard for it to take fruition and it takes a long time to build up the credibility needed," he says.

IT experts believe a strategy to offer services, along the traditional lines, and the ability to support the open source strategy taken on by a reseller's customer, will be the only way to rake in any money.

Although Rumble concedes the times have changed and the open source market is widely accepted, the distribution of the product has become a lot harder.

"In the past there were big opportunities because it was this 'great big thing'. Now the opportunities are gone, users don't need us resellers anymore. The advent of more accessible broadband has made us somewhat redundant now," he says.

"For the box selling market there's not a lot of opportunity and it only boomed when there were no vendors really to validate the open source market. We were doing okay back then, but that's gone."

Robin Hapgood, sales director of Attain IT, a Red Hat Linux channel partner, says money made from licence sales is insignificant. "Customers can buy hardware with Linux already installed. That's fine from a customer's point of view. But for resellers there's no money and never will be any money if they view the open source market like the traditional software market," he says.

Harking back to his previous reseller days, Hapgood says he would have found it very difficult to go into open source to make money from licence sales. "They are better off selling more commercially viable products. People who think of entering because of licence sales won't ever get that's not where the open source market is for the channel," he says.

"If the channel partner is a large box mover with OEM versions of Windows and traditional IBM and HP partners, making some money putting Linux on server, then they have skilled people. There was a cost involved in ensuring the staff acquired the right technical skill, which the reseller was not going to get back from licence revenues."

What can you do?

The situation is not hopeless - if resellers can get around to thinking about entering the open source market as a genuine service provider.

Costigan says what resellers need to do is sell a package that incorporates infrastructure hardware, middleware to solution users who do not have too much money to spend on propriety software. "Resellers aren't going to make money on Linux alone, but they will make more margins on a total package," he says. "Resellers have the ability to lower the cost of IT solutions for their customers and allow them to own it as well."

In fact, Hapgood believes resellers who could not recoup money from licence sales could make money in providing value added services. "Red Hat doesn't sell its software product - it comes free with hardware; however, what a customer is buying is services and support. Service is what a reseller can sell," he says. "Resellers have to become first line support for customers in the open source market."

Rumble agrees: "A value-added reseller providing services - that's where the money is. Trying to move boxes will not help them survive. However, with a combination of value added products from the box market and services should bring in the money."

Training needs

However, the thing is services, and what the experts believe is serious services cannot be learnt during a one-hour or two-hour training course. "You will be eaten alive if you don't have the right experience. If you don't know what you are doing, customers will view the reseller as nothing more than a glorified sales technician," Rumble says.

Ford says there is a fair amount of technical training needed to sustain the right support for customers.

He believes it will take a while before there are a lot of organisations that have the skills set to support themselves if they run open source hardware. "You have to go out and find the guys with the right skills. If you go out and find people who you want to train up, it will take longer to gather than a couple of days."

Resellers can also incorporate their staff's current technical skills with the technical skills learnt in open source. "To be successful, resellers need to have a combination of closed source skills so they can take a look at whether open source will serve customers that run Windows and Netware better," Ford says.

According to Hapgood, resellers need to keep in mind that there is more to open source than Linux. "There's application development, where apps have been developed on an open source database and an open source server," he says.

However, if resellers can't put in the time, or don't have the money to train up, then perhaps partnering with other channel associates could be a way for them to enter the open source market.

Hapgood says channel partners can create a grab-bag package, whereby a reseller aligns themselves with a group of specialists in technology, for example, database, OS work and definitely a Cisco specialist, perhaps even a storage specialist.

"These technology partners are called on when a reseller needs them and they aren't kept in-house. It goes along the same lines as a traditional outsourcing contract," he says. "There is no way an organisation can grow organically from a staff of 40 to a 400-strong organisation."

The primary basis for this type of relationship is to employ a specialised house when required. "However, a reseller has to bare in mind the traditional reseller relationship with its customer will be put on the line. A customer trusts the reseller to introduce partners who can get the job done," he says.

According to Hapgood, a five- or six-year relationship stands or falls according to the partners that resellers introduce to their customers.

Ford says going out and getting someone trained and hiring university or college graduates for programming is another cheaper alternative.

Key drivers

Once the reseller has their business in order then they need to look at the market drivers for open source technology.

Costigan says for its guys the SME market its pretty much were they operate. "I think this is where we are going to see the adoption rate increase in the next five years."

Rumble says this is the "new ground" - the new world for resellers.

"I think the large organisation won't come on board for a while because there's still a sense of anarchy about the open source market. Essentially it's still driven by technical people who create software to scratch an itch," he says.

The open source market is more suitable for the SMB market because it is easier to find the right package for them and maintain those services, Rumble believes.

He says the open source market still has a long way to go for an enterprise to take on.

"The biggest plus about the open source market is you can take someone else's software and mould it to the customer's needs. However, with all the compliance issues an organisation has to face, they won't be taking on an open approach to their enterprise," Rumble says.

"Who do they sue if things go wrong? There's no software vendor to blame for glitches with software. Novell and the other big name vendors are trying to create an open source marketplace that is middle of the road so open source will move up the food chain."

This middle road combines open source software with proprietary features, and whether it works remains to be seen, Rumble says. "It misses out the whole point of open source, which is to recode software to suit a user's or their customers' needs. What the big vendors are trying to do is fit a square hole into a round shape."

Martin Leadbeater, managing director Linux reseller Tellurian, says the SME market and small business find they can use open source software and save a lot of money.

Small businesses are not as conservative as big end of town corporations, he says. They also do not have deal with all of the compliance issues surrounding a corporation.

"The SME is where a reseller can make inroads because the majority of them just want to outsource the whole thing. When they find success and move up the food chain, then they can move onto bigger companies looking to move onto supported platforms," Hapgood says.