Linux Not Just For Geeks Anymore

It's official. The Linux operating system has secured its position on a very short list of products that can claim cult status. Since a Finnish student posted the first lines of Linux code on the Internet in 1991, hobbyists, investors, IT executives and blue-chip companies have been fascinated by its potential.

There's no question that Linux is here to stay as a viable technology, but some were overly bullish about its prospects. For example, Linux will never rival Windows as a mainstream desktop PC operating system, and Linux still has a long way to go before being widely used in "back-end" applications like databases and enterprise resource planning.

"Linux has done either spectacularly well or not well at all," says analyst Dan Kusnetzky of International Data Corp. in Framingham, Mass. What it has done well is provide a robust, less expensive alternative to Unix and Windows for certain server applications.

Look at the numbers: The first commercially packaged versions of Linux came to market only in 1994. According to IDC, Linux now accounts for an "amazing" 27% of the market for server operating systems, up from less than half of 1% in 1995. More than half of all Web servers sold today run Linux. Sales of entry-level servers (characterized as costing less than $100,000) running Linux grew in 2001, to 486,000 units worldwide, while sales of Windows NT and Unix servers declined in the same time period.

Still, what Linux represents to a lot of people is freedom: freedom of dependence on Microsoft and the flexibility to modify the so-called "open source" software. That means that anyone can change or improve upon the OS as long as they make the changes public on the Internet.

At the same time, industry leaders IBM , Oracle , Intel and others have committed resources--in IBM's case billions of dollars--to Linux marketing, support and development. Roughly 10% of Dell Computer 's servers are sold with Linux pre-installed, according to the company.

The endorsement of such established companies helped make Linux a credible option for large customers. A mandate to cut IT costs amid the downturn also attracted customers to the free OS, which runs on standard Intel-based systems. Customers like

"In the beginning [using Linux] may have been risky because there was no ISV [independent software vendor] market, but Intel's research and development helped to mature the market so we had more confidence," says O'Connor, senior vice president of engineering technology at Lehman Brothers, which is replacing Solaris systems from Sun Microsystems with Linux in its equity division.

"We are taking a pragmatic approach to Linux," she says, explaining that the company is using Linux only for proven applications--not critical applications like databases. Lehman expects to save more than $10 million a year within 18 months, by using Linux. "That's a pretty conservative number on our part," says O'Connor.

O'Connor's plans are common among Wall Street firms, a fact that doesn't bode well for Sun, which seems to profess broad Linux support while holding its nose.

There likely isn't a large company out there that isn't at least evaluating Linux, but the biggest independent suppliers and distributors are losing money and--after an initial boom--have largely turned out to be a dud for investors.

When VA Linux--now known as VA Software --went public in December 1999, it increased over 700% to $242, holding the record for the biggest one-day pop ever. Of course, the company's prospects and business model never came close to justifying its share price and VA today trades at 86 cents. It has been below $1 since late May.

That Linux penetrated corporate America the way it has is surprising when one considers the competition: Microsoft's Windows and Sun's Solaris. Despite its promise and its momentum, Linux will not wipe out Unix, Windows or any other well-established technology. But like others before it--minicomputers, PCs, the Internet--Linux will likely marginalize older technologies because the value proposition is too great to ignore.

Is it disruptive to the status quo? Absolutely.