Great Expectations for Linux

It is symptomatic of the great weight of expectations that the Linux operating system now carries that 2004 now appears to be just another year in its development, despite being the year in which it broke through the $1bn quarterly server revenue barrier for the first time.

Perhaps the reason why that achievement, realized in the third quarter according to IDC, has been somewhat over-looked, is that even greater performance figures are being predicted for the open source operating system in 2005 and beyond.

IDC's later prediction that Linux will be responsible for $35bn in revenue by 2008 is bound to overshadow any of the current market share and revenue figures, but it is worth looking at the current performance of Linux to asses how it will eventually get to become that huge market.

Linux continued to grow strongly throughout the year as a server platform with revenue showing 42.6% growth in the third quarter to represent 9.2% of overall server revenue, and unit shipments up 31.7%.

The operating system outpaced Microsoft's Windows (revenue up 13.3% to $3.9bn to represent 33.9% of overall revenue, and unit shipments up 19.1% year-over year) and Unix (revenue down 2.3% to $4.0bn, despite shipment levels up 8.3%).

Small Intel-based single processor machines and the edge-of-network, file, print and web server space have in the past driven the growth of Linux as a server operating system. That situation is changing, according to IDC, which noted that dual-processor systems now account for 74% of total Linux server shipments, having grown at a CAGR of 89.8% between 1998 and 2003. By comparison, the uni-processor segment grew at a CAGR of 37.5% in the same period.

That growth is expected to continue in 2005 and beyond as Linux's share of enterprise workloads continues to increase. IDC predicted that Linux server customer revenue will grow at a compound annual growth rate of 89.8% to reach $9.1bn in 2008, compared to a CAGR of only 3.8% for the worldwide server market as a whole.

IDC has also predicted that Linux's share of worldwide server shipments will also continue to rise rapidly, from 15.6% share in 2003, to 25.7% in 2008, as the release of Linux distributions based on version 2.6 of the Linux kernel makes it more suitable for a variety of server form-factors and enterprise applications.

It's not just IDC that sees Linux moving steadily towards enterprise applications. According to ComputerWire studies, workloads currently managed by Linux operating systems include file and print, email, proxy/caching, web serving, and other such mundane infrastructure support tasks.

But such is the price-performance draw of Linux and open source, it appears that some of the other really core business applications like ERP and CRM could be next up as suitable candidates for Linux. Those studies are backed up by research from Peerstone Research that sees Linux making inroads into the market for enterprise application operating systems over the next three years.

The open source Linux operating system is the platform for only 2% of the installed base of SAP AG, Oracle Corp, and PeopleSoft Corp ERP application suites, according to the research, but that figure is set to rise to 15% in 2007 as Linux gains enterprise functionality.

The research was based on a survey of 252 SAP, Oracle, and PeopleSoft users, and indicated that Unix's share is set to drop from 65% this year to 50% in 2007, while Windows is forecast to fall from 28% in 2004 to 27% in 2007.

Rather than simple predictions, those figures are based on the migration intentions of existing Unix ERP users. Peerstone's research sees 78% of current Unix users sticking with Unix, 17% planning a move to Linux, and 4% moving to Windows, with 1% as yet undecided.

IDC also predicted that Linux's share of the enterprise application and infrastructure operating system market is set to rise, this time at a CAGR of 44% to reach $14bn by 2008. That was one of the factors that will see the total Linux desktop, server, and software market reach $35bn by 2008.

Another factor will be the long-awaited growth of Linux on the desktop. According to IDC figures, the market for new and redeployed PCs running Linux will grow to $10bn and 17 million units in 2008 to reach an installed base of 42.6 million units at a CAGR of 30%. That will push Linux's share of the desktop shipments to about 7% in 2008, from about 3% today.

Of course, by then the research firms will have come up with even greater predictions for the operating system, looking beyond 2010. The expectations for Linux continue to become greater and greater, and it is a danger to look too far ahead into the future.

For 2005, it is likely that Linux will continue to gain a foothold in the enterprise applications space, driven by distributions based on version 2.6 of the Linux kernel, such as Novell's SUSE Linux Enterprise Server 9 and Red Hat's forthcoming Enterprise Linux 4, as well as increasingly powerful Intel and AMD servers.

On the desktop, Linux's impact will be less, but with Novell's Linux Desktop and Red Hat's Desktop both now available, just a handful of high-profile business desktop wins could increase the momentum of Linux as a viable desktop alternative.

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