HP’s Linux strategy: a tough nut to crack?

Once upon a time HP’s Linux strategy was deemed unpredictable. However, the company’s record Linux-based revenue growth in 2003 has effectively silenced its critics. With its increasingly stronger Linux line of business, HP is all set to challenge IBM’s hegemony in the Linux world, says RAHUL NEEL MANI

According to Faisal Paul, from October 2002 to October 2003, HP shipped $2.5 billion worth of Linux servers worldwide, whereas IBM shipped just half the figure

HEWLETT-PACKARD’S (HP) tryst with Linux is now an open secret. Indeed, the company’s love affair with the open source operating system is thriving—to such an extent that it’s created a separate Linux Business Unit. With plans to unveil strong benchmark results for its Linux-based carrier servers, HP is hoping to score in terms of open source adoption and professing a stream that will eat into both the Windows and Unix markets. HP has also decided to promote Linux to resellers who serve large carriers and Internet Service Providers.

It is often alleged that HP lacks mindshare in the Linux sector when compared to IBM and Dell. HP denies this, with claims that it supported Linux on its servers long before IBM did. However, IBM’s marketing strategists have created an aura around the fact that the company was the first to ‘discover’ Linux. To compound matters further, Dell has become yet another fast-growing provider of Linux servers. Where does that leave HP?

According to IDC APAC’s Server Market Tracker report for Q1 2004, HP has consolidated its number one position in the Linux market in the Asia-Pacific region. Measured in server revenue terms, HP’s market presence increased by two points to 33 percent. In the Linux-on-Itanium space, HP once again leads the pack with a 76 percent market share. The Linux-on-Itanium market has increased substantially year-on-year with a 400 percent growth in revenue, from just over $2 million in Q1 2003 to over $10 million in Q1 2004.

In terms of the worldwide IDC figures, HP is already over $2.5 billion strong and maintains its number one slot in the rapidly expanding Linux server market. In Q3 2003, HP held the number one position with 28.1 percent of Linux server factory revenue worldwide. During the same period, HP ProLiant servers led the market for Linux x86/IA-32 server unit shipments, with 27.4 percent of the worldwide market. HP’s Itanium-based (EPIC) Linux servers led the market for EPIC-based Linux server unit shipments with 66.7 percent share worldwide. The total size of the Linux server market during this period amounted to $743 million in revenue, registering a growth of about 49.8 percent over Q3 2002.

One for all

On the surface, HP’s overall Linux strategy seems simple to execute, and one that IT executives should find easy to work with. Linux is available on most of HP’s 32-bit and 64-bit Intel servers, and, as one of the operating systems in HP’s multi-OS strategy, the company’s comprehensive software suite is available on Linux.

Says Pallab Talukdar, director, Enterprise Market and Alliances, HP India, “We believe that the building blocks of open source should be on industry-standard hardware.” For HP that means its ProLiant range of IA32 servers and its Itanium IA64 machines. Talukdar adds that HP is consciously avoiding Linux on RISC because it is not in line with what the market requires—around 98 percent of the market runs on industry-standard open source.

There are two things that HP

segmentation perspective. One, what kind of applications run on Linux, and two, who the end-users are. Comments Talukdar, “In terms of application deployment, HP sees three types of markets: high performance technical computing (HPTC), government and defence, and small and medium enterprises (SME). Databases such as Oracle 9i and 10g and application servers—including both commercial apps and servers at the edge of the network—are the hot apps being deployed on Linux.”

The industry is taking to Linux in a positive way. Oracle’s campaign (‘Unbreakable Linux’) focuses on the fact that Linux is a stable OS. Another player which is actively promoting Linux with HP is Intel. HP’s recent initiative of reference architecture is significant. “HP is creating a reference stack—including hardware, OS and databases—and middleware. In a proof of concept centre, HP certifies that stack so that users feel more confident deploying it,” explains Talukdar.

IBM may have put more marketing muscle behind Linux but then IBM is also involved in a fierce lawsuit filed by SCO. Although HP’s Linux efforts may not have been as visible as Big Blue’s, one must keep in mind that it supports three core operating systems: Linux, Windows and HP-UX. But in recent times even HP has revved up its strategy by expanding its Linux product portfolio with the launch of carrier-grade Linux servers and various development tools. The company formed the Gelato Federation, a worldwide consortium that develops Linux-based solutions for colleges and governments, and for industrial research.

pallab talukdar says that there are examples in both India and China where a lot of government users are replacing SPARC-Solaris with an IA32/IA64-Linux combination

HP is a member of the Open Source Development Lab (OSDL), which works to strengthen Linux’s hardware support. It plans to release server benchmark results that could strengthen Linux’s reputation as a platform for carrier services.

Big Blue’s moves

It’s true that HP is yet to come out of IBM’s shadow, for Big Blue has ported the bulk of its software and middleware to Linux. IBM could generate more market buzz because its software portfolio—including the DB2 database and WebSphere application server—is widely known. At HP, except for OpenView, the software portfolio generally lacks brand recognition and recall. Also, IBM’s statements—that it is spending $400 million to develop and dominate the Linux market, and opening research centres in Asia Pacific and Europe—works in its favour.

IBM says that it will have Linux running across its platforms, including the iSeries (AS400) and zSeries (Mainframe systems). According to HP, IBM is actually trying to convert its proprietary stack to open source. “Linux that runs on AS400 and zSeries servers from IBM is not an industry standard distribution from the likes of RedHat or SuSE. It’s a proprietary implementation of Linux because they have to modify the kernel for it to run on those servers,” insists Talukdar. “The question is: how many ISVs are writing code on an iSeries or a zSeries implementation of Linux? ISVs are also eyeing volumes and industry standards. If IBM says it’s putting billions of dollars in Linux research, it’s all about giving a Linux look and feel to its iSeries and zSeries servers.”

Agrees Faisal M Paul, business manager, HPTC & Linux, HP India, “From October 2002 to October 2003, HP shipped $2.5 billion worth of Linux servers worldwide, whereas IBM shipped just half the figure.”

IBM has Linux on all of its eServer platforms and is spending billions to lead the industry in Linux-related technology. Aberdeen research shows that enterprise IT executives have accepted the IBM story at face value. IBM’s strategy of “all Linux on all hardware platforms” is admirable. But from a revenue-generation and profitability standpoint, can IBM sustain a long-term effort across four platforms?

Nevertheless, IBM’s Linux initiatives are more than marketing hype. The reality is that leading Linux developer Red Hat typically partners more closely with IBM than with HP. Of the three companies—HP, IBM and Dell—Red Hat is closest to IBM. Clearly, HP’s Linux challenges continue and this tug-of-war will not come to an end so soon. Even the Yankee Group suggests that HP perhaps didn’t come out with the clamour of marketing Linux, but did so quietly, behind the scenes, HP has been very aggressive about the penguin. That’s the reason why, in a somewhat uncharacteristic announcement about Linux, HP’s revenue from the open-source operating system and connected products and services hit $2.5 billion, an increase of about a half-billion dollars from the year before.

Open standards

Calling 2003 a ‘banner year’ for Linux at HP, the company said its Linux services and solutions business grew by 40 percent during this period. HP, which led the Linux server market in the results of the last quarter’s research from IDC, has also expanded its Linux portfolio with an announcement of new Linux reference architectures for its ProLiant and Integrity (Itanium) servers, new Linux clustering software for 64-bit environments, and new Linux notebook and desktop computers. This will ensure that the company makes money from other products and services that go along with Linux servers.

The new Linux reference architectures, created by integrating applications based on open-source software and HP’s systems expertise, will help mitigate business risk and improve support for mission-critical Linux deployments. But is it such a big deal? Even IBM and Sun have their respective Linux architectures in place, so what makes HP’s unique? Answers Paul, “Although Sun and IBM have similar architectures, they are built around the proprietary architecture the two companies have. Categories such as directory servers, identity management servers, Web servers etc. are all based on products made by those vendors. On the other hand, HP’s architectures are based exclusively on open standards.”

What about Windows?

A battle is on within HP to pacify the strong Windows server market. Till Linux caught its attention, Windows was HP’s staple for volume servers (except Unix-RISC-based servers, which were used only in high-performance computing environments). If we look at worldwide trends, Linux is growing at the expense of Unix and not cannibalising Windows for the greater part. This means the player most affected is Sun, which dominates the low-end Unix market. Users think they are better off with a combination of IA32/IA64 and Linux rather than SPARC with Solaris.

Says Talukdar, “We have examples in both India and China where a lot of government users are replacing SPARC-Solaris with an IA32/IA64-Linux combination.” HP, which is not a market leader in the volume segment of Unix, does have an edge in the mid-range and high-end Unix server space, where the company thinks cannibalisation has been minimal. Talukdar accepts that the HP-Windows server market growth and revenue flow have been hit to a certain extent because of user apprehensions over security, licencing policy and vulnerability issues. So without changing the hardware, those very customers are now experimenting with Linux. This is happening more in the SME segment where the stake in terms of investment is not too high.

Though Linux is gaining tremendous momentum, no one at HP is ready to accept the fact that it is paying less attention to Windows-based systems and services, because these are not showing any negative market trends. HP’s low profile when it comes to Linux might just be the company’s way of selling enterprise software (including Windows) primarily from other vendors because it still sees significant growth in its Windows business.

HP-ISV Bhai-Bhai

HP is continuing to work closely with Linux-motivated independent software vendors (ISVs) such as SAP, enhancing the combined offering of Linux solutions for the enterprise. This strategy delivers key benefits to users: leading-edge hardware, industry-leading applications, a world of IT management tools, the technology to integrate mission-critical capabilities, and high availability with Linux.

States Talukdar, “Our ISVs are a committed lot. Many Indian ISVs are saying they will only develop apps for Linux. HP has a Developer Solution Partner programme, through which we work with 200 ISV partners.” A large number of these ISVs work only on the Intel-Linux architecture. At HP’s Systems Technology and Software Division, the engineering arm of HP in Bangalore, nearly 200 engineers work solely on Linux development. These people are also available for any sort of technical support needed by an ISV, including application tuning, performance and benchmarking. HP is also in the process of setting up a Partner Technology Access Centre, where partners have access to technical resources.

IBM says it has spent billions in an attempt to lead the industry on Linux-related technology. But it is an open question whether the company will be able to sustain this strategy. In a study by the Aberdeen Group, IBM’s ISVs have accepted that corporate customers say that enterprise costs are too high to justify widespread Linux development. Aberdeen mentions that IBM has a number of vulnerabilities in its Linux strategy, including the high cost of support and development against four hardware types and several operating systems, plus a lattice of different Linux distributions. Aberdeen further says that IBM cannot make Linux evenly available because of inconsistencies in its ability to make Red Hat, SuSE and TurboLinux available on different platforms, and the gaps in its middleware to support the different distributions.

Getting along with Novell/SuSE

HP and Novell have recently announced a joint agreement to certify and support the Novell-SuSE Linux on select HP-Compaq client systems. The announcement expands HP’s multi-OS strategy across servers and PCs. It builds upon HP’s existing certification of Novell SuSE Linux across its ProLiant and Integrity servers, storage, software and services. HP now insists that it is the first major technology vendor to offer enterprise customers a single, proven Linux solution, from desktop to data centre. Clearly, with Novell SuSE coming into the picture, HP is expecting to garner an even larger share of the Linux market.

As part of the joint agreement, Novell SuSE Linux will become HP’s standard Linux distribution across its portfolio of business desktops and notebook PCs. HP and Novell will also offer product support for Linux-based business PCs, and, with certain support contracts, HP will provide qualified customers indemnity against possible litigation from SCO.

Ahead with Linux

HP will continue to drive platform leadership in printers, PDAs, notebooks, desktops and servers. It says it works closely with Linux-motivated ISVs such as SAP, and many other Indian ISVs to offer Linux solutions for the enterprise.

No matter which processor family one prefers to run Linux on, HP readily delivers. For example, a combination of SAP, HP ProLiant servers and Linux provides performance and cost-effectiveness. Traditional Unix users are also looking at Linux as a way to reduce costs, and may be deploying mixed-application environments with a traditional HP-UX on HP Superdome database, front-ended by application or Web servers running Linux on ProLiant servers. With more than 5,000 worldwide service professionals available for Linux support, HP can easily serve those companies.

Indian server market: growth in volume
Operating System	2002	2003	% Growth
Unix	4,991	5,697	14.10
Windows	21,527	30,552	41.90
Netware	5,818	11,235	93.30
Linux	2,189	5,702	160.50
OS400	81	77	-4.90
Others	66	71	6.70
Overall	34,672	53,334	53.30
			Source: IDC India

rahul@expresscomputeronline.com