Open Mind

Linux supporters step up to the plate and try to persuade Middle East channel partners to give the penguin a chance

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By  Stuart Wilson Published  June 25, 2005

The case for Linux|~|enigmatis200.jpg|~|Christian Kroker, managing director at enigmatis|~|Linux is here to stay and the channel needs to get to grips with the long-term implications of penguin power. Channel Middle East lined up a selection of experts to dig a little deeper.

From the vendor (V) side, Graham Porter, marketing manager MENA at Sun; Bashar Kilani, software group manager at IBM Middle East; Mohammed Alojaini, principle product manager server technology at Oracle Middle East, Gordon Ratcliffe, general manager at Novell Middle East, and Paul Salazar, European marketing director at Red Hat shared their opinions.

From the systems integrator and developer (SI) side, Christian Kroker, managing director at enigmatis and Khalid Al Rajhi, chairman at Holool provided valuable perspective.

CME: How well have Linux and open source software solutions been received in the Middle East to date? Are you seeing strong customer uptake and channel demand?

CHRISTIAN KROKER (SI): There has been strong interest in Linux solutions since last Gitex. Since enigmatis started offering ‘eXpedio’, our pre-defined, fixed-price Linux packages for many back-end services we have seen a tremendous uptake in the market

KHALID AL RAJHI (SI): Adoption levels of Linux have increased considerably in the Middle East, particularly in Saudi Arabia, Oman and the UAE, which have witnessed large-scale server implementations. Businesses are becoming comfortable using Linux and are no longer concerned about licensing and intellectual property issues.

BASHAR KILANI (V): Interest is high because of the strong value proposition in terms of scalability, availability and return on investment (ROI). There is a genuine interest in Linux and open source and as the IT industry grows faster in this region than in other parts of the world, new technologies can be introduced faster and adopted quicker.

GRAHAM PORTER (V): To date there’s been a lot of hype; Linux has been used primarily as an internet application server and in education.
||**||Vendor support|~|holool200.jpg|~|Khalid Al Rajhi, chairman at Holool|~|CME: Where exactly does Linux and open source fit into the IT picture? What products and solutions are actually on offer for customers to use and partners to sell?

GRAHAM PORTER (V): We have end-users running our Sun Java desktop product, which is a SuSe Linux-based GUI for desktop PCs, along with our StarOffice suite and open source products like Gnome and Mozilla to provide e-mail and internet browser capabilities, most of which Sun has helped co-develop with other open source providers. At the other end of the scale we have large oil and gas companies running Linux grids on our AMD Opteron powered servers where we have racked up to 1,000 servers onto one grid network.

BASHAR KILANI (V): All our hardware and middleware software can run on Linux, so we have a complete stack. When you move up a level to the development tools, we have made huge contributions to creating a Linux environment. This fits well with IBM’s vision of flexibility and open architecture.

MOHAMED ALOJAINI (V): Oracle offers all its technology and application products on Linux. We collaborate with Linux distributors such as Red Hat, Novell and Asianux and provide support for the entire software stack including Linux. Oracle is the only ISV to provide operating system support for Linux.

PAUL SALAZAR (V): The most critical product we offer is the operating system, Red Hat Enterprise Linux. This is clearly a product as opposed to an open source project. A project does not have services associated with it. The products include updates, maintenance, applications certified on the technology and support packages.

GORDON RATCLIFFE (V): Novell has a full range of Linux services including desktop and server solutions, system management tools as well as security and collaboration solutions for its customers starting from the desktop environment up to the datacentre.
||**||Channel change|~|kilani200.jpg|~|Bashar Kilani, software group manager at IBM Middle East|~|CME: Where does the channel fit into the selling, deployment and servicing of Linux-based and open source solutions?

CHRISTIAN KROKER (SI): There is not so much ‘selling’ anymore since open source is the antithesis to it. Open source and Linux products drive sales of other products and especially services. While not many companies will pay external suppliers for Windows-based services, Linux skills are definitely not yet a commodity and are in high demand.

KHALID AL RAJHI (SI): The channel can add value by providing customised solutions and consulting for migration to Linux from other conventional operating systems. Partners will be critical to the success of our Linux product range, Host. Selling and servicing of Linux-based solutions is already a multi-billion dollar business globally.

GORDON RATCLIFFE (V): It is time for the channel to adopt a proactive way to promote open source. Reactive quick-sale concepts with low margins have already given way to professional services with open source technology. Partners who have the vision to provide professional support and services are the ones that will survive long-term.

MOHAMED ALOJAINI (V): The channel angle falls under the strategies of the major hardware and software vendors. Their commitment to Linux automatically strengthens its position in the channel. Besides Oracle, major vendors such as Dell, HP, Sun and IBM are clearly committed to the Linux movement.

CME: Why should channel partners jeopardise their existing business models by committing resources to open source software?

GRAHAM PORTER (V): The IT industry has changed a great deal in the last 20 years and many companies that once had great names no longer exist. The only thing we can guarantee in this industry is that expecting the industry to remain the same and margins on products to continue, is not going to happen, so change now and choose your direction. Those companies who fear open source and Linux will lose out; those that start to embrace it will likely win in the long run, even if they only put a toe in the water today.

CHRISTIAN KROKER (SI): It is not jeopardising existing business models; it is about expanding service offerings in new market areas. But the commitment to resources, skills development and also awareness generation needs to be there.
||**||Mix and match|~|porter200.jpg|~|Graham Porter, marketing manager MENA at Sun|~|KHALID AL RAJHI (SI): Open source software gives the channel partners another business line to increase their revenues. Hardware vendors can load Linux operating systems on PCs and servers as a value-add, which is required in today’s competitive market. Channel partners can also provide open source solutions and services without jeopardising their existing business models.

GORDON RATCLIFFE (V): Channel partners are not actually jeopardising their existing models by committing resources to open source. On the contrary, they increase their profitability. This is how the IT world is going. The customer demand is for open source.

PAUL SALAZAR (V): The channel is very strategic to Red Hat. Three or four years ago we did not have a model that the VARs and VADs were looking for in terms of volume and potential sales. Today, especially around Red Hat Enterprise Linux, there is a model that the channel understands in terms of an annual subscription meaning a recurring revenue stream and a ‘per installed machine’ revenue component. Customers are buying the service but it is packaged up in a way that the channel understands.

MOHAMED ALOJAINI (V): Linux has become the strongest rival that Microsoft has ever faced. In the server space IDC predicts that Linux market share based on unit sales will rise from 24% today to 33% in 2007, compared to 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 and not just the other alternatives and is forcing Microsoft to discount to avoid losing sales.

BASHAR KILANI (V): If we take the example of the operating system, the channel, whether it is a systems integrator or reseller, is focused on providing the best solution to the end-user. Linux solutions now have a better value proposition — they come at a lower cost, are more flexible, integrate with more systems and an open infrastructure is much better for IT transformation. Anyone reselling IBM hardware or software now has by default the capability to offer open source and Linux solutions.

CME: How does selling Linux and open source software impact channel revenue models? Is it a case of software for free and revenue from long-term servicing and maintenance?

CHRISTIAN KROKER (SI): Yes, definitely. With software for free there is potentially more initial services revenue in a project. But there is also long-term maintenance revenue streams.

KHALID AL RAJHI (SI): Absolutely, the value addition coming from consultation, deployment, support and services is phenomenal. Even though Linux and open source is free, customers have to pay for the services. With the benefits that Linux offers over other operating systems, users are willing to pay for solutions and services related to open source software.

GRAHAM PORTER (V): It’s a mix and match — very few customers will go only Linux and only open source software, so integration, installation, maintenance and services are going to produce opportunities for those with the skills. A simple example: how many resellers can build a Linux grid of 100 two-way servers today? At US$2,000 a box, that is an amazing bargain of US$200,000 for a supercomputer, but where is the channel to deliver this?

GORDON RATCLIFFE (V): Linux and open source definitely affects the channel revenue models. However, profitability would increase dramatically. This is something that any business model would like to embrace, as ultimately every company would like to have more profits but less investment.
||**||Channel enthusiasm|~|gordnovell200.jpg|~|Gordon Ratcliffe, general manager at Novell Middle East|~|CME: How many partners do you now have in the Middle East reselling and promoting Linux and open source-based solutions? Is this number increasing?

GRAHAM PORTER (V): We have 50-plus partners in this region, most of whom are embracing our AMD Opteron servers, which run Solaris, Linux or Windows, and I think the choice of all three operating systems is important and the Sun channel is unique in having all three operating system skills. We also have a handful of real Linux specialists and open source partners and this number is growing.

KHALID AL RAJHI (SI): We have five channel partners in the Middle East at present and this number should double by the end of the year if our channel recruitment initiatives go according to plan.

GORDON RATCLIFFE (V): We have around 30 dedicated partners in this region and the trend is for this to increase. Channel partners in the region are a little reactive. However, due to the growing demand for Linux in the region we have partners that are eager to work with us to meet customers’ demands.

MOHAMED ALOJAINI (V): Almost every partner we have is reselling and promoting Linux solutions expect for the few ones signing an exclusive agreement with Microsoft.

CME: What unique selling points are driving Linux and open source adoption by customers and channel partners?

PAUL SALAZAR (V): Three to four years ago the biggest migrations we saw were financially driven. The customers that saw the biggest financial payback made the first move. For anyone with 20,000 or 30,000 servers it was not a case of ‘should I do it?’, rather it was a case of ‘how quickly can I do it?’ In the last couple of years it was a case of ‘should I go for UNIX or Linux?’ Now it is a case of ‘Windows or Linux?’ That is a harder question. Customers are considering points such as true manageability and the ability to remotely provision and deploy. The two significant factors are security and manageability. It is not just the potential hardware total cost of ownership (TCO) benefits; it is also the administration side of the TCO argument. They also want flexibility and choice and this is something that Linux provides. If they work with Red Hat, they can easily switch to another Linux vendor.
||**||Margin potential|~|redhat200.jpg|~|Paul Salazar, European marketing director at Red Hat|~|CME: What barriers and obstacles are holding back the development of Linux-based solutions in the Middle East?

CHRISTIAN KROKER (SI): Right now there is still some scepticism about these new technologies in the region and there are also massive amounts of negative PR coming from one vendor that has a lot to lose.

KHALID AL RAJHI (SI): Lack of awareness and applications; the fact that open source can be unfriendly to install and the after-sales maintenance and support is poor.

GORDON RATCLIFFE (V): There are actually no barriers or obstacles that hold back Linux development in this region. Actually, no one wants to make the first jump because of the possible repercussions. It is probably a lack of courage to embrace new technologies. They are so used to spending on expensive solutions that they cannot or do not believe in getting a product so cheap that can do everything they want and more. It is not a matter of them being first as several thousand firms have already made the transition to Linux. Really, it comes down to one question: do you want to be the last one off the sinking ship?

CME: So what margins can I make selling Linux and open source solutions? Are they healthy?

CHRISTIAN KROKER (SI): Yes, there are service business opportunities with margins that are better than average.

GORDON RATCLIFFE (V): This is a fantastic system for integrators and resellers not only to increase their profitability, but also to project professional competencies. The channel now has a chance to proactively upsell their services like never before.

KHALID AL RAJHI (SI): It depends on the value-add you do and if you can sell Linux as an enterprise solution as opposed to just box-pushing.

GRAHAM PORTER (V): Anything new has good margins attached but just to be cynical for a moment, quite frankly I have seen many vendors talking about Linux to demonstrate that they are hip and trendy and then selling proprietary products once they get a chance to offer a second option; so why shouldn’t resellers do the same?
||**||Microsoft makes its case|~|haider200.jpg|~|Haider Salloum, marketing manager at Microsoft South Gulf|~|Linux advocates can present a compelling case for the adoption of open source technology, but as always there are two sides to the argument. Listening to both perspectives, it is clear that there are multiple issues that need to be considered by channel partners and customers alike.

Haider Salloum, marketing manager at Microsoft South Gulf, said: “Linux went through an initial phase where it was promoted as free. In fact it is just a different way of paying for the solution. In the commercial market the Linux licence may be free but customers then have to pay for the service and maintenance afterwards.”

Open source solution vendors are clearly deploying commercial business models more and more. Microsoft also takes issue with any perception that open source systems are inherently more secure, pointing to in-depth research by reputable analyst houses such as Forrester and IDC.

These reports also offer a compelling argument for Microsoft in terms of potential indemnification for Linux users — especially given the current legal wrangling surrounding patents and coding — and also the financial health of resellers deploying solutions. “If partners believe they can make more money selling open source solutions they should go ahead. However, these people are finding it difficult to maintain a model where the licence is free,” added Salloum.

A report in May 2004 commissioned by Microsoft concluded that VARs with a strong focus on the Windows platform reported up to three-and-a-half times higher revenue growth and profit margins more than 24% higher than channel counterparts focused on Linux, UNIX, NetWare and other operating systems.

The channel also needs to consider the support resources in place for Microsoft-based solutions and the huge ecosystem of applications that exist. Concludes Salloum: “Partners should think about what their customers want and should understand the backing and technical support that Microsoft offers.”
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