Free Market

Open source vendors have been quick to promote the benefits of their proposition ever since the “Linux penguin” first parachuted onto the IT scene. But it’s fair to say that the concept has still failed to reach the kind of altitudes that many of its most ardent Middle East supporters predicted. Channel Middle East examines if there are blue skies ahead for the open source channel.

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By  Dawinderpal Sahota Published  February 27, 2007

|~|anis200.gif|~|Anis Krichen, Opennet|~|Open source vendors have been quick to promote the benefits of their proposition ever since the “Linux penguin” first parachuted onto the IT scene. But it’s fair to say that the concept has still failed to reach the kind of altitudes that many of its most ardent Middle East supporters predicted. Channel Middle East examines if there are blue skies ahead for the open source channel.

Channel Middle East surveyed some of the key influencers in the regional software market to source their verdicts on the development of the open source movement in the Middle East and asks them how they see the market shaping up in the future. This includes: Gerard McDonnell, managing director at Novell Middle East; Bharat Kumar, business and marketing director at Microsoft Gulf; Jamie Bliss, software solutions sales manager Southern and Eastern Europe, Middle East and Africa at Sun Microsystems; Mohamed Ojaimi, director of technology, marketing department at Oracle; Anis Krichen, finance director MEA at Opennet, and Maged Hussein, product manager at Egyptian system integrator Valuesys.

How well have Linux and open source software solutions been received in the Middle East to date?

GM: Firstly, it’s important to understand what it is that motivates people to look at open source; if you look at the areas where it’s strongest, the biggest driver is cost. The fact that open source is free means that it does motivate people and makes it easy for people to start using it without having to make an up-front investment of any type.

JB: I came to the region three years ago and Sun has been talking about open source for a long time — we’re the largest contributor globally. Back then, people weren’t really very interested in what open source could do for them. However, more customers are talking to me about open source and how it can help them. I also have government agencies talking about hosting style communities here as well to promote open source as an advantageous way of moving forward and keeping open source within a business’ strategy. We support that 100% and there has been an uptake in open source recently.

MO: The Middle East is always a little slower than the rest of the world, and this was also the case with the reception to Linux. Open source software was perceived differently a while back to how it is now. Five years ago people thought of Linux as being client software but today it’s seen as a replacement to Windows. The move towards open source software has been ‘behind the scenes’ — sometimes the user does not even know they are using open source software.

AK: It actually took quite some time to get Linux in the Middle East market. What stimulated demand in this region was the work we had been doing during the first few years actually, the success stories we had in the market, such as Aramco, which is using Linux operating system, clustering products, system management products and workstations. Then Red Hat bought JBoss, Microsoft struck an alliance with SUSE and Oracle launched its ‘Unbreakable Linux’, and this got everybody talking about Linux. People wanted to know why such big names were investing in something that was supposed to be nothing two or three years ago.

Linux has always been the best technology but it didn’t get any media promotion, because it is seen as a community project. What is happening in the Middle East now is almost what happened 10 years ago in the US and Europe. For Red Hat, we’re seeing a growth of almost 85% per year since 2003 — worldwide Red Hat is experiencing a growth of around 45%.

BK: We’d say there’s been limited success. When open source and Linux first appeared on the horizon in the market there was some interest — this free software was something different, something exciting, something new — so there was some interest. However in the months and years that followed, the take-up and deployment of open source solutions hasn’t happened in the same way as markets like Western Europe or the US, so I think there’s been limited success. Certainly, if I were looking from an open source vendor perspective, demand has been less than what I would have expected.
||**|||~|gerard200.gif|~|Gerard McDonnell, Novell|~|Which sectors of the market are showing the most appetite for open source software solutions?

MH: Telcos and oil companies are showing the most demand for open source solutions in the Middle East because those areas are where a higher level of customisation in IT services are required.

JB: Mainly government — they’re really aware about open source because they don’t want anti-competitive issues and open source is all about giving a single standard in order to connect and do business with each other.

MO: Demand is primarily coming from enterprises in the financial, telecommunications, travel and transportation sectors.

GM: The edge of the network and in the datacentres as the incumbent operating platform of choice for applications. Where there’s still a lot of potential — and where it should go — is into the small to medium business as your central office environment. The next point that will come later is Linux on the desktop itself. The reason why that will be at the back end of the emergence is because people perceive their workspace as sacrosanct — changes to it can have a big impact. So, ‘open office’ will be the first stage and it is growing in this region. The second stage will come when they’re increasingly using alternative browsers like firefox. Customers will start to think: “Well, if I use a browser and I use my open office environment, why shouldn’t I use an open source operating system?”

What role does the Middle East channel have to play in terms of the delivery of open source solutions?

BK: There are a couple of elements that affect the channel. Firstly the traditional element, they obviously need to sell open-source solutions, represent the vendors to the customer and be that ‘point-person’, as they do for commercial software. The difference comes in when you have different flavours of open source, different distributions and so on, and there are slight nuances between open source solutions available on the market. Resellers have to understand the solutions and where the differences are.

Secondly, open source requires a different set of skills in terms of technical and development skills. Normally some sort of customised development needs to take place within the customer’s environment. This is one of the reasons open source hasn’t taken off so much because customers are not willing, able or interested in dedicating resources. That puts more pressure on the partner to customise and develop solutions. The third difference is the business model. How do partners make money out of making open source? Support is very important — I know people believe that open source is free, and while there may be no initial purchase cost, it has a very different model in terms of support and signing up. For commercial software the model is more mature, partner-driven and very well defined with licensing models.

MH: In terms of sales it is a different selling model for resellers because you’re not selling the software. The software is free. What you’re selling is a solution and a service. This requires a completely different set of skills so not all resellers can successfully provide open source products.

MO: The model is totally different. Until very recently, there has not been a marketing force behind Linux solutions in the same way that there has been with commercial software. Resellers also don’t make any money on a sale so, for example, if a reseller was to provide an ERP solution, the channel partner’s role is in implementing the solution.

JB: From our perspective, the channel is our only outlet into the marketplace in terms of selling into the market. Open source is incredibly important to us and the channel plays a vital role in taking open source technologies forward because it is all about having a standard that people can communicate with. If you look at Java, we invented it 11 years ago and open sourced it last November. That is an incredibly important message for the market — 75% of all development globally happens on Java and it is a standard that people use.

GM: The channel plays a big role. Our partners are very important to us as they are the ones who implement the software and interact with the end users at the point of purchase. A challenge that we face in this region is the availability of local skills. This is a real barrier to open source in the Middle East and so we’re investing in education for the channel. We’ve made a huge investment in training partners, to build up skills and confidence with working with the software so that they are able to really understand it. We’re providing this training through roadshows, seminars and events across the region.
||**|||~|blis200.gif|~|Jamie Bliss, Sun|~|What advice would you give to system integrators in the Middle East to provide open source solutions effectively?

GM: Develop skills internally. I would urge them to use the software and see for themselves. It will become quite apparent that the technology will simply sell itself; the software is very easy to use and it speaks for itself. It will be simple to convince clients to adopt open source solutions.

MO: My advice to resellers is not to be afraid of having a big enterprise vendor to back them up. They shouldn’t feel that providing open source solutions is something they have to do alone. They should be aware that vendors like Oracle, IBM and Sun are all providing open source solutions and there are plenty of different solutions available on the market and a lot of technological innovation out there.

AK: Open Source is an opportunity — everybody wants to know more about Linux — so firstly resellers should find out about the technology and advise the clients to use it. Also, open source is a knowledge-based technology, so resellers need to make an investment in training.

What barriers and obstacles are holding back the development of Linux-based solutions in the Middle East?

AK: Preconceptions of how user-friendly it is or how compatible it is with other software, even though you don’t even notice the difference. The same tools, features and options are available in open source as in commercial software.

JB: I think that the barrier is purely perception of open source rather than there being any technological barriers to implementing it.

GM: There have been a number of areas that have been identified as being issues that may concern users, including availability of skills and support, security and scalability. However, these areas of concern are unfounded, and there’s a number of reasons for that. Novell is one of the biggest open source vendors in the market and we provide enterprise level support, so does IBM and a whole host of other vendors, so that criticism doesn’t hold true; there is support available.

A lot of commercial software users who have switched to open source are relieved at the quality and efficiency of support that they receive and claim that it’s better than what they were getting before, and the open source community is also always there to provide added support. Security is another misconception. Architecturally, Linux is the most secure and has received accreditations and recommendations as one of the best when it comes to security. And as far as scalability, I can tell you that we have implemented Linux for a client in a grid of 4,500 users with no problems, so again that is an unfounded criticism, Linux can scale up just as well as anything else.

BK: The skills are definitely a barrier. The very large companies in this region even have developers in-house and they have developers working to customise solutions because they have very specific customer requirements. For open source, you need development and customisation skills across the board, not just for the large enterprises. Now, as a partner, I would need to develop the pre- and post-sales support as open source is the type of solution that requires that hands-on approach even more. Pre and post-sales support isn’t readily available in this region. If things go wrong who do I call? If the liability is on the partner, that’s yet more pressure on partners and if it’s the vendor, it’s questionable that all of the vendors have the call centers and support available in this region. There’s the open source community — and the community aspect is a positive thing — we recognise that, but how big and active is the open source community in this region? We had a user group set up when open source first came into the region, but that’s pretty much died a death in terms of activity. If that was an avenue that I was hoping to rely on as a customer, I’d be very wary of it and I’d have to do research to find out who exactly I could contact for what problem.
||**|||~|Bharat-Kumar200.gif|~|Bharat Kumar, Microsoft|~|What factors affect pricing and margins of Linux and open source solutions for resellers?

AK: With Microsoft you can make money in the product itself and get 50% to 60% maybe. For Linux, the margin is in the knowledge and expertise that you are going to sell. The product doesn’t offer a lot of margin but successful resellers add value and that’s where the money for them lies. Migration is a huge area of opportunity as well.

MO: The open source model is a bit different so resellers should look at the solutions they sell, not the components that comprise the solutions. They can always flow the same model they use for packaged solutions by providing a value-add on the solutions by deploying some customisation. If open source will lower the cost for the client, they may be willing to spend more on a solution to deploy onto the software — which would open the door for ISVs and software houses to make a sale on top of the open source and I’m sure the margin on that is much higher than getting a 5% to 10% margin on the software.

What skills are required to sell open source software?

AK: There are two parts: technical knowledge and sales knowledge. Linux open source is a knowledge-based technology and there are certification standards for partners. Then they spread the knowledge — you can go to university and learn Linux in a way that you used to be able to learn Unix before. Any Unix product can be replaced by Linux and there is scope for Linux to spread rapidly, which the channel needs to focus on.

There is also the sales approach as there is much to learn about why to sell Linux and Red Hat rather than any other software. Our job is to be here with our channel to train them and give them leads and it’s a continuous process that happens over time as new technologies arise. From the channel’s side, they need to make an investment in training and make it in time so that they are up-to-date with the new solutions and technologies available.

MO: Nobody buys open source simply because they want to have a Linux solution, they just want to have a good solution. There aren’t many people out there specifically demanding open source Linux operating systems because they only want to use Linux. If a reseller is hoping to take that angle they’ll find a lot of resistance. But if a customer is looking for a switch solution, for example, and they like the solution a reseller is offering, I don’t think they will mind that it is Linux.

JB: We’re taking the message of open source standardisation to the marketplace. It’s all about education. We’ve been educating ourselves on open source software for a very long time, and now to get it into the public forum. Government organisations are leading the way in educating end users about open source software but the channel is also a very important place to promote education.
||**|||~|ojaimi200.gif|~|Mohamed Ojaimi, Oracle|~|How do you expect to see the open source market develop over the next few years in this region?

GM: We expect the open source market to grow exponentially in the Middle East. We’ve already seen massive growth over the past year and we expect to see the same thing again this year and over the next three years. We expect customer behaviour to mirror what has been happening across the world, even to such an extent that people will be specifically demanding open source solutions.

AK: Market growth for Linux will boom. I expect to see 60% growth in 2007. We know that as more successful deployments occur we will see even higher growth. We have booming markets in the region like Qatar, Egypt and Saudi Arabia. The more familiar people get with the solutions, the more people will adopt it.

BK: If you look at IDC reports, they predict a 20-plus points growth in 2007 for the IT industry in the Middle East. Microsoft will stay ahead of the market, we’re confident of that. From an open source perspective I expect it to grow, at best, at the same rate as the overall IT market, but probably a little less than that. When open source first hit the Middle East there was a lot of commotion, but that has now died down and people are making more fact-based decisions.

MH: The technology industry in the Middle East is growing at a faster rate than Europe, the US and many other areas of the world. Open source is the fastest growing type of solution and I expect that trend to continue. Within five to seven years I expect to see open source in any environment that commercial software is deployed in, including enterprises, government institutions and even amongst consumers.

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