Linux VARs: Make Money by Specializing

NEW YORK—Companies can make money from Linux—but for that to happen, it’s important for them to understand how open-source software models and communities work, said participants in this week’s “Linux on Wall Street” conference here.

In some ways, successful players in the Linux space will be following in the footsteps of VARs before them by adding software, hardware and services to implementations, said Larry Tabb, founder and CEO of The Tabb Group, who moderated one panel session at the show.

Yet in the open-source arena, services will emerge as particularly valuable to customers, panelists agreed.

“The pressure is on to build value,” said Duncan Johnston-Watt, chief technology officer at U.K.-based Enigmatec Corp.

“It is services that are really going to attract you guys to us,” Johnston-Watt told the audience of IT buyers.

Speakers pointed to systems integration, technical support and training services—areas long addressed by VARs—as some of the possible business models for third-party providers in the Linux and open-source markets.

But providers in these areas also tend to be active at encapsulating services in software. Enigmatec, for example, produces software designed to automate management of IT resources in emerging environments such as virtual machines.

Generally speaking, it’s tougher to make money through software development in Linux and open-source environments, since so much code is available for free, according to another speaker, Stephen Ferrando, CEO of dbConcert Inc.

But software development can also turn lucrative, for those who build highly specialized services on top of open-source software projects, he told the group.

dbConcert has used an open-source toolkit called OpenAdaptor as the platform for its Integration Management Suite product.

Still, moving into the open-source sphere can take a big investment of time, according to Ferrando. He estimated that dbConcert spent an initial period of about 18 months “getting its arms around” open-source software models and the open-source community.

In the process, the company has contributed components to the OpenAdaptor project, while helping to scope out the next major release of the toolkit.

In an interview with The Channel Insider, Ferrando said that companies stand a much better chance of making money in the open-source market if they are highly focused.

dbConcert, for instance, has been concentrating in two areas: integration middleware and the financial vertical market. Just about all of its new business leads have come through word of mouth.

Ferrando also cited a number of service providers cropping up in open source. For instance, a company called Open Source Consulting LLC focuses exclusively on programming and support.

Another new provider, Optaros Inc., offers professional services in the areas of advisory services, business application development, information services and application support.

SpikeSource Inc., on the other hand, specializes in facilitating the adoption of open-source software in enterprises through testing and certification.

Some of the other exhibitors at the Linux show have adopted business models reminiscent of another traditional VAR model: integration of hardware with specialized software.

Not all of these companies are new. Concurrent Computer Corp., for example, now offers its real-time computing devices with a choice of Linux or Unix operating systems.

At one time, though, the 20-year-old company used proprietary real-time operating systems, said staffers on hand at the Concurrent booth.

Earlier this week, Concurrent announced that its iHawk real-time Linux platform has been integrated with ticker and messaging software from Market Systems Technology Inc., for customers in the financial services industry that want to deploy both of these solutions together.