The VAR Guy

One innovation is easy. But sustainable innovation — building lots of worthwhile new things again and again, even as you maintain your old products — is challenging. The VAR Guy wonders: Is open source the key to sustainable tech innovation? Is open source the best way to keep a maturing company feeling vibrant and young? Before you answer, consider some of these scenarios.

The VAR Guy built this site entirely on open source software (of course, he paid some talented developers to piece it all together). And during the first few months of business, our resident blogger had ample time to test new open source components for this site.

But then something wonderful — and disturbing — happened. This “fun” site turned into a business. Our blogger actually had to blog (no stop!) for his loyal readers. It’s as if he shifted from innovation mode, to maintenance mode.

Still, open source seems to be the best way to keep on innovating. Especially for a small business. By skipping a few hours of sleep, The VAR Guy can test open source code from developers across the globe. Like a kid snapping together a new set of LEGOS, our resident blogger keeps finding (and testing) new building blocks. Best of all, he relies on the work of strangers from far off lands who don’t demand any money.

In stark contrast, companies like Microsoft have to keep hiring developers, debugging legacy code, and apologizing for less-than-stellar products. Clearly, the open source model beats closed source for ongoing innovations.

Rare Fruit

Or does it? How do you explain a company like Apple — the apparent king of sustainable innovation. Just when you warm up to your iPod, along comes the iPhone and now the iPhone 3G. As you brag about your MacBook Pro, along comes the MacBook Air.

How does Apple out-innovate the entire Wintel industry — Microsoft, Intel, Dell, HP, Lenovo — and so on? And how does Apple stay ahead of open source on many fronts?

Sure, Canonical CEO Mark Shuttleworth says he sees the day when Linux will be more intuitive than Mac OS. Frankly, The VAR Guy doesn’t see that day coming anytime soon.

When it comes to sustainable innovation, the open source model seems to have just about everyone beat. Everyone, that is, except Apple.

Tom McCallum, VP of investor relations at Red Hat, is diving into some rather interesting waters. Red Hat’s stock has dipped a bit following the company’s June 25 earnings announcement. Now for the twist: McCallum on July 7 wrote a blog that attempts to clarify Red Hat’s financial momentum.

McCallum’s blog entry is a good read for anyone who wants to get up to speed on Red Hat’s business. But… The VAR Guy wonders… is McCallum trying to tactfully rally investors around Red Hat?

The VAR Guy needs to be extra clear here: He’s not accusing McCallum of any wrongdoing. McCallum’s blog entry goes to great lengths to mention how specific members of the financial analyst community reacted to Red Hat’s June 25 earnings announcement. Overall, it’s a balanced, fact-filled blog entry that doesn’t hype Red Hat. In fact, it includes some negative comments from analysts.

But this portion of McCallum’s blog entry really caught The VAR Guy’s eye:

“A number of investors and analysts said that they would have liked to see higher billings growth in the quarter, but they noted that the additional color on the solid bookings that was discussed on the [earnings] call was very helpful. Overall, Red Hat’s earnings were solid, especially considering the current challenges of the economy.”

Ahem. Is McCallum saying Red Hat deserves more credit (i.e., a higher share price?) for its most recent quarterly results, based on solid bookings?

That’s pure speculation on The VAR Guy’s part. But consider this: Red Hat shares rose steadily from $16.58 on March 17 to $24.36 on May 30, according to Yahoo finance. Since that time, Red Hat shares have fallen considerably to $20.53 on July 7, and a good portion of the decline occurred after the June 25 earnings release.

Still, McCallum certainly sounds upbeat about Red Hat’s long-term prospects. And he should, considering Red Hat’s position on the server, and the continued growth of Linux-driven solutions.

The key point here: According to Red Hat’s blog archives, McCallum has posted three blogs so far this year to the Red Hat site. Is McCallum diving into dangerous waters by blogging about Red Hat’s financial results — even if the blog entries have the best of intentions?

Full disclosure: The VAR Guy doesn’t own any Red Hat shares as of this writing. But he has considered buying a few shares in recent days.

Two small Linux companies are merging. What does it mean to Linux market leaders like Red Hat, Novell and Ubuntu — and Linux customers? Here are some clues from The VAR Guy.

First, some background: Xandros has acquired Linspire. Xadros is making big, wonderful claims about the Linux-focused deal. But Matt Asay over at CNet’s “The Open Road” blog provides a healthy reality check — and some harsh words from Linspire’s former CEO.

Fact is, there’s only one real winner here: Customers. Here’s why.

There are far too many Linux distributions from which to choose. Most consumers walking down Main Street USA have never heard of Red Hat — and even fewer know about Novell and Ubuntu.

Start tossing niche players like Xandros and Linspire into the conversation, and most consumers will retreat to Redmond, opting for the “comfort” and “safety” of Windows — rather than the challenge of selecting the “best” Linux.

Goodbye, Linspire (at least as a standalone company). And thank you to Xandros for funding a market consolidation that’s badly needed. The VAR Guy applauds customer choice and open source. But in this case, fewer Linux options will mean faster decisions by frustrated Windows customers.

The VAR Guy is always looking for a bargain. And he just spotted one. The ASUS Eee PC — that little Linux laptop — is going on sale. Here’s the scoop.

Thrifty shoppers can pick up the ASUS Eee PC for $274.99 from BJs, the big discount warehouse. The sale ends July 9. The sub-notebook / ultra-portable device typically sells for $299 to $399 from various locations.

The $274.99 model from BJs features a 7-inch screen, though fanboys await a 9-inch model that will debut any day now (at a higher price, of course).

For those who aren’t familiar with the Eee PC, the device has sparked a revolution of sorts. (Check out Works With U, our sister site, for details.)

Major PC makers are now trying to mimic the Eee PC, which combines low cost with fast boot times, WiFi connectivity and tightly integrated open source applications. (A Windows version of the Eee PC, for Microsoft purists, also is available.)

The VAR Guy has a theory: Sure, thousands of Microsoft partners are seeking to host Exchange Server, Dynamics and SharePoint. But, our resident blogger believes, a good portion of the Software as a Service (SaaS) industry is going open source. First, Linux became popular for hosting applications. Now, open source applications like SugarCRM are increasingly shifting to the SaaS model.

The VAR Guy got all the evidence he needed by listening to a podcast featuring SugarCRM CEO John Roberts. In it, Roberts says roughly 30 percent of SugarCRM’s now comes from SaaS-centric customers rather than on-premise deployments. And the figure continues to grow.

For VARs and solutions providers that grew up on Wintel servers, the shift to SaaS represents a natural inflection point. If you’re ever going to diversify beyond traditional Wintel servers, now is the time to do it. A growing number of solutions providers already host MySQL, SugarCRM and other open source platforms.

Microsoft isn’t going away. And The VAR Guy respects the fact that Microsoft freed us all from RISC hardware running Unix. But Linux further freed us on corporate servers. And now that open source movement is shifting into the SaaS applications space.

Okay, the headline is a bit over the top. But fans of The VAR Guy have come to expect some pumped-up drama on this site. So here we go. A few days ago, The VAR Guy openly wondered if Novell (based in Waltham, Mass.) would have any marketing surprises in store for Red Hat Summit, which runs June 18-20 in Boston. Well, The VAR Guy finally has some answers.

A Novell spokeswoman says the company has an ongoing marketing campaign that includes Novell banners (see photo) in the Hynes Convention Center. Anyone care to guess where Red Hat Summit is scheduled to be held?

Will those banners stay up during Red Hat Summit? Does Red Hat even care about The VAR Guy’s lame attempts to stir up controversy?

Regardless, the summit should be worthwhile. The VAR Guy expects to hear about five key trends at the event, and he also expects Cisco Systems — yes, Cisco — to be there in full force.

Now, if only The VAR Guy would make a surprise appearance as well…

When Red Hat kicks off its big customer summit June 18 in Boston, the open source giant will bring along a rather large — and surprising — date: Cisco Systems Inc. Why does Cisco plan to hang out at one of the open source industry’s largest events? The VAR Guy has a few hunches.

Over the past year or so, Cisco has begun a quiet metamorphosis. During meetings with The VAR Guy in 2006, Cisco could barely utter the term “open source,” and company insiders weren’t familiar with industry players like Canonical, SugarCRM or MySQL (since acquired by Sun Microsystems).

But by mid-2007, The VAR Guy noticed some small but significant changes. During a media gathering in Dublin, Ireland, Cisco managers actually uttered the “open source” term, and they spoke a bit about their efforts to get open source (and closed source) application developers aboard the unified communications bandwagon.

Good News, Bad News

The VAR Guy isn’t suggesting that Cisco is ready to start open sourcing all of its software projects. But the networking company is starting to realize that open source is both a blessing and a burden.

On the upside, Cisco can leverage open source partners to fend off Microsoft’s unified communication efforts. We all know that application developers are the key to winning platform wars. And in Cisco’s mind, the next big platform is unified communications.

Now, for the challenge: Open source also threatens Cisco in some ways, particularly at the low end of the market where companies like Digium, Untangle and others are promoting open source networking, IP PBX and security solutions.

Open source won’t threaten to destroy Cisco anytime soon, but Cisco isn’t waiting around to see how the competitive landscape evolves.

Welcome to Red Hat Summit

Instead, Cisco is attending — and even sponsoring — events like Red Hat Summit.

During the summit, Cisco is expected to describe how its products complement Red Hat’s middleware. But The VAR Guy thinks Cisco will spend considerable time listening to attendees — rather than pitching products.

Microsoft spent the 1990s ignoring and dismissing competitive threats from Linux. Apparently, Cisco is determined to avoid that mistake in the modern age of Web 2.0 and open applications.

Ignoring open source would mean dismissing dozens of application companies — and thousands of independent programmers — who can add value to Cisco’s unified communications strategy.

Imagine if the Los Angeles Lakers held a fan rally in Boston, right in the Celtics’ back yard. That’s the situation facing the open source industry, where the Red Hat Summit starts June 18 right in Boston — roughly 15 miles from Novell’s corporate headquarters. So, should Novell defend its home turf and march on Red Hat’s parade? The VAR Guy certainly would. Here’s how.

First, some background: Red Hat Summit is a massive gathering of Red Hat partners, customers and followers. Red Hat will also provide some channel partner program updates at the event, and may even discuss a few strategies for managed service providers, according to MSPmentor.

Now, for the drama (supplied by The VAR Guy, of course): The event runs June 18 through June 20 at the Hynes Convention Center — which is a 15-mile drive from Novell’s headquarters in Waltham, Mass.

Another Tea Party?

So, how could Novell counter Red Hat while the summit is in town?

Certainly, prominent Novell SuSE Linux ads on buses, taxis, billboards and other public displays would catch some attention. And this is a prime opportunity for Novell to schedule some lunches and dinners with mutual partners — say, IBM, Intel and AMD — while those cherished sources are in Boston for the Red Hat event.

Novell could even throw a few curve balls: How about some SuSE Linux ads in Fenway Park, where Red Hat will host a private tour of the stadium for selected guests?

But hey: The VAR Guy isn’t playing favorites here. He’s just cheering for a good game — and maybe a few brush back pitches along the way.

Steal the Spotlight?

Conventional wisdom says Red Hat continues to dominate the corporate Linux server market, especially in North America. But Novell has turned a few heads lately, surprising skeptics with improving sales and profits.

The VAR Guy was down on Novell in 2007, but he’s gradually opened his mind to Novell and its improving fortunes this year. Even full-time open source bloggers like Matt Asay are giving Novell a second look.

Still, Novell’s marketing has taken its lumps over the years — and being the number 2 company in an open source industry can be thankless. Some of Novell’s marketing messages got lost in the noise of Microsoft, Red Hat and security companies that compete with Novell’s own identity management tools. Other Novell messages were too passive.

Will Novell take the next step, and launch a few surprise attacks during the Red Hat Summit in Boston? The VAR Guy will be watching.

In our “winner take all” society, The VAR Guy is starting to wonder: Can open source companies like Concursive, Compiere and EnterpriseDB ever escape from the shadows of their larger and more successful rivals (SugarCRM and MySQL)? Before you answer, consider these lessons.

First, let’s look beyond the open source market and zero in on the search industry.

Yahoo generated $1.8 billion in revenue during its first quarter, yet the press and Wall Street widely consider Yahoo a modern day failure because of its second-place status to Google.

Before we all bury Yahoo, shouldn’t we give the company a little credit? Anybody else remember Lycos, Altavista and all the other non-relevant search engines that went by the wayside? Yahoo’s still in the game… though many folks forget that.

Open to Alternatives?

Now let’s shift gears to the open source sector.

First up, consider the situation at Concursive (formerly Centric CRM). Intel Capital seems to like the open source application provider, and has pumped money into the company. And Concursive claims to have several Fortune 500 customers.

Another open source ERP and CRM company, Compiere, claims to have the world’s most widely used open source automation solutions. In fact, Compiere has been downloaded more than 1.3 million times.

Sweet. But apparently, not as sweet as the situation over at SugarCRM. Bloggers and journalists (The VAR Guy included…) seem to fall over each other, as they position SugarCRM has the open source industry’s best hope for a successful IPO (initial public offering).

Perhaps it’s time for our resident blogger to start digging a little deeper and spending more time looking at Compiere, Concursive and Spain’s Openbravo, which just received a $12 million investment.

Meanwhile, EnterpriseDB has landed a new CEO, and IBM has pumped a few bucks into the open source database provider. Will that take EnterpriseDB from good to great?

Or will MySQL remain the open source industry’s database darling?

Let’s face it: Finishing second place can be pretty darn good to your wallet (just ask David Archuleta). But in the corporate world (and the software industry), the press continues to insist that finishing second sucks.

The VAR Guy will keep a close eye on the Red Hat Summit, which kicks off June 18 in Boston. Here are five trends and themes he’ll be investigating at the event.

1. Red Hat on Laptops: Sure, Red Hat has publicly stated that the company isn’t launching a consumer desktop initiative. But that doesn’t mean Red Hat is ignoring the corporate desktop and laptop markets.

In fact, Red Hat’s Richard Hughes will host a session on Laptop Power Management, which will show attendees how to “make batteries last longer and how to make suspend work successfully in a modern Linux desktop.”

2. Linux on Appliances: The VAR Guy spends considerable time writing about open source appliances, and the growing popularity of network-centric open source products from Untangle, Groundwork Open Source and others.

But how is Red Hat attempting to serve the appliance market, and how can ISVs as well as hardware companies cash in? We may get some clues during an appliance-centric session scheduled for June 18.

3. IBM vs. Microsoft On the Desktop: We all know who won this ugly , one-sided war in the 1990s. This time around, IBM is wisely reaching out to open source developers and partners to aid its desktop cause. IBM’s John Walicki will be on hand June 19 to describe customer case studies involving the IBM Open Collaboration Client Solution (catchy name, eh?).

The VAR Guy hopes Walicki will describe how that effort relates to Lotus Symphony, the productivity suite alternative to Microsoft Office.

4. Red Hat Exchange: The company’s online software store, known as Red Hat Exchange, launched with great fanfare last year. It was supposed to serve as an Amazon.com of sorts, that would allow customers to buy a range of open source applications from dozens of software providers. But how is Red Hat Exchange actually performing? The VAR Guy will search for answers.

5. Managed Services: Red Hat hinted a few weeks ago that the company planned to more aggressively work with hosting providers as well as managed service providers. During the conference, The VAR Guy expects Red Hat to quietly tell channel partners more about this strategy.

Assuming The VAR Guy doesn’t take a wrong turn toward Fenway Park, he intends to cover the Red Hat Summit closely. Plenty of additional strategies — related to middleware, software as a service, and virtualization — should capture his attention at the event.