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Linuxcare wins deal for IBM services

Linuxcare wins a new contract to back up the Linux offerings of IBM's global services division.

Linuxcare has won a new contract to back up the Linux offerings of IBM's global services division.

Under the deal, Linuxcare will provide 24-hour technical support for "Level 3" cases--the trickiest jobs that come to IBM's global services division, the companies said today. Those jobs typically require scrutiny and modification of the Linux "source code," the underlying programming instructions of Linux that are freely shared under the open-source model.

The global services division, which accounts for the fastest-growing segment of IBM's revenues, helps companies plan, install, manage, and retire complex computer systems.

The contract is a step ahead for Linuxcare, which is locked in a battle with Linux seller Red Hat and others to try to win a place as the preferred provider of Linux services for companies wishing to use or even customize the Unix-like operating system. Yesterday, Red Hat expanded its own services to include other open-source projects besides Linux.

Red Hat already has a deal with IBM global services to provide Level 3 support for its own version of Linux, a company representative said.

In expanding services, Red Hat has the advantage of $84 million from its initial public offering. Despite Red Hat's IPO and more Linux-related offerings in the pipeline, Linuxcare is being more cautious with its own IPO plans.

Dell Computer is one battleground for the Red Hat and Linuxcare. Though Red Hat's version of Linux is preinstalled on Dell computers, Dell has a contract with Linuxcare to provide technical support.

Beefing up services is a top priority for Red Hat, said Paul McNamara, leader of the company's enterprise business unit, in an interview. The company currently has about 100 people handling support operations.

"Services are growing very quickly as a percentage of our business," McNamara said.

It must be noted, however, that Red Hat's services push is a relatively new initiative. According to the company's SEC filings, Red Hat had only $247,903 in services revenue for the six months ending August 31, 1998, so an increase to the $1.8 million for the same period in 1999 naturally shows sharp growth. The company's total revenue for the comparable period was $3.8 million and $7.2 million, respectively, meaning that services accounted for 7 percent and 25 percent of revenue.

Eventually, Red Hat's services revenue will hit 35 percent in coming years, McNamara said.

Red Hat's expansion into support of other open-source software besides Linux raises the prospect of competition with Sendmail, a company that provides support and consulting services for the email software. But Sendmail chief executive Greg Olson said in an interview that there's plenty of room to support the 2 million users of the software. "We really welcome Red Hat's help in supporting the...users of Sendmail."

In addition, Olson said Sendmail and Red Hat are in discussions for helping each other out in support tasks.