Linux closing in on Microsoft market share, study says

That conclusion, drawn by market researcher International Data Corp., is good news for Linux backers. The bad news? The open-source operating system has little chance of generating anywhere near the revenue of Microsoft's Windows.

And over the next few years, revenue growth from sales of all server operating systems will pale in comparison to the number of units shipped, according to IDC's new study--a paradox explained by the skyrocketing popularity of Linux versions for low-cost systems.

In 1999, Linux scooted past Novell's Netware to become the No. 2 server operating system behind Microsoft's Windows NT. Over the next four years, IDC said, Linux shipments will grow at a rate of 28 percent, from 1.3 million in 1999 to 4.7 million in 2004.

"There are a number of factors behind (Linux's) growth," said Al Gillen, an analyst with IDC, explaining that Linux is primarily used for some Internet-related tasks. "There's a 'gee whiz' mentality about it: It's inexpensive to obtain, easy to fool around with, and, if it doesn't work, the cost of entry is very low."

Many Linux companies are working to make the operating system even more appealing to large-scale servers. Red Hat, generally agreed to be the leading seller of Linux, is developing "clustering" software that enables computers to share work or take over from one other if one fails. Competitor TurboLinux has designs on clustering software. Mission Critical Linux recently snagged $20 million to advance its effort to bring clustering to Linux. And Steeleye Technology has just released a new version of its $2,995 LifeKeeper clustering software, originally developed at AT&T and NCR.

Server computers power both Web sites and e-commerce transactions, along with enabling large-scale database applications and file and printing tasks. Demand for the operating systems that run these computers has grown in response to the increasing use of online computing and networked PCs, according to IDC.

In fact, shipments of server operating systems will grow at a compound annual rate of 17 percent from 1999 to 2004, IDC said. However, revenue growth will increase at an anemic 1 percent during the same time period.

That discrepancy is explained by the ascendance of low-cost Linux, according to IDC. Further, over the next few years many new operating system sales will be upgrades from Windows NT 4 to Windows 2000, Microsoft's recently released server operating system. These incremental upgrades are less lucrative than new shipments.

"The market has grown and Linux has absorbed bulk of growth in the market," Gillen said.

While Linux's popularity on server systems is booming, the operating system will not enjoy the same widespread use on client systems that run on desktop or notebook PCs. IDC recently released its numbers for the client market, showing that Windows' revenue grew by $1.6 billion in 1999. However, the entire market grew by only $1.53 billion, lowered by other product declines.

In fact, on the client side, Windows accounted for 87 percent of all sales in 1999, a figure that will decline to 85 percent by 2004.

"On the client side, it's pretty boring. The story is, it's a Microsoft world," Gillen said. Of the 13 percent of the market not buying some type of Windows product last year, he said, about 5 percent purchased an Apple computer running the Mac operating system.

Although that represents a 26 percent jump from its 4.5 percent of the market the year before, Gillen said, "the Mac OS continues to be a non-threatening element in the market."