Linux is booming, but unpaid adoption may hurt vendors

Even as the recession continues to cool CIO appetites for software purchases, Linux is bucking the trend, according to a new IDC report.

IDC is projecting Linux revenue to expand at a compound annual growth rate of 16.9 percent from 2008 to 2013, topping $1.2 billion in 2013.

As IDC notes, this growth will comprise just 4 percent of total software market revenue by 2013, up from 2.2 percent in 2008. However, for the second time, IDC has also examined nonpaid deployments of Linux, revealing some troubling data.

I've always assumed Red Hat's primary Linux competitor is Novell. And based on IDC's numbers, it does appear that Novell is increasingly a real threat to Red Hat.

But it is the nonpaid usage of Red Hat's software that may well pose a bigger risk.

Novell has 27.9 percent market share of paid deployments and 20.1 percent of the total paid and nonpaid market. This doesn't look so great at first glance; after all, more people use Red Hat (including Fedora) for free than pay for Suse Linux Enterprise Server.

However, in growth, Suse stands out. On paid shipments, Red Hat's 2007 to 2008 growth was 1.9 percent, while Novell's Suse was nearly double that at 3.5 percent.

On revenue, Novell comes in at 29.8 percent market share. That represents 50.3 percent growth in market share, versus Red Hat's 14.8 percent growth. Granted, Red Hat has a much larger base of revenue from which it's growing ($319.5 million compared with Novell's $112.6 million in 2007), but Novell's Linux revenue growth has outpaced Red Hat's since 2007.

I don't particularly like Novell's partnership with Microsoft to promote Linux, but it does appear to be paying off for Novell.

If Red Hat could elect to eliminate one competitor tomorrow, though, I'm wiling to bet that it would not choose Novell's Suse. It would choose unpaid Red Hat Enterprise Linux (RHEL), which accounts for a big chunk of the overall Linux market.

This may seem trivial, given that Red Hat earned a 62.2 percent share in the overall market for new license paid shipments/subscriptions, measured by deployments, or 64.7 percent, measured by revenue.

Sounds great, right?

Maybe. Intriguingly, Red Hat also claims 28.6 percent of the nonpaid market...for RHEL, its Linux distribution that should only be available to paid subscribers, but which many companies dishonestly use without paying (e.g., they may violate their contract by running more RHEL servers than they actually pay for).

Add Red Hat's paid and nonpaid deployments together, and Red Hat accounts for 47.6 percent of the global Linux market, whether users are legitimate customers or pirates.

It gets better (or worse, depending on your view). If one adds in the RHEL clone CentOS and Red Hat's own community distribution Fedora Core, Red Hat and its offspring dominate the global Linux deployments market with 57.1 percent market share.

This might not be so bad, if the trend were toward more paid Linux adoption, but it's not. While paid Linux server deployments will grow at an impressive rate, nonpaid deployments will grow even faster, nearly reaching parity with paid deployments in 2013.

Why this growth in nonpaid Linux?

Undoubtedly some of it stems from enterprises wanting to get something for nothing. Rather than pay for value, they attempt to cheat the system, leaving less money to help develop Linux.

But it may also be that the longer the world uses Linux, the less it feels the need to pay for it. Noted technology CTO Jon Williams once posed a dilemma to me at the Open Source Business Conference. He indicated that the longer his team works with an open-source project, the less need it has for support and maintenance from a vendor.

In other words, the minute the customer becomes profitable to the vendor is the same minute the customer no longer needs that vendor.

We could be seeing this in Linux. Still, the fact that they seem to be stealing RHEL rather than adopting Ubuntu or another "community-led" Linux distribution suggests that we're seeing enterprise IT attempt to cheat vendors rather than do without them.

All of which may mean that the world increasingly recognizes that Linux is a superior server operating system...and doesn't want to pay for it.

How comforting...and alarming. It's not as if Linux development costs nothing. Red Hat pays over $100 million each year to develop Linux, and it's not the only company making such hefty investments.

UPDATE @ 11:03 PT: For the reading-impaired: When I talk about "stealing RHEL" I'm in no way referring to CentOS or Fedora, as my post clearly states. I'm talking about using RHEL without paying for it. Not CentOS. Not Fedora. RHEL. Red Hat has a fair number of companies that actively underpay on RHEL: that is, companies use more RHEL than they are legally allowed to use as per their contract with Red Hat.

So, please read the post, and don't get worked up by the word "steal" and "CentOS" in the same post. I'm not referring to CentOS or other legitimate uses of Linux. I'm talking about theft of RHEL (which is what IDC is talking about, too. Maybe you should buy the report and read it before commenting so that we can have an informed discussion.

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