Wind River's Linux transformation

It's been a slow, hesitant embrace but now open source is top-of-mind for CEO Ken Klein.

In the past two years, Wind River Systems got over its scorn for Linux. Now it's up to Ken Klein, chief executive for 15 months, to do more than embrace the open-source operating system: He's got to find a way to profit from it.

Wind River specializes in embedded software used in computing devices such as DVD players and nerve gas detectors. The company has historically sold its VxWorks operating system for these tasks, but it now also pushes Linux.

"It's brain surgery, but we're doing it with a micro-scalpel," Klein said of the transformation. Linux revenue remains small so far, and there have been some slipups along the way: Klein had to revamp a partnership with Linux leader Red Hat, choosing instead to build its own version of Linux for most products.

But some things are clearly going right: The company turned an $8 million profit after four years in the red as revenue rose to $236 million. The company expects revenue for its next fiscal year somewhere between $265 million and $270 million.

Wind River quietly began embracing Linux in October 2003, when the company started releasing programming tools that could be used to build software for the open-source operating system as well as VxWorks. That same year, Klein took control of the company, replacing co-founder Jerry Fiddler as chairman and Tom St. Dennis as CEO. Since then, the company has released its first version of Linux, tailored for networking equipment, and another is due out soon.

Klein, 45, is relaxed and optimistic, saying he has banned cynicism and negativity at the company. But he's also willing to use an iron fist, replacing two-thirds of the managers in the two ranks below him. He talked with CNET earlier this month at the company's headquarters in Alameda, Calif.

Q: What has Wind River been, and what is it becoming?
Klein: We were closed and narrow in terms of our partnerships. We were taking a very adversarial approach toward Linux. We've turned 180 degrees. We're viewing Linux as incremental to our business. In set-top boxes, Linux is a great fit.

There's another area of change. Partnerships with semiconductor manufacturers before were relationships of convenience. Now customers are sick of semiconductor suppliers and software suppliers not playing very well in the sandbox together. They want a deep ecosystem of partnerships with the semiconductor manufacturers--MIPS, Freescale, ARM, Philips, Broadcom, Texas Instruments.

Embedded software wasn't viewed as being very important. But it's changing.

Why did you make the switch to Linux?
Klein: We responded to the demands of our customers. Customers, particularly in the telecommunications marketplace and to a lesser extent in consumer electronics, were making a beeline to Linux. Our customers have an aversion to putting Microsoft in any of their devices. They're not interested in seeing Microsoft usurp value from their devices. The availability of talent and applications and the fact that Linux is free from a runtime perspective (Editor's note: Device manufacturers don't have to pay per-unit fees for using Linux)--those factors created demand.

The question was: Do we want to continue to ride the VxWorks horse or expand the range of possibilities by embracing Linux? Our customers were asking for help. Many experimented or tinkered with Linux, but it's not free. There are time-to-market costs. It takes awhile to test it and maintain it and support it. It was a clear mandate to us that someone needed to help them with that.

So if the customers don't want to hand control to Microsoft, why would they want to do that with Wind River?
Klein: You want a supplier with a stable platform and product development environment, but (one) that is not going to compete with you, a la Microsoft's entry in the set-top box market. They're not just interested in being a software supplier; they're interested in taking over the business altogether.

Why are you trying to replace the term "embedded software" with "device software"?
Klein: Embedded software was incidental and invisible. It was hidden. When you call it device software, you realize it's becoming the brains of the product. You're talking about a much more strategic opportunity.

There's a shift in the marketplace. The time-to-market windows are shrinking, down to nine months from 12 recently. That's shifted customers toward buying software instead of building it. The average OEM (original equipment manufacturer)--Siemens, Sony, Nortel, Motorola--they're spending 62 percent of engineering money on software. Whether they like it or not, they are in the device software business. It's software that's becoming the key differentiator, not the form factor, not the color of the plastic.

We see Linux bordering on becoming half the business probably in three to five years.

So does the term show a power grab? A move to give Wind River more prominence?
Klein: People didn't care about the embedded industry. Embedded software wasn't viewed as being very important. But it's changing. In five years, there will be 14 billion intelligent, connected devices. Software is going to make these devices intelligent. It's the

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