Caldera has inherited Santa Cruz Operation's main sales challenge: telling customers why it's worth spending money on Unix when Linux is just as good.
Although Unix remains a more mature product than its younger sibling, Linux--a clone of Unix--is the rising star.
Linux is receiving significant attention from programmers, students and software companies such as Oracle. Unix, meanwhile, has been relegated to a mere feature of a server bought from Sun Microsystems, IBM, Compaq Computer, Hewlett-Packard or SGI.
Selling operating system software as a standalone product that can work on a variety of computers is a difficult task, said Illuminata analyst Jonathan Eunice.
The business of "hardware-independent operating systems...seems to work only for Microsoft these days," he said.
D.H. Brown Associates analyst Tony Iams said the Caldera acquisition signals the end of an independent Unix.
"Independent Unix is effectively becoming Linux," and over time, Linux will acquire the high-end features of Unix, Iams said.
Eunice agreed that Linux has tremendous momentum. "The attention to Linux is enormous compared to the attention of any of the individual Unixes," Eunice said. "Solaris (from Sun Microsystems) maybe has more momentum than the average Unix, but Linux is clearly the place where people are paying attention."
SCO initially scoffed at Linux as an immature operating system, an adolescent seeking to play in the adult realm of Unix. But in the past two years, Linux has attracted the attention of major companies such as IBM, Dell Computer, Compaq, HP, Intel, Oracle, SAP and countless others. In the end, SCO had to recognize Linux as a serious competitor.
"It's been a gradual evolution," Giga Information Group analyst Stacey Quandt said about SCO's attitude shift. SCO simply couldn't ignore Linux, despite the operating system's relative immaturity. "Linux was eroding their market share on the low end."
SCO moved gradually to embrace Linux, making sure Linux programs would run on SCO's Unix and offering professional services for companies wanting consulting help with Linux. But Linux was moving faster than SCO, and now SCO's Unix is part of a Linux company's product line.
With its acquisition of SCO's Unix products, Caldera has inherited SCO's main sales challenge: telling customers why it's worth spending thousands of dollars on Unix when Linux is often just as good for many tasks, such as running a few dozen point-of-sale terminals in a retail outlet.
The answer is that Unix is still much more mature when it comes to heavy-duty server tasks such as running huge databases on servers with dozens of processors and requirements for minimal downtime. But unfortunately for SCO, it turns out that's much easier to do when an operating system is tightly wedded to a specific hardware design.
SCO must have realized it couldn't stay in business on its own. Its solution to keeping its version of Unix relevant was to join with IBM while hitching itself to the upcoming 64-bit chip family from Intel, the IA-64 line. SCO teamed with IBM to merge Big Blue's AIX version of Unix with SCO's UnixWare to create a composite called Monterey-64.
"They didn't have the technology or the deep pockets to invest in that technology and strengthen it," Iams said. Now the ball is in Caldera's court. "Caldera is going to have to show they can step up to the role SCO had been playing, a partner for IBM."
But even with IBM's clout and Compaq's intention to adopt Monterey-64, the future of the product is uncertain. Dell, for example, is putting its eggs in the Linux basket, despite examining Monterey-64 and Sun's version of Unix, Solaris.
The moral of the story
There's a lesson here for Microsoft: Selling software on its own may not be a great business model. Microsoft's Windows is immensely popular on the desktop and has strong prospects for low-end servers. But that franchise is endangered by Linux's price structure: free or very cheap.
It's a lesson already learned by Novell, which has been making the shift from selling its Netware operating system to selling back-end "directory" software for managing the resources of large groups of computers.
And Linux will get better. For one, SCO has highly regarded "clustering" software developed with help from Compaq. Clustering lets one machine take over for another if the first fails and lets several computers share a job.
"We intend to move clustering over onto the Linux platform," SCO chief executive Doug Michels said.
Merging SCO's and Caldera's product lines won't be simple, however. Michels and Caldera CEO Ransom Love argue there won't be redundancy having several Unix-like operating systems in one company, but the company will have to decide how to allocate development and marketing resources among its products.
"Moving forward, we intend to support OpenServer, UnixWare, Project Monterey and Linux as kernel platforms," Love said.
But Giga's Quandt is concerned about the acquisition's merits. "This is fraught with challenges," she said. It might not be easy for Caldera to execute the new plan, whereby programs will be able to run easily on SCO's UnixWare or OpenServer, as well as on Caldera's OpenLinux.
Quandt sees the acquisition as an attempt by Caldera to build awareness and credibility. Caldera is "not the leading Linux vendor," Quandt said. "They don't have the technical expertise of Red Hat or SuSE."
And neither SCO nor Caldera has fared well with Wall Street of late. SCO's stock, currently at $3.28, has remained low except for a spike in January. Caldera's price of about $7.75 today is well below its IPO price of $14 this year and its high of $33.
SCO has learned its lesson about the viability of standalone operating system products. Now it's Caldera's turn.