The Starting Line: Companies shy away from the penguin

Linux penguins are bleating louder, but companies don't plan to adopt many of them in the near future, according to a new survey by Goldman Sachs.

4 min read
Linux penguins are braying louder, but companies don't plan to adopt many of them in the near future.

Almost every large company has at least thought about Linux, and many of them are running pilot projects or even day-to-day (albeit non-essential) systems on the open-source operating system.

And because the economy is still weak, many tech observers believe Linux--and its price tag of "free"--will attract more businesses looking to cut costs.

At least that's the theory. Practice indicates something else.

Goldman Sachs this week released its first information-technology spending report, based on a recent poll of 100 executives from Fortune 1000 companies. Part of the survey asked the executives to rank their highest and lowest spending priorities. Broadly speaking, the results were unsurprising: Corporate tech budgets aren't expected to increase in 2002; big technology companies such as Dell Computer, IBM, EMC and Microsoft are gaining market share; corporate clients are cutting back on less urgent areas and focusing money on more immediate needs.

The curious part came in the details. "Areas like supply-chain management software and Linux servers rank near the bottom of spending priorities," wrote Goldman Sachs analysts Rick Sherlund and Laura Conigliaro. The results brought "some surprises from our IT managers, with Linux...virtually not registering on our survey."

Respondents to the Goldman survey indicated that mainframes, Linux servers and supply-chain management ranked as the three lowest spending priorities, in that order. Conversely, the top items in order of importance were Windows 2000 or XP Professional desktop operating systems, security software and Unix servers.

The emphasis on security and de-emphasis on supply-chain management is easy to explain. Network security is on the mind of every IT executive in these days of cyberterrorist fears and increasingly common virus attacks. Likewise, new supply-chain management applications have lost their cachet in recent quarters as companies concentrated on more basic issues, rather than installing software with a short track record.

Despite the economy and need for expense reduction, software that justifies itself through a rapid return on investment (ROI) isn't high on corporate lists. Supply-chain software supposedly reduces costs in the long run, and Linux has an obvious cost advantage in up-front pricing, and perhaps even in long-term support; Amazon.com, for example, said it saved millions by switching to Linux from Unix in many areas of its business.

"It depends on the company. Many of our clients consider Linux to be a very real option for cost savings," said Chad Robinson, senior research analyst with the Robert Frances Group, a consultancy for IT executives. "There's a definite ROI."

Yet tech Web sites continue to fill pages with debates about the total implementation and support costs of Linux compared to Unix and Windows operating systems. The fact that those arguments continue is one reason IT managers haven't fully embraced Linux, despite instances of Linux running important systems such as oil-rig controls.

About 65 percent of executives polled by Goldman Sachs said they have no plans to use Linux at their company next year. Twenty-four percent of respondents said they would use Linux as an addition to their Windows and Unix setups, but not as a replacement. And only 3 percent see Linux as their primary enterprise server system within three years; 60 percent named Windows.

Even IBM--"Linux's staunchest adherent," in Goldman Sachs' view--is careful to say that Linux has its limitations. Many of Big Blue's clients are interested in Linux, but an IBM representative said most of them are still in the "dabbling" stage with the operating system. The most vital, "mission-critical" systems that keep corporations running still rely on traditional Unix systems.

By contrast, Windows desktop installations are seen as a safe, "conservative" choice, Goldman analysts said. "We believe corporate IT departments are now gradually replacing their desktop operating systems, with lengthy evaluations of Windows 2000 desktop software now moving into the implementation phase," Sherlund and Conigliaro wrote.

Windows may be firmly entrenched on the corporate desktop, but Robinson believes there is more attraction to Linux servers than the Goldman report suggests. "I would agree that many companies are scaling back forward-looking projects," he said. "However, the feedback we get from our clients is that they are very interested in Linux."

The level of Linux activity varies by industry, Robinson said. Financial services companies tend to be more aggressive with Linux, for example, while the health care industry--long known for its reluctance to rapidly adopt new technologies--is moving slowly.

Ultimately, technology managers don't want to hear about the operating system, Robinson believes. "All you care about is wanting a stable, scalable platform for applications to run on."