Turbolinux Challenged in Tough Linux Market

An effort aimed at publishing a Linux version that runs software

programs from four different distributors of the open-source operating

system could be in peril as Turbolinux Inc. struggles to stay afloat.

But even if the company manages to stave off layoffs and office

closings, an unfocused business model has the company headed in an

uncertain direction that could kick off consolidation of the Linux

distribution market, analysts say.

The future of Turbolinux looked bright after the Brisbane, California,

company joined with three other Linux distribution companies earlier

this year to create UnitedLinux, a joint effort whose ultimate aim was

to make the operating system more viable in the corporate market.

However, reports surfaced this week that cloud at least the company's

immediate future as word circulated on the Internet that Turbolinux had

shuttered its headquarters.

The president and chief executive officer of Turbolinux, Ly-thong Pham,

issued a statement to Linux Today, an industry publication, that while

the U.S. office is being restructured, the company remains open for

business and will provide more details on restructuring plans next

month.

Representatives from the U.S. office of Turbolinux did not respond to

repeated requests for comment. The Japanese branch office was told that

an expected round of funding from investors had not come through, and

the company was "forced to conduct (an) urgent restructuring on July

15," said Fumiko Doi, marketing director of Turbolinux Japan. These

layoffs caused the shutdown rumors, but they only affected the U.S.

office, and do not mean the company as a whole is in danger of failing,

she said.

The very nature of Turbolinux' business is cause for concern, said

analysts.

The source code for open-source software, such as Turbolinux's

distribution, can be viewed and modified by anyone under the terms of

the GPL (General Public License). So, if another company coveted a

feature of Turbolinux's distribution, it could merely view the source

code, and create its own distribution based on the same code, said

George Weiss, vice president and research director for enterprise

servers and storage at Gartner Inc., based in Stamford, Connecticut.

"This is the strength and weakness of the open-source model: (the

technology) is there, and it's not dependant on any one body, but it

lowers the overall profit potential that vendors would like," said

Weiss.

Turbolinux had tried to differentiate itself as a Linux distributor to

Asian countries. The company has offices in Tokyo, Beijing, Hong Kong,

Taipei, and Seoul, and made versions of Linux optimized for Asian

languages. But it missed out on a huge market in its own backyard.

The Chinese government has embraced open-source software, but chose to

sponsor a version of Red Hat Inc.'s distribution over Turbolinux's, said

Dan Kusnetzky, vice president of system software at IDC, in Framingham,

Massachusetts.

Analysts attribute most of Turbolinux's troubles to the company's

haphazard marketing and product strategies. Turbolinux was trying to

move away from being a Linux distributor to selling products that run on

top of Linux, said Stacey Quandt, an analyst at Giga Information Group

Inc. in Santa Clara, California. But it developed products that faced

stiff competition, or didn't achieve what was promised.

The company developed PowerCockpit, which is a server provisioning and

management product for large server environments that could run on

either Linux or open-source archenemy Microsoft Corp.'s Windows

operating system. But this product pitted Turbolinux against UnitedLinux

partner Caldera and IBM Corp.'s Tivoli Systems Inc., both market

stalwarts, Kusnetzky said.

Turbolinux also attempted to conquer load balancing with the release of

Cluster Server, designed to maintain uptime for Web applications.

However, despite the name, it's not a true clustering product as defined

by IDC, said Kusnetzky. It does not create the single application

development environment through one machine characterized by clustering

products, he said. Cluster Server is also pitted against Microsoft's

Application Center 2000, and other open-source products.

And EnFuzion, the company's parallel computing software, competes

against Sun Microsystems Inc.'s free Grid Engine, and the open-source

Beowulf product. While there might be valid reasons for purchasing

Turbolinux's product over a free product from Sun, Turbolinux did not do

a good enough job educating customers as to those reasons, Kusnetzky

said.

"(The software products) didn't give them any traction in the market,

and they have not gelled at all. They are going from a volume strategy

(with the Linux distribution) to a low- volume services-oriented

business model," Weiss said.

The troubles of Turbolinux do not bode well for UnitedLinux, the

analysts said. Each member of UnitedLinux is mainly a regional player,

trying to band together for safety in a market ripe for consolidation,

Kusnetzky said.

In May, Turbolinux announced it had created UnitedLinux along with

partners Caldera International Inc., SuSE Linux AG, and Conectiva SA,

with the goal of creating a single version of Linux on which the four

companies would standardize their products. This would mean users could

avoid having to reconfigure software products from any of the four

vendors to run on a distribution from one of the other vendors. However,

the companies did not extend an invitation to industry leader Red Hat to

join the group until one day before it was announced.

Weiss noted that the group can't build a strong presence to compete with

Red Hat if the individual members are too busy solving their own

problems.

"This points to the delicate nature of their partnership. They're

attempting to create something of a standard or a common development

platform for independent software vendors, and why would they generate

any enthusiasm if the individual members themselves are in one way or

another weak?" he said.

As if this weren't enough, Turbolinux faces a difficult situation with

the continuing shrinkage of IT budgets. In difficult times, users are

more likely to turn to traditional vendors, such as Hewlett-Packard Co.

and IBM, which have embraced Linux as an alternate technology, Weiss

said.

And since venture capital funding has dried up for many technology

companies, Turbolinux will have to scramble to come up with capital or

drastically cut costs to survive. Neither Kusnetzky or Weiss had much

faith in the long-term prospects for the Linux distribution market, both

predicting company failures or mergers within the next year, but Linux

itself isn't going away.

"We are expecting consolidation in the Linux distribution market, but

don't see the software itself disappearing. The problem is, how do you

sell a product that an enterprising person could get for free?"

Kusnetzky said.

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