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    FIGURE 1Linux Server and Operating System Growth, 1998-2008

    -.0 3,50000- 3,000e n. . . . . .c(]) 2,500E>.0 2,000Q.(])"0 1,500-nc0 1,000: ; : : : ;Q.c 500oe n.0::J 0(j) 00 (J) 0 ..- N C' ? " " ' "J) (J) 0 0 0 0 0(J) (J) 0 0 0 0 0N N N N N

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    D Paid Linux Server OS (Enterprise) D Paid Linux Server OS (Other) f\.bn-paid Linux Server OS Linux x86 Servers, units (000)

    Source: IDC, 2009

    Linux After the 2009 RecessionThe current economic climate is forcing a retreat across the industry on spending forhardware, software, and services. How this spending pul lback is distributed dependson the way platforms are being deployed by customers.IDC research finds that Linux, like other operating systems, has experienced areduction in growth of software spending. Figure 2 presents the worldwide growth rateprojections according to IDC software forecast data. Not surprisingly, every operatingsystem platform sees a significant reduction in growth during 2009, but the recoverystarts in 2010.IDC data indicates that Unix will experience the least robust post-recession recovery,while Windows will recover at moderate rates.However, it is important to remember that the relative size of the markets must beconsidered as well. The Linux software market in 2008 generated $12.3 billion inspending, and that total is projected to nearly triple to $35.5 billion in 2013. Bycomparison, the Microsoft software ecosystem was $149 billion in 2008 - so evenwith a sub-1 0% growth rate through 2013, it will add $56 billion in spending.

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    FIGURE 2Worldwide Software Revenue Year-over-Year Growth Rates,2006-2013

    4 0 ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,353025-r f t 20. . . . . . . . .

    15105o ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

    2013006 2007 2008 2009 2010 2011 2012

    -+-Linux and Linux-related software___ Unix and Unix-related software-+-Windows and Windows-related software_ Overall market

    Source: IDC, 2009

    End-User Attitudes Toward Linux DeploymentIn early 2009, IDC conducted a study that looked at Linux adoption trends, includingthe impact of the economic downturn, as part of a project sponsored by Novell Inc.(The related white paper - Li nux Adoption in a Global Recession - is available onNovell's Web site.) The participating organizations had to have more than 100employees; the survey was looking primarily for IT decision makers familiar with Linuxusage and adoption plans. Among the survey participants, 55% had Linux serveroperating systems in use, 39% had Unix server operating systems in use, and 97%had Windows server operat ing systems in use.The IDC survey found that the economic climate has had the largest negative effecton the budget for companies in the Americas and in the government and financialservices sectors. Overall, 62% of respondents said that their budget has been cut orthat they are moving more cautiously and investing only where needed.From this survey, IDC also found that the economic climate has a direct effect on howusers are planning to deploy Linux on both the server and the client. As illustrated inFigure 3, IDC found that 53% of respondents are planning to increase adoption ofLinux on the server and 48% are planning to increase adoption of Linux on the clientas a direct result of the economic climate. This increase in deployment can beinterpreted as either an increase of Linux overall or a shift toward Linux withoutnecessarily including a net increase of operating system deployments.

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    From a regional perspective, Asia/Pacific is the most bullish on increasing Linuxadoption, as 73% of respondents said they would increase adoption of Linuxdeployments on the server and 70% said they would increase adoption of Linux onthe client. In the Americas, 66% said they are evaluating or have already decided toincrease adoption of Linux on the desktop and 67% on the server.While end-user projections can be overly optimistic, the direction and intent noted inthis document are strong indicators that these users believe that Linux is a key part oftheir IT deployments moving forward.

    FIGURE 3Increasing Linux Adoption Due to Economic ClimateQ. Do you plan to incr ease your adoption of Linux on server s in 2009 as a result of the

    e co no mic c li ma te an d a focus on cost containment?Q. Do you plan to incr ease your adoption of Linux on clients in 2009 as a result of the

    e co no mic c li ma te an d a focus on cost containment?

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    Source: IDC's L inux Usage Survey, February 2009

    Total Ecosystem GrowthNot surprisingly, the growth trajectory for the overall Linux ecosystem saw somecooling in 2008 compared with IDC's original predictions, and when services andhardware spend is included with software spend, the overall Linux ecosystem marketgrowth is projected by IDC to grow at 9% in 2009, well below IDC's pre-recessionexpectations.

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    As shown in Figure 4, the single largest reduction in revenue for the Linux ecosystemcomes from a sharp reduction in spending on new server hardware, which isparticularly evident in 2009. This reduction in hardware spending is driven by acombination of factors, including customers deferring purchases of new systems andincreased use of virtual ization software, which over the past several years has helpedincrease system utilizat ion, at the cost of unit volume in the server market.IDC projects a return to growth of the overall Linux ecosystem through 2012. Ourupdated forecast, which extends through 2012, projects continued growth, reaching$28 billion in software spend in 2012 and a total ecosystem spend of $43 billion bythe end of 2012.

    FIGURE 4Worldwide Linux and Open Source Software EcosystemRevenue, 2007-2012

    50,000 ,-----------------------,45,000 -1------------------------140,000 +-------------------35,000 -1---------------

    _ 30,000 +------------~ 25,000 +---------........0,000

    15,00010,0005,000o -I-~--,--

    2007 2008 2009 2010 2011 2012

    Linux server hardwareoLinux operating system System infrastructure software (excluding OS)DApplication development and deployment softwareDApplication software Linux and open source services

    Notes:Server hardware revenue is adjusted for operating systems value.Services revenue forecast was last updated in September 2008.Source: IDC, 2009

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    Figure 4 includes the following elements:129 Linux hardware revenue, which includes factory revenue associated with the

    sales of servers that are sold where Linux is deployed as the primary operatingsystem either at the factory or in the channel.

    129 Linux operat ing system revenue, which is primarily SOE-related revenue.129 System infrastructure software, which is defined by IDC to include systems

    management software, security software, storage software, as well asvirtualization and clustering software.

    129 Applicat ion development and deployment software, which includes informationand data management software (including RDBMS software), development tools,development life-cycle products, application deployment software (includingapplication serving, transaction, and middleware software products), and dataanalysis software.

    129 Applicat ion software, which includes col laborat ive application software, contentmanagement software, ERP software, customer relationship management,supply chain management, manufacturing applications, and engineeringapplications.

    129 Services revenue associated with services and support delivered to Linuxdeployments. The suite of open source-related services offerings is virtuallyidentical to services available in the industry for competitive SOEs and includesthe following:o Systems integrationo Software deployment and supporto IS outsourcingo IT education and trainingo IT consulting

    Virtualization and Cloud ComputingTo fully appreciate the potential for expanded Linux usage in today's market, onemust understand the parallels between the market dynamics today and the marketdynamics from 2001.During the prior recession, IT professionals were challenged with a need to continueto build out their companies' Web presence and to solve technical issues related toconsolidations that they were continuing in the wake of the buildout that took placetwo years earlier. In many cases, the solution was to redeploy a decommissionedserver, reprovision it with Linux, and bring the system back into service.

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    In today's environment, the components are slightly different, but the solution is muchthe same. In this case, the hardware pool includes virtual servers, made possible byXen hypervisors incorporated in all major Linux distributions today, as well as third-party solutions such as VMware ESX, Citrix XenServer, and other products. Thesehypervisors make it possible to carve out additional virtual servers from existinghardware at no capital expense - since no-cost hypervisors are available from all themajor industry vendors.Linux operating systems are available in commercially supported and non paid,no-cost distribut ions, much the same as in 2001, albei t with commercial distribut ionsat a higher price point than in 2001. However, the ability to "spin up" additional replicacopies of the host operating system - which is included in the subscriptionagreement covering most commercial products - makes it possible to greatly expandthe utilizat ion of those Linux distributions (although in some cases, use rights offeringunlimited virtualized replica copies may be associated with only premium subscriptionofferings ).IDC believes that customers using Linux today will continue to increase theirdeployments of virtualized instances of Linux operating systems aboard existingservers. The customer use data cited in Figure 3 suggests customers are receptive toexpanding their use of Linux.

    Cloud ComputingIDC's sees cloud providers as virtualizing a layer of the computing stack andpresenting that as a service to the customer. The virtualization can occur at severallayers, which would offer different services or different types of services, including:129 Infrastructure clouds offer infrastructure services such as CPU, networking, and

    storage, often presented as a virtual machine over the Web. Users install their ownoperating system and applications on top of this type of infrastructure cloud.

    129 Platform clouds are effectively an operating system hosted in a cloud formfactor, providing an application development and runtime environment.

    129 Application clouds virtualize an entire application stack and what is today oftendescribed as SaaS. These services either may be consumed in their entirety as asolution or may deliver individual services, accessed through applicationprogramming interfaces (APls), allowing those services to be aggregated intoanother application solution that may be hosted locally in a company's intranet, ona second cloud, or on the same cloud that is providing the applicat ion services.

    IDC observes that Linux has emerged as a key component of many of today'savailable cloud infrastructures, providing both the base technology for cloud providersand an operating environment for customers that wish to access the Linux operatingsystem and Linux services that are hosted in a cloud.Linux has gained traction among cloud providers due to its low cost andcustomizability. Cloud providers are building cutting-edge, highly complex servicesand often require source code access and the ability to modify the base code to theirhighly specific needs.

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    Workload ShiftsFigure 5 shows results from IDC's ongoing Server Workload studies, which aremodeled against Linux server hardware shipments. This view shows the primaryworkloads deployed on Linux servers between 2002 and 2012, with projectionsshown in two-year increments.We can see that well-established workloads such as Web and IT infrastructureremain a relatively static portion of Linux deployments - capturing just over 50% ofLinux server deployments, with a slight decl ine through the data shown.By comparison, business and commercially oriented workloads, including businessprocessing and decision support (which include ERP, CRM, and other commonbusiness management solutions), grew through the period, from 13% to 18.6%, anincrease of over 5 percentage points. This growth is the result of slight shifts ofworkload share from established workloads, including IT infrastructure and Webinfrastructure, and a reduction in the "other workloads" category.The growth of Linux as a platform for business-oriented workloads appears to becoming largely from the migration of existing Unix deployments in combination withorganic growth of Linux deployments in these same workload areas.Database workloads are not explicitly broken out from the other workload categoriesshown in Figure 5 because database workloads are an integral part of many otherworkload types. That is, virtually all business-oriented workloads have a databasecomponent, as do many Web infrastructure workloads and collaborative workloads.It is important to note that a flat share of a given workload does not indicate adecreasing opportunity. As the overall size of the Linux opportunity increases, eachsegment grows in terms of the number of units placed into that workload as well. Thesegments where shares are growing are simply expanding at a faster rate than thesegments where shares are stagnant or are in decline.

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    FIGURE 5Worldwide Shifts in Linux Server Usage by Workload, 2002-2012

    100908070]i 60.9 50. . . .0

    ' ; : f 2 . 400. . . . . . . . . 3020100

    2002 2004 2006 2008 2010 2012

    .OtheroCollaborative Application developmento IT infrastructureDWeb infrastructure Decision supportoBusiness processing

    Source: IDC's Server Work loads Study, 2008

    FUTURE OUTLOOKIDC projects that Linux-related software growth will lead the industry, with a2008-2013 CAGR of 23.6%. Linux-related software spending is expected to growfrom $12.3 billion in 2008 to $35.5 billion in 2013.By comparison, the overall market is projected to increase at a 5% 2008-2013CAGR. The Unix and Windows platforms are projected to show a 2008-2013 CAGRof 1.8% and 6.6%, respectively. These growth rates are calculated based on largerbase numbers, with Unix spending growing from $69 bill ion to $74 billion, whileWindows spending grows from $149 billion to $206 billion.

    C HALLE N G EStOP PO RTU N ITI ESThe continued growth of Linux SOE adoption and deployment is expected to bechallenged by a number of factors, but it also has substantial opportunity to takeadvantage of customer receptiveness to deploy more mission-critical applicationsaboard the Linux operating system. IDC sees the following factors impacting theLinux SOE market going forward:

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    129 Challenge: Unix operating systems. The market for Unix servers and serveroperating systems has been squeezed by competitors in recent years, and thatplatform is being hit particularly hard by the current economic downturn.Nevertheless, this remains a sizable market with a significant ecosystemsurrounding it, leading to an installed base momentum that can be hard to break.

    129 Opportunity: Unix operating systems. The growth of the Linux ecosystem hasevolved both by capturing net-new market revenue as the market grows and bysiphoning off revenue previously spent on other operating systems. Given thenatural synergy between Linux and Unix and the large installed base of Unixservers, IDC expects this platform to present a long-term source for futuredeployments of Linux alongside and as a replacement for retiring Unixinstallations, especially as next-generation high-performance and energy-efficientsystems are embraced.

    129 Challenge: the Windows market. Windows presents a significant long-termchallenge for Linux, since software revenue related primarily to Windows SOEdeployments continues to account for over half of marketwide customer softwarespending. Windows will continue to enjoy the largest installed base of any majorserver operating system. When it comes to Unix migration opportunities, expectMicrosoft to compete vigorously for opportunities in this space in the future. Wedon't see Windows being an attractive migration platform for installed Linuxsystems today.

    129 Opportunity: the Windows market. Microsoft has shifted its approach to bothLinux and other open source technology and today is working both competitivelyand cooperatively with Linux solutions at a technology and development level.However, the company still takes a highly competitive marketing and salesapproach to Linux. This approach improves the ability of Microsoft to sell intoLinux-friendly or mixed-platform accounts. The company has yet to deliver anymajor software products aboard the Linux platform, and IDC does not expect tosee any such activity in the near term. In particular, Unix shops that add Linuxtoday will benefit from Microsoft's interoperability efforts. Given this improvedsynergy, customers that have a justification to use Linux alongside Windows willbe more likely to deploy.

    129 Opportunity: reduction in the use of discrete software stacks. IDC sees ashift in the industry that is favoring the configuration of turnkey software stacksthat incorporate operating system functionality along with middleware and otherinfrastructure software components, and potentially with application software aswell. This packaging at times takes on a form factor that IDC describes as a"software appliance." If this form factor takes off with end-user adoption, it couldconsolidate revenue opportunities to those vendors with a strong softwareportfolio that can be married with a Linux operating system. This trend couldresult in higher-volume deployments of Linux, but it will reduce revenueopportunities for discrete products.

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