Software bundles value, access - Linux, others offer low-cost alternative to Microsoft platforms

By Kenneth Aaron
Business Writer
Times Union, Sunday June 29, 2003

Hannaford Bros. Co. was in a pickle.

About three years ago, the company that made the software behind the Maine-based grocer's checkout lanes said it would soon ax the product. "When your vendor drops support, you're forced to move on," said Bill Homa, chief information officer for the 116-store chain, which has 19 stores in the Capital Region.

Buying new point-of-sale systems - what most customers think of as cash registers - isn't something retailers like doing. So Homa wanted the next system to last long. And to cost little.

Enter Linux, a so-called open-source operating system popularized by a Finnish graduate student about a dozen years ago. But this isn't a story about some geeky technology that only a CIO could love. It's about the bottom line: Hannaford will save $2,000 per checkout lane in installing its new system, rather than one powered by a commercial operating system made by Microsoft Corp. or some other giant.

Annually, "it will save us hundreds of thousands of dollars," Homa said.

Hannaford, which will install the system in its Capital Region stores by the fall, is among scores of businesses adopting open-source software, which relies on a worldwide community of developers to tweak, update and strengthen instead of a single company. That its champions frequently give the stuff away fro free hasn't hurt, either.

Online bookseller Amazon.com lopped $17 million a year from its information technology budget after switching to Linux. Logical Net Corp., a Colonie Internet service provider, runs three quarters of its servers on Linux and relies on an open-source database for many of its customers, saving more than $100,000 a year...

...And as these cheap solutions win converts, major players such as Microsoft and Sun Microsystems are left to scratch their heads over how to play this new game that gives away some of the very things they charge dearly for.

Tim Stowell, network manager for high-tech manufacturer Intermagnetics General Corp. in Latham, has installed several open-source tools on his computer systems, saving about $40,000 a year in ongoing costs. "I would say that I don't think that the other major operating system has to worry about going out of business," he said, referring to Microsoft Windows.

"But I do think, because of their costs and the costs associated with how their licensing is set up and the availability of savings of open-source software, that open source is here to stay," he said. "And I think it is going to increase above what its current market share is."

Companies are making the move to open sources partly to avoid steep licensing fees. For example, when they pick a computing platform, businesses need to license an operating system to drive it. After they pick an operating system, they pay more to run applications on top of it.

For every computer running a copy of that operating system, there is a separate licensing fee. Bulk users can drive those fees down with volume discounts.

Typically, those operating systems are proprietary - the makers don't allow companies to peek beneath the hood to make adjustments. If a function isn't included in the operating system, users either can wait for a new version or do without it.

And to get the next version, they need to pay another licensing fee.

That's not how open source works. The software code is available for any programmer to adjust - as long as they promise to make the adjustments available to the world.

Take Linux. As the story goes, Finnish grad student Linus Torvalds took an open-source bundle of software that could substitute for Unix, an industrial-strength operating system still widely used today. He developed a "kernel" that tied the bundle together and then released it back in the wild.

For nothing. It can be downloaded for the price of an Internet connection. The only catch is that users promise to turn over changes they make back to the Linux community, in case anybody else wants them.

And that really isn't much of a catch, because it helps to ensure that instead of becoming obsolete - the problem that forced Hannaford Bros. back into the market - it can be updated as long as programmers are available.

Saving licensing fees, then, is just part of the savings companies say they receive. They also save on obsolescence. And because open-source software can be tailored to its users' needs, proponents say they can get it to run on hardware less powerful - and less expensive - than they might need to drive a bulkier commercial product...

...But open source doesn't mean software costs plummet to zero. In fact, one of Microsoft's big arguments against the movement is that total cost of ownership actually rises for open-source users because more internal support is needed; a study the company commissioned by IDC proved that contention, in some instances.

Because the open-source software doesn't have the gloss that many commercial packages do, it does tend to require more expert help in using it. "That's one resource you do need in an open-source shop," said Michael McCasland, a partner with Exceptional IT Systems LLC, a security and network consultant based in Latham who relies on open-source solutions. "You do need some developers on hand."...

...So how is Microsoft responding? The Redmond, Wash.-based company didn't respond to requests for comment for this article...

...Microsoft has advanced to the point where company officials consider Linux and open-source competitors a threat. "Noncommercial software products in general, and Linux in particular, present a competitive challenge for us and for our entire industry, and they require our concentrated focus and attention," Microsoft chief executive Steve Ballmer recently wrote in a company wide memo, according to The Associated Press.

Part of the company's anti-Linux strategy involves convincing customers to head away from it. Hannaford's Homa said Microsoft wanted him to turn to a lower-cost Windows solution for the new point-of-sale system.

"Microsoft suggested we try embedded Windows XP, which I think is too new for us to think about," he said. "I asked about constantly being forced into new versions of embedded Windows XP, and I didn't get a good answer."

So far, the revolution has been largely confined to servers, which are computers that distribute data to other users. But other markets are evolving. Linux is gaining acceptance in some consumer-electronics devices, such as the TiVo video recorder. And while the desktop appears a long shot, some, such as Homa, wonder: Why not?

"We're starting to question why we should be spending $300 or $400 per PC on Microsoft Office and only using 5 percent of its functionality," Homa said. OpenOffice, a substitute for the seemingly ubiquitous Microsoft product, is out there - for free.

"I think it does everything I need it to do," he said.