For a short time after its IPO about one year ago Larry Augustin's company was a darling of Wall Street. He is one of the most public faces of Linux and the open-source community and now Augustin, chief executive officer (CEO) of VA Linux Systems, is leading a company that sells Linux-based servers during tough economic times.
Like other high-tech firms, the company has fallen victim to a slowing economy, reporting in February a wider than expected loss for its second fiscal quarter. On Tuesday, VA Linux [LNUX] saw its stock hit a 52-week low on the Nasdaq of US$2.09, down from $70 about a year ago.
Augustin sat down Tuesday with the IDG News Service to talk about the effect of dotcom deaths on his company's strategy, what the economic downturn means for the open-source OS, and that perennial question, Can Linux make it on the desktop? Following is an edited version of a question and answer session with Augustin after he gave a keynote speech at Comdex Chicago 2001.
IDGNS: For the Linux community, what does the economic downturn mean? How is your company doing and how is the Linux community doing overall?
Augustin: A lot of companies are looking at their spending costs to see how they can reduce spending. That propagates down into IT costs. Linux and open source, in general, provide an excellent way for companies to look at lowering those IT costs, and it is not just a matter of acquisition costs. Free software is free. In fact, that is part of it, but it is also in the total cost of ownership, in particular around the cost to integrate the software into their environment.
We also see a lot of opportunity to improve productivity in the enterprise. One of the things I talked about today was a system we sell that's based on SourceForge, which is a collaborative development environment. We show that we can generate significant productivity improvements by simply creating an environment in which software developers inside a company can collaborate and share code.
IDGNS: Has VA Linux changed its target audience at all in the last year?
Augustin: A year ago, or maybe a year and a half ago, our target customer audience was dot-coms ... It's been pretty clear that those guys have fallen on hard times. What we have done is change our target customer base a little faster then we've wanted to, and that means going after the enterprise customers sooner than we had expected ... It takes long sales cycles to move into the enterprise.
IDGNS: How crucial is it for Linux to succeed among large corporations?
Augustin: I think that is a big step as it moves from being a technology to being a solution. That's an important step. You know, technologies can survive ... within their small communities for a long time. But they don't accelerate and gain wide adoption really until they move into the enterprise. So my dream is that anywhere I go, everything supports Linux just as much as it supports anything else. That isn't going to happen until there is wide-spread adoption and Linux has to go in the enterprise. Now, I think we are in the midst of that right now and we are beginning to see that.
IDGNS: If I am an IT manager and I come to Larry Augustin ... why should I change to Linux during an economic downturn if I am already working in, say, a Microsoft environment?
Augustin: Again, it comes down to doing more for less. If you are running Microsoft in a back office environment, odds are we can show you where for less money you can be more productive by running Linux. Now, I don't claim that is for every application and every use in the world that open source is going to be better, but for a lot of infrastructure, IT applications, we can show you ... where you can improve performance for a lower cost.
IDGNS: A year ago, you told an IDGNS reporter that the success of Linux on desktop computers is largely dependent on the wide availability of applications. How are we doing with Linux application development?
Augustin: Linux has made some progress in the past year, but I think the progress in moving to the desktop is not as much as we expected. Again, I will say we need applications. In particular, what do those desk top users use? They use Microsoft Office as the application. I still think we need either a credible alternative to Microsoft Office or a port of Microsoft Office to Linux. Either one of these would suddenly, dramatically spur the use of Linux on the desktop. Numbers out there now from [International Data Corp.] are somewhere between 2 percent and 4 percent of desktop systems -- which is on par with or slightly below Apple Computer Inc.
IDGNS: What type of (desktop) application development are we seeing?
Augustin: The ones I see are the collaborative enterprise applications where people are looking at, for example, ERP (Enterprise Resource Planning), Oracle Corp. applications being able to run on the Linux desktop. They tend to be leaning not just to the Linux desktop but general desktop portability.
VA Linux, in Fremont, California, is at +1-408-542-8600, or at http://www.valinux.com/.