New Zealand Linux

Red Hat is widely expected to crack a billion dollars in revenue in today’s earning call. This achievement will finally put to bed the argument that “nobody can make money with open source.” I want to congratulate Red Hat for this incredible achievement. However, I would also like to use this occasion to show that there is significantly more at play here. It isn’t just the billion dollars Red Hat is making with open source; there are many more reasons why Linux and open source are fundamental building blocks of the future:

* Red Hat will today pass a billion dollars in revenue.

* The collective investment in Linux is $10billion – freely available to you.

* Billions of users a day use Linux systems in everything from their TV, to their ATM machine to the cell phone to the servers powering the cloud. B

* Billions of dollars are transacted on Linux systems running every major financial exchange EVERY day.

* The fastest Linux computer does 10 quadrillion operations a second (that is a thousand billion or a billiard in long scale countries).

* Facebook used Linux to build a company forecast to be worth one hundred billion dollars.

Credit where credit is due: Red Hat has worked extremely hard and extremely smart to leverage open source to make a billion dollars. Here at the Linux Foundation, we work with them everyday and I am continually impressed by their focus, their management and their consistent commitment to working upstream.

But even more significant to Red Hat’s future prospects is the virtuous cycle that they now participate in. Platform economics have always been dominated by network effects. More users beget more applications, which beget more users and so on. This has resulted in great scale for particular companies who lock people into their network effect but has arguably not resulted in great innovation. Red Hat however, benefits from a different kind of network effect. A network effect centered around innovation.

Since Linux has grown, so have the benefits Red Hat receives (and gives to others). When Facebook contributes code to make their data centers more efficient, Red Hat benefits; when Red Hat contributes code to improve file systems, mobile device makers benefit; when mobile device makers contribute code to improve power consumption, super computer cooling costs go down; when super computer users contribute code to make Linux faster, Wall St. benefits with faster trading systems — and so on and so forth. So you can see that the positive feedback loop that is represented in the billions of figures above shows no signs of slowing down. Congratulations to Red Hat but also to all Linux users and ecosystem members who participate in this virtuous circle.

IDC recently announced its numbers for 2011 Q4 servers sales: overall server revenues are up for the year 5.8 percent, and shipments are up 4.2 percent. As The Reg reports, these shipment numbers are back to pre-recession levels.

What’s more interesting, though, is the trends that emerge from the very latest reporting quarter, Q4. Linux was the only operating system that saw a revenue increase in servers Q4, with a 2.2 percent rise. Windows lost 1.5 percent and Unix 10.7 percent.

IDC attributes some of that Linux success to its role in what the analyst firm calls “density-optimized” machines, which are really just white box servers, and are responsible for a lot of the growth in the server market. These machines have gained popularity in a space still squeezed on budget and that continues to be commoditized. But there are other factors at play for Linux’s success over its rivals.

Coming out of the recession, Linux is in a very different position than it was 10 years ago when we emerged from the last bubble. Today it’s mature, tried, tested and supported by a global community that makes up the largest collaborative development project in the history of computing.

Our latest survey of the world’s largest enterprise Linux users found that Total Cost of Ownership, technical superiority and security were the top three drivers for Linux adoption. These points support Linux’s maturity and recent success. Everyone is running their data centers with Linux. Stock exchanges, supercomputers, transportation systems and much more are using Linux for mission-critical workloads.

Also helping Linux’s success here is the accelerated pace by which companies are migrating to the cloud. Long a buzzword, the cloud is getting real, right now. While there is still work to do for Linux and the cloud, there is no denying its dominant role in today’s biggest cloud companies: Amazon and Google to name just two.

The mass migration to cloud computing has been quickened due, in part, to the rising level of data: both the amount of data enterprises are dealing with but the also how fast that data is growing. IDC this week predicted that the “Big Data” business will be worth $16.9B in three years. There is a huge opportunity here for Linux vendors. Our Linux Adoption Trends report, shows that 72 percent of the world’s largest Linux users are planning to add more Linux servers in the next 12 months to support the rising level of data in the enterprise. Only 36 percent said they would be adding more Windows servers to support this trend.

The enterprise server market is a strong area for Linux, but it’s an incredibly competitive market. Together we’ll continue to advance Linux to win here. In fact, we’ll be meeting at the NYSE offices in April at our Annual Linux Foundation Enterprise End User Summit where some of the world’s largest companies will talk in depth about exactly the things I’ve touched on here.

Yet again we are seeing market winners are born from collaboration. And we have the numbers to back it up.

Nicholas Negroponte is always ahead of his time. When he envisioned One Laptop Per Child (OLPC), the average price for a PC was still hundreds of dollars. The industry rallied around his vision for a low-cost PC that anyone could use but couldn’t fathom innovative technology at the $100 price point he claimed he could hit.

But a little bit of time goes a long way: In the case of the newest low-cost computer, the Raspberry Pi, his vision is not only alive and well but selling out (Raspberry Pi Computers Sell Out On Launch).

Computing for everyone, starting with children, was the idea behind OLPC. And while the Raspberry Pi does target students, which is the most admirable of goals, it also puts a lot of computing power into the hands of anyone looking to create something interesting. $25 for a computing device is just incredible.

So why does this matter? Because it is showing just how well Moore’s law is at work and how consequently important free software is to the world of computing. For the price of four Raspberry Pi’s, you can’t even get a copy of Windows 7 at Best Buy. And that is just for the upgrade version.

Innovation is happening because the next Steve Jobs or Mark Zuckerberg can grab free software and low cost hardware and DO SOMETHING. Zuckerberg even took the time to point out the power of the hacker way as he filed one of the biggest IPO’s of the decade. The next technology innovator doesn’t have to spend a fortune prototyping ideas or taking out licenses with everybody under the sun. With $25 and free software you can get started building something cool.

In fact, the only thing holding back this form of innovation is the billion dollar price of patents these days. This speaks miles to the power of getting the tools of innovation into the hands of many and the sad state of our current patent system. The only thing that holds back the next Steve Jobs is being sued by the company started by the late Steve Jobs.