Beyond Ubuntu: Canonical Pursues New Revenue Streams
At first glance, Canonical is an operating system company — built around Ubuntu Linux. But take a closer look at Canonical’s moves during the first half of 2009, and you’ll find the company has increasingly bet its revenue stream on cloud, online and consulting/support services. Here’s some perspective.
Am I suggesting that Canonical is abandoning potential support revenue from Ubuntu? Certainly not. Rather, I’m pointing to a range of services built around Ubuntu.
Three quick examples include:
1. Ubuntu One: The online storage and file sharing system is in beta test now. The first 2GB are free; 10GB of storage costs (US)$10 per month.
- The Opportunity: 12 percent of WorksWithU readers say they’re willing to pay for Ubuntu One. That figure, based on a reader poll we conducted in June, may sound low. But I think it’s a reasonably good figure.
- The Challenge: Ubuntu One only works with Ubuntu 9.o4. No Windows. No Mac OS X. I move between Mac OS X and Ubuntu regularly… and I wish Ubuntu One allowed me to share files between those two systems.
2. Ubuntu Enterprise Cloud Services: Professional services designed to help and support customers building private clouds, according to Canonical.
- The Opportunity: No doubt, CIOs and business executives are trying to figure out how to build and maintain secure private clouds that drive down IT costs but increase information sharing.
- The Challenges: Do CIOs really think of Ubuntu when they think of clouds? Canonical is going to need some big-name partners for the Ubuntu Enterprise Cloud Services. (Collect call to IBM…). Meanwhile, Red Hat has announced a cloud certification/partner program, and Amazon.com — a powerful brand in cloud computing — is the first named partner.
3. Landscape: A support and management tool that allows IT managers to remotely administer Ubuntu systems.
- The Opportunity: Canonical could take Landscape in multiple directions. Canonical itself could become a managed service provider that remotely administers customers’ Ubuntu networks, much in the way that Dell launched ProManage Managed Services to remotely manage customer systems. Canonical could also promote Landscape as a platform for VARs and resellers to use to remotely manage customer networks.
- The Challenges: Landscape remains a work in progress. Until Ubuntu more deeply penetrates corporate networks, Landscape won’t be able to fully flex it’s own muscles.
Smart Strategy
Generally speaking I like Canonical’s decision to pursue revenue opportunities outside of the base Ubuntu operating system support services.
Think of it this way: Cisco Systems has a core operating system (IOS), but Cisco made its profits on a range of solutions built around that operating system.
Or think of it this way: Netscape originally made its money around a core product (the Navigator browser). But when the browser market became a zero-sum revenue game, Netscape didn’t have strong enough alternative revenue streams.
No doubt, Microsoft wants to crush Canonical before Ubuntu is a financially viable, self-sustaining operating system. Canonical is wise to put a few additional irons in the fire.
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This is win win for both Oracle and BEA as oracle is good in aquisition and integrating suite of products from the aquire company. The customers of BEA also can be happy about the future support and releases as it happened with siebel and peoplesoft.
On the contrary for oracle it helps in strengthening its middleware position with SAP and IBM. what else we need..
Also of note: One of Oracle’s top channel execs, Rauline Ochs, built BEA’s partner program a few years back. So BEA partners would be respected within Oracle’s growing channel organization.
The VAR Guy
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This is all very interesting, but I think you miss one of the key problems with this strategy. Canonical will increasingly cease being a free software company and become a closed SaaS vendor. It might be good for their bottom line, but is it good for the user? Will the base install of ubuntu be usable for a user without a broadband connection and subscription?
I would be more excited if the cloud services were released under the AGPLv3 or similar license. This would also allow developers to easily develop clients for other platforms.
Canonical took a very long time to release the source of Launchpad (we are still waiting) and it will not all be made available. Actions speak louder than words
@A User: yes, there is a problem between the “do as I say, not as I do”. OTOH, I doubt this will affect the quality of the underlying distro. Redhat is the _best_ example IMHO of a company fully supportive of the community, self consistent _and_ profitable. Geniuses!
@Leo: You say Red Hat is the “best” example of a company that’s fully supportive of community, self consistent and profitable.
I’d go one step further. I think Red Hat is the ONLY company that fulfills that statement. I can’t think of another open source company that’s consistently profitable. Am I overlooking anyone???
@Joe: I think you are right. I can think of other successful open source companies (including JBoss, now under RedHat), but not Linux Distributions.
With regard to Canonical’s overall strategy, before we say anything let’s remember that it is *not* your average startup.
If Shuttleworth’s financial details as mentioned in the NYT a couple of months ago are true, he could keep on financing it for the next 50 years! This means that Canonical can take the long route, make mistakes, weather a few storms, etc., so long as Shuttleworth is committed to it.
@A User, what you say is true but not a sad truth. We all want free stuff but someone has got to pay for it. Shuttleworth has consistently made it clear he wants to see sustainability at Canonical. Red Hat believes that the business segment is the only place it can make a market, not the broader fragmented general applications desktop market (that includes the home user). If the pattern had not emerged before it should now be apparent. Software as a service and other value added services are what the proponents of free software had been talking about for all these years. This gets us beyond tooling difficulties to getting real work done, which is where we pay money. When you look at the complements model you see that free OS means more hardware and other complemetary products sold.
“No doubt, Microsoft wants to crush Canonical before Ubuntu is a financially viable, self-sustaining operating system.”
Shuttleworth has already said Canonical is now breaking even.
[…] At first glance, Canonical is an operating system company — built around Ubuntu Linux. But take a closer look at Canonical’s moves during the first half of 2009, and you’ll find the company has increasingly bet its revenue stream on cloud, online and consulting/support services. Here’s some perspective. […]
@Fellini: While you are 100% right that the general desktop OS for the home user will never make money for Linux, I’m pretty sure Shuttleworth knew this from the beginning. I don’t think the strategy was to make money off of the OS from consumers, it was to make the best desktop distro possible to get the greatest Linux desktop mindshare. They want you to think Ubuntu when you think of desktop Linux. There’s a reason Microsoft practically will give away Windows to OEMs to make sure they install Windows on their computers. Once they have that mindshare it will make it much easier for them to penetrate the corporate desktop. I think the big key here is if they can add value to their server product to make it work with and increase the value of their desktop offerings much in the same way that Microsoft has the Windows, Active Directory and Exchange combo.
“Shuttleworth has already said Canonical is now breaking even.”
No. He has never claimed that. Canonical is still operating at a heavy loss
How can UbuntuOne compete with Dropbox? It has better pricing and Linux, OS X, and Windows support…
Jepp:
UbuntuOne’s competitive advantage over other services revolves around deep integration of the underlying protocals and APIs that UbuntuOne makes use of into the Gnome desktop as a set of core technologies that all gnome application developers can pick up and make use as part of the upstream Gnome framework. I do not think UbuntuOne is meant to be competitive with what Dropbox is. With deep framework integrations UbuntuOne will be positioned to leapfrog over the filesystem folder layer completely and target onlines data services for individual applications or mashups between applications.
The discussions going on right now to integrate CouchDB based functionality into upstream Gnome is an encouraging sign that Canonical is serious about a deeply integrating data services functionality into the Gnome Desktop that UbuntuOne can tie into as an optional opt-in service. There’s real potential here for Canonical to offer something different as a web service if they can drive the necessarily clientside framework elements into the upstream Gnome desktop as core elements.
We’ll know UbuntuOne has succeeded when the the UbuntuOne branding starts to cause confusion among users as people start to make use of the services from Gnome desktops from other distributions.
-jef