Linux Market Shrank in 2001, Survey Says

Despite the clamor of the past two years that open-source operating systems would revolutionize the world, Linux operating environment revenue declined by almost 5 percent in 2001. This marks the first year of contraction for the newbie OS.

New license shipments for server operating environments (SOE), which makes up an overwhelming percentage of the $80 million spent last year on Linux software, experienced essentially flat growth. But on a brighter note, client unit shipment grew by nearly 50 percent with the Asia/Pacific region contributing generously (34 percent) to 2001 sales.

“The previously strong growth of Linux SOE shipments was interrupted during 2001,” said Al Gillen, research director, system software at IDC. “We also saw China’s Red Flag and Brazil’s Conectiva make strong contributions to the Linux COE market, which continued to grow at a healthy pace.”

Gillen noted that average selling prices varied considerably region to region. Consequently, because of the pricing differentials, 2001 results actually showed an increase in unit shipments but a decline in total revenue.

The IDC report is consistent with Linux overview from NPD Intelect that showed the total Linux market has declined 10.2 percent.

Although Gillen’s report doesn’t break out revenue on a geographic basis, industry leader Red Hat was quick to point out its success in the North American marketplace.

“The landscape in North America was dynamic due to other factors as well…Red Hat extended its already strong position in North America, capturing 60 percent of the revenue and 84 percent of the new license revenue shipments into this geography,” according to Red Hat representatives.

For fiscal 2001 which ended Feb. 28, 2002, Red Hat reported annual revenue of $78.9 million.

Red Hat was followed by SuSE Linux in overall market rankings.

Ironically, the only operating environment to experience positive revenue growth in 2001 was Microsoft’s Windows, which unveiled Windows XP on Oct. 25, last year

Still, IDC expects spending on Linux operating environments to increase over the next five years from $80 million in 2001 to $280 million in 2006, which means a compound annual growth rate (CAGR) of 28 percent.

Despite the unconventional way Linux is bought and sold, IDC said it has become a mainstream choice for many infrastructure workloads particularly because the software is available either freely on the network or as a low-cost packaged product that can be deployed on low-cost, high-volume systems.

Furthermore, Linux is often packaged with other open source software such as Samba for file/print services, Apache for Web services, and MySQL or PostgreSQL for data management, which makes it a highly functional and cost-effective environment.