Can You Make Money Selling Linux? Try $3.5 Billion

HP and IBM proved this week that the open source business model is not only viable, but can mean big business.

Speaking at an HP storage conference in Amsterdam earlier this week, HP CEO Carly Fiorina revealed that HP had raked in $2 billion last year in Linux-related revenue.

IBM, meanwhile, said that it brought in $1.5 billion in 2002 from Linux, and that its Linux business was profitable.

That’s a significant increase from the year before, when IBM made $1 billion dollars from Linux.

While the growth in both companies’ Linux business has been rapid, it still makes up only a small percentage of both companies’ overall revenue. IBM’s fourth quarter 2002 revenue of 23.7 billion. HP’s sales for its fourth fiscal quarter, which ended October 31, were $18 billion.

HP expects its Linux business to continue to grow, according to Judy Chavis, the firm’s worldwide Linux director. “Linux is a key corporate focus for HP,” she says. “Every single business unit, whether it be hardware or software, has a Linux roadmap and Linux deliverables.”

Most of HP’s Linux revenue so far comes from selling hardware running Linux, along with support. Linux itself may be available for free, says Chavis, “but customers who are running their businesses on it are willing to pay for the value-add of services and support. They want to be able to call somebody who has expertise when they’re in a panic and they need a patch.”

HP, which says it has 5,000 employees trained in Linux, is adding a program to certify on Linux more than 500 consultants in the company’s global services organization.

In the future, an increasing amount of HP’s Linux-related revenue will probably come from software, according to Chavis. At this week’s LinuxWorld show in New York, the company announced that its HP Serviceguard high-availability clustering product, to date only available on HP-UX, now runs on Linux.

In other announcements, the company said that it is working with channel partners to drive Linux-based solutions for Oracle, Sendmail and high performance computing clusters, and introduced a four-processor blade server, the 4 HP ProLiant BL40p server, which runs Linux.

Both HP and IBM used LinuxWorld as an opportunity to showcase new Linux customers. HP announced that its users running Linux now include the California Institute of Technology, seismic technology specialist Reservoir Technologies, and retirement fund management firm AFP Futuro Bolivia, which supports more than 350,000 clients on an HP ProLiant cluster running Oracle 9i Real Application Clusters.

IBM, which says it has more than 6,300 customers running Linux, announced ten new customers, including PGA Tour, Verisign, and auto insurer Mercury Insurance Group.