October 28th, 2008
Very important to preface this with: it’s my own personal opinion, written on my own personal blog. This obviously relates to Mandriva and is informed by my own experience working there, but it is not the official opinion of Mandriva, and please don’t read it as such. If you want Mandriva’s opinion, ask our PR folks for an official statement, and it will not look like this.
So, I’ve just been (implicitly) quoted bashing the Mark Shuttleworth / Canonical business model. (The rating on my ZDnet post is a stunning -21 as I write – my most negatively rated comment anywhere ever – but, strangely enough, no-one’s replied to refute my argument). I thought it was worth expanding my point from my own tiny pulpit.
I’ve written before about what I think about Ubuntu. It’s a good distribution. It does a lot of stuff right. Around 2004 it was better than MDK / MDV in many ways. I don’t think it was ever better in every way, and I think MDV is a better product now, but that’s by the by. This is about Canonical, and Mr. Shuttleworth.
First, the facts: Canonical is a privately-held company. It has no external shareholders and is not listed on any stock exchange. This means it has no legal obligation to provide any information to the public about its assets, liabilities, revenues, costs, or anything at all along those lines. The only information we have is what is volunteered by Canonical staff in interviews and so forth.
From this information we don’t know a lot of detail, but we know the big picture. Canonical does not make money, and has never made money. According to the press call with Mr. Shuttleworth cited above, it is not expected to make money for some time. I don’t know if it’s accurate, but I’ve read a figure suggesting it has cost Mr. Shuttleworth personally $10m over the last four years, suggesting annual losses of approximately $2.5m. Canonical has a substantial amount of paid staff both in development and ancillary areas (I can’t find a reliable figure on this, but I think it’s more than Mandriva), and clearly has a substantial marketing / evangelism budget, given the ShipIt program and its presence at (and sponsorship of) major conferences all over the world.
Now, the facts about Mandriva: it is a publicly traded company (on the Euronext exchange) and posts quarterly financial results, which you can look at for the details if you like. From 1998 (its foundation) to 1999, it made a modest profit almost entirely from sales of boxed products to home users. From 1999 to 2004 (especially following public flotation in 2001), the new management attempted to expand the business rapidly into all sorts of different areas, with the result that costs mushroomed and the company started running substantial losses. Since then, the external management went, and the company has been re-trenching around three core areas: selling Linux products to home users, selling Linux products to ‘corporate’ users, and OEM deals – like the one in which Mandriva will be pre-loaded on the Emtec Gdium netbook system, or the major pre-load deal we have with Positivo in Brazil. Mandriva is currently not profitable, but its losses have been reducing steadily for a while, and we are projected to hit break-even reasonably soon, if all continues according to plan. But, importantly, selling products to individual end-users is a part of the business that is shrinking in importance year on year. It’s now around 20% of total revenue. This isn’t by natural choice, but out of necessity; Ubuntu has more or less killed the market for Linux distributions normal end-users will pay money for.
OK, so much for the facts. Here’s my spin.
What Mr. Shuttleworth did with Canonical and Ubuntu was divebomb the distribution pool. I can’t claim to know anything about his personal motivations: I’ve never met him and we’ve never interacted. He’s on public record as saying his motivation is to promote the usage of Linux in particular and free software in general, and that’s a laudable goal and one I can’t with good conscience say is not his true aim. However, if I accept that that’s his aim, I still question his methods.
Ubuntu is fundamentally in a position of deeply unfair competition within the Linux distribution market. I know Mr. Shuttleworth frequently says its true competition is Microsoft, but that’s exactly it – he tends to act as if other distributions were irrelevant at best and a hindrance at worst. Ubuntu is a commercial distribution, with a large staff of paid developers – like Mandriva, Red Hat (and, to an extent, Fedora), or SUSE. However, it is not remotely self-supporting and does not plan to be self-supporting in any reasonable timeframe.
This is patently unfair. If Mr. Shuttleworth were a man of typical means and had taken the Canonical ‘business plan’ to a bank or to potential funding sources (venture capital groups and so on) for funding, he’d have been laughed out of court. Well, any time after the dot.com boom, anyway. Let’s imagine the meeting.
Venture Capitalist #1: So, Mr Shuttleworth, you want us to provide several million dollars of annual funding for your brand new commercial Linux distribution. What’s the business plan?
Shuttleworth: Well, we’re going to give the product away for free, and not have any product for which we charge money. We’re going to spend a lot of your money on promotion. We’re also going to ship the product anywhere in the world for free.
VC1: Um…when do we start making money?
Shuttleworth: Well, I figure about ten years down the road.
VC1: Ooookay…how are we going to start making money?
Shuttleworth: I haven’t exactly figured out the details on that yet, but the word “services” is going to figure very prominently!
VC1: Thank you very much, Mr. Shuttleworth. The door is that way.
Think I’m exaggerating? Read the pile of flimflam that is Canonical’s services page. Then compare it to a real company’s. Canonical doesn’t have a business plan, it has a collection of vague aspirations and a distinct tendency to throw money all over the place and hope it sticks somewhere (viz. Ubuntu Server). Remind you of anyone?
So, how does Canonical get away with this? Because it’s all funded by Mr. Shuttleworth’s own money. The only person he has to justify his business plan to is himself, and he gets a pretty easy pass there.
Okay, so, what’s the problem with this?
Imagine you’re a guy selling wooden carvings. You’re not Wal-Mart, but you’ve got an honest business going. Sure, the wood’s basically free, but you put your own time and effort into it and people like your carvings, so they pay you a reasonable fee for them. You get by.
Then a rich guy shows up in town. He calls a press conference.
“I like wooden carvings. Not enough people have wooden carvings. I would like to give the world of wooden carvings a giant boot up the ass. So, I am opening Rich Guy’s Free Wooden Carvings Emporium.”
Rich Guy’s Free Wooden Carvings Emporium is three times as big as your store, excellently lit, and air-conditioned. It has greeters. There’s a workshop with five well-paid and skilled carvers kicking out nicely made carvings – maybe they’re not quite as good as yours, with all your years of experience, but their wood is more consistent and higher quality as they can afford to pay a high-class wood supplier. For customers who can’t make it out to the Emporium, they’ll ship a carving right to their door. And all the carvings are completely free. How does Rich Guy’s Free Wooden Carvings Emporium manage this feat? It doesn’t have a magic way of making money. No, it loses money, hand over fist. But Rich Guy pays for it all.
How do you feel? Pretty fucking pissed off, I’d imagine. How the hell are you supposed to compete with Rich Guy’s Free Wooden Carvings? You can’t. You’re screwed. You find another job, find some kind of wooden carvings niche that RGFWC hasn’t figured out a way to cover yet, or you swallow your pride and go take a job working for Rich Guy. An attractive set of choices there! And what happens when Rich Guy runs out of money, or just loses interest, is never adequately explained.
That’s Canonical’s impact on the Linux distribution market, in a nutshell. Competition’s great, but unfair competition isn’t. It’s just fundamentally very difficult for a truly independent, properly funded company to compete with Mr. Shuttleworth’s Giant Shiny Magic Box Of Coins. The playing field is not level.
The danger is that this unfair competition ultimately drives out all the genuinely independent commercial Linux vendors, except Red Hat. Then you have a choice of Red Hat (which is great, but not what everyone wants; they have either a very stable and well-supported, but old and expensive, corporate product line, or an extremely experimental community desktop product, nothing in the middle); Novell (and lots of people don’t like THAT idea); Ubuntu; or a community distribution. Which, again, is great, but not what everyone wants. And what happens when Mr. Shuttleworth’s money runs out, and Canonical / Ubuntu actually has to start making money somehow? I don’t think that question’s been answered yet.
Ultimately, the way Mr. Shuttleworth decided to make his move to promote Linux was a way that will prove destructive to the ecosystem of Linux vendors. I think, if he’d been willing to be more selfless, he could have had a more positive impact with a plan which worked together with the existing ecosystem instead of just blowing it out of the water and saying “it’s my way or the highway”.