In defense of Ubuntu [LWN.net]

In defense of Ubuntu

Posted Aug 20, 2008 19:29 UTC (Wed) by vmole (guest, #111)
In reply to: In defense of Ubuntu by AlexHudson
Parent article: In defense of Ubuntu

FWIW, the usual multiplier (that I've heard) is (very roughly) employee_cost = 2.5*employee_salary. Payroll taxes, benefits, physical plant, computers :-), etc. Of course, a LOT of Canonical employees work from home, so less, I suppose.

Huh. I just googled "caononical ubuntu burn-rate", and come with this, which claims that Shuttleworth told Wired in 2007 that Canonical had cost $25 million in three years, which means your estimate of $7 million is better than mine.

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In defense of Ubuntu

Posted Aug 20, 2008 21:34 UTC (Wed) by AlexHudson (guest, #41828) [Link]

Employing someone certainly isn't cheap, and a 2.5 salary multiplier isn't far off at all.
You're right, working from home will save money on engineers equipment, but that pad in
Millbank Tower (Central London) won't come cheap.

I'm not sure about what the $25M you state includes, though. The endowment to the Ubuntu
Foundation was supposedly $10M, so that would leave a cost of $15M over three years for
Canonical. That's $5M per year, which is close to my estimate, but also they've grown
extremely artificially over that time, so their fixed costs will be much more now than when
they were the unnamed enterprise a few Debian hackers were working on. That feels about right.

Personally, I suspect my estimate is conservative: I think their costs are higher than $7M/pa,
which even for Shuttleworth means that they need to start making money relatively soon. By the
end of 2008 he could have spent something closer to $40 million in total on Ubuntu. Is Ubuntu
worth that much?

If it doesn't get close to an even keel soon (= next three years), Canonical could end up
going the way of OSAF: burning through capital for a few years, not receiving the necessary
tough love, and not having any reason to be successful. I doubt Shuttleworth would let it get
to that point, though.

In defense of Ubuntu

Posted Aug 21, 2008 16:47 UTC (Thu) by gouyou (subscriber, #30290) [Link]

Looking at the current market cap of RedHat (4B+ USD) and Suse/Novel (2B+ USD), a 40M+
investment is pretty good. I guess from the current popularity of Ubuntu, any investor would
be more than willing to put quiet a bit more money in Canonical.

And you can hardly compare OSAF and Canonical: OSAF took over 5 years to deliver their first
stable product.

In defense of Ubuntu

Posted Aug 22, 2008 7:49 UTC (Fri) by AlexHudson (guest, #41828) [Link]

I wouldn't be so sure about investment. RedHat's IPO ten years ago raised them $90M
(thereabouts), which was towards the end of the .com boom. Today's market is much more tech
IPO hostile. RedHat and Novell both have a vast range of products that Canonical doesn't have
as well. 

My comparison with OSAF wasn't really about the finished product (although clearly, with
Debian, they had a bit of a leg up in that department ;). What I mean is that there have been
a number of "open source" companies who have been well funded but failed to become profitable:
OSAF was funded very similarly to Canonical, and have had to contract hugely when the founder
decided it wasn't worth playing the game any more. You also have examples like Eazel.

My point is nothing more that when you grow a company artificially, like Canonical, you need
to invest heavily up-front to create product and services which then sell like hot cakes. If
you fail to get to the "hot cakes" stage (and we're talking sales, remember), it becomes
extremely difficult to turn that into a profitable business and things go downhill quite
quickly.