Red Hat Opts for Pragmatism Over Glitz (NY Times)

http://lxer.com/module/newswire/view/91429/
John Hull of Dell, October 2007

"Another area that has changed is our thinking around OS support models. Traditionally for enterprise Linux customers, if we sell them an OS on their system, they expect and demand a high level of operating system support. That is certainly not the case for our Ubuntu Linux customers, who have stated very loudly that, for the most part, they do not want to pay for OS support, and would rather get support from the community. That is a much different support model from what we have traditionally used, but is certainly one that we have embraced."

I realize that quote is a year and a half old, but its the most salient quote I can find that speaks to the idea that selling software support services for the consumer desktop is going to be a good business strategy. It's not. I think the Dell experience with Ubuntu speaks directly to that. Does it make long term business sense for a software service companies like Red Hat, or Canonical, to be in markets that aren't interested in buying support services?

Enough people are out there willing to pay for linux pre-installed hardware for Dell to offer it, but those customers are not looking for any paid software support. I'm sure Dell is making money off those Ubuntu boxes as an OEM. I wonder if Dell's margins on each Ubuntu pre-install sold are better than for each WinXP/WinVista unit sold.
Begs the question, is Canonical making any money from those Dell pre-installs if customers aren't buying support contracts and getting all their support from the community directly? Is Dell paying Canonical for engineering services directly? I don't think there is a clear understanding about how revenue is shared in the Dell/Canonical partnership.

I completely understand Canonical's no acquisition cost model, and its way to build brand value. But what I don't understand is how they plan to turn that brand value into dollars large enough to sustain the business long term. If community support is good enough for consumer linux customers, where is the value-add that the for-pay Canonical services provides? Is there anyone reading this that is paying for an ongoing support subscription to Canonical for a desktop or netbook system?

Too bad Canonical is still being pretty cloak and dagger about UbuntuOne services, maybe that will finally be a services framework by which Canonical unlocks the Ubuntu desktop/netbook brand value. How long with the market wait before a 3rd party webservice developerers starts targeting that built up Ubuntu brand value? Dropbox already seems like a pretty popular service for Ubuntu users as a storage provider.

I think the more sustainable model for consumer linux is a model where the device manufacturers are also the software integrators for their own devices and the operating system development and quality assurance becomes a sunk cost that is recouped across sales volumes. Maybe that is exactly how Canonical is positioning their OEM services, and maybe the OEM services is where the bulk of the current Canonical revenue is coming from. I hope so. If OEMs are getting higher revenue margins on their linux units versus the windows units then the system integrators like Xandros, Linpus and Canonical need to get a piece of that in order to keep the relationship sustainable.

-jef