Canonical's business model? [LWN.net]

Canonical's business model?

Posted Aug 20, 2008 4:21 UTC (Wed) by drag (guest, #31333) [Link] (20 responses)

If Mark Shuttleworth is very smart with money, or at least hires people that are smart with
money, then the profits he made selling Thawte  (something like 575 million dollars) could
support Canonical pretty much indefinitely on interest and return from investments alone. 

Think about it. If you have $500,000,000 dollars and are able to pull in a 3% return on that
money per year, then that's pretty darn close to $15,000,000 dollars a year. Unless you figure
out a way to give almost all of it a away taxes will simply take it from you. 

You could spend $40,000 a day and never go broke.

Ubuntu has the hallmarks of a vanity project. It's goal is probably to be mostly
self-supporting in the long-term. In the short term I expect their goal is to simply get 'mind
share' and market penetration. If they gain high levels of popularity then the opportunities
to make money will present themselves naturally. 

If I had a couple hundred million dollars to burn I'd do a similar thing. 

I'd would think I'd hire a team of people to simply do the 'boring' work in Linux and try to
convince them that they are going to improve humanity with their tireless efforts.
Documentation, bug fixing, software packaging, etc. Then for 'profitability' I'd farm them out
to companies that want to improve some particular piece of open source; open source software
development as a service.

Something like that. It would be one of a few different projects. 

This is one of the positive aspects of capitalism.

Canonical's business model?

Posted Aug 20, 2008 4:45 UTC (Wed) by jspaleta (subscriber, #50639) [Link] (19 responses)

Are you saying that businesses and governments and individual users should be buying support
contracts and relying on the services of a corporation that can be succinctly described as a
vanity project of the fabulously rich?

I really hope there's more to Canonical that that. I'd like to think that Canonical is a
serious attempt to create and service a developing market of small businesses who are looking
to leverage the power of the open linux platform.

My one concern is that Canonical isn't sure exactly how to do that yet as a sustainable
business model and when it finally figures out what is profitable, its internal reorganization
will disrupt the current Ubuntu community because there is not enough flexibility in the
Ubuntu development framework to sustain efforts that Canonical will have to walk away from to
focus on more profitable areas. But its something the Ubuntu community can fix, if they are
willing to stand up and challenge Canonical to provide an open framework that the community
and Canonical can both rely on.

An open framework serves dual purposes depending how you look at it. First it provides
assurance to the community that as corporate culture changes the community interests can
continue even if the business interest change. That's important, it says the business trusts
its own leadership of the community and the community doesn't have to be coerced into
following. Second it provides a barrier to the development of radically different business
culture that is hostile to open development. The more deeply ingrained an open development
process is to a business the less likely they are to want to move to a closed development
process. The more closed development Canonical relies on the more risk there is that their
internal business culture will shift away from being supportive of open development. What is
the risk to Canonical by using an open build process for Ubuntu? Are they concerned that
someone would steal the secret sauce that holds the Ubuntu community together under their
leadership? What is the risk to the Ubuntu community by relying on proprietary infrastructure
that Canonical has put together? If Ubuntu is a partnership between Canonical and the outside
community who has more to lose if the other partner in the dance decides to walk away? It
seems to be the Ubuntu community puts a lot of trust in Canonical.. is it wrong to expect
Canonical to put as much trust back into the community by opening up its infrastructure?

-jef

Canonical's business model?

Posted Aug 20, 2008 4:58 UTC (Wed) by drag (guest, #31333) [Link]

> Are you saying that businesses and governments and individual users should be buying support
contracts and relying on the services of a corporation that can be succinctly described as a
vanity project of the fabulously rich?

I donno. Most people that like their job a lot are very good at it. So out of everything in
the world Mark could of done, he choose that. It's a good sign. It's a better sign that he
takes a active role in it. 

Or would you rather pay for support from somebody that hates his life?


> I really hope there's more to Canonical that that. I'd like to think that Canonical is a
serious attempt to create and service a developing market of small businesses who are looking
to leverage the power of the open linux platform.  


What you said and what I said are not mutually exclusive. :) 

Plus the people that work for Canonical defenately want it to succeed. They don't want to lose
their jobs, do they? Most of them probably feel that they have a significant personal stake in
the success of the company. It may be a dream job for a significant number of them.

Canonical's business model?

Posted Aug 20, 2008 5:08 UTC (Wed) by dlang (guest, #313) [Link] (17 responses)

yes, in part they are afraid of ubuntu fragmenting if lauchpad code was available and anyone
could run their own launchpad server.

they've said this in the past. they've also said that they expected to hit a 'critical mass'
where it no longer matters, they would be big enough and solid enough that clone would be like
CentOS is to RedHat, there, but not a significant force.

the fact that they are now giving a timeline for when they will release the code indicates
that they are close enough to the critical mass to be comfortable with the announcement.

as for the number of developers hired by canonical, they are a young company who's not making
a profit yet. this isn't the dot-com boom and they are trying to grow the business and address
their priorities first. I fully expect that as they grow they will be hiring more and more
developers, and more of them will be heavily involved with other projects. but I would rather
see them grow slowly and become self-sustaining then to have them hire a few dozen
high-profile developers for a couple of years and then go under due to the costs.

and one question for everyone screaming so much about getting the code for launchpad.

what's the big deal here? the source is all available, the compilers are all available. every
other distro out there runs it's own build farms and scripts. the amount of fuss you are
making over this one tool is such that you are making it sound like the best thing since
sliced bread (while at the same time being sure to proclaim how it's nothing special)

Canonical's business model?

Posted Aug 20, 2008 6:11 UTC (Wed) by jspaleta (subscriber, #50639) [Link] (16 responses)

Afraid of fracturing the codebase.... that suggests a deep failing to understand the strengths
of open development. Deep failings. Would Mozilla as a corporate entity be the corporate
power it is today...if the mozilla codebase wasn't available to be fractured to create the
phoenix browser which later became firebird which later became firefox?

You want to know what an open codebase really means to a business... it means you trust your
community to find the better answers that you don't see and give them back to you for you to
support as part of your business... that is what an open codebase capable of being fractured
really means.

I'm not sure I like the idea of a corporate entity who doesn't itself understand how to
leverage the strength of open development for its own interests, managing an open development
community.

As for the importance of lauchpad. Let's talk specifics. Canonical released at least one
version of Ubuntu aimed at sparc and now its no longer a 'product' that Canonical supports.
Why did Canonical stop supporting it? Not commercially viable? Who knows. The point is they
tried something as a business, and then dropped it, leaving a set of users out in the cold
with no more future products lined up. Is the Ubuntu infrastracture open enough to allow a
niche sparc using Ubuntu community to continue to build a Ubuntu release for sparc, even if
Canonical doesn't want to support it? Even when Canonical no longer allocates any company
resources towards sparc including corporate backed iron to build packages on? Or will the
community need to go it alone and rebuild a completely new set of infrastructure tools from
the ground up to support a dedicated sparc build once canonical turns off the build support
for sparc? If launchpad were open and replicable by community..there'd be no question. Those
Ubuntu sparc lovers could organize inside the Ubuntu community and provide their own iron and
hosting without having to redo all the software engineering to reimplement the job that
launchpad does for the supported arches. That's what an open infrastructure would mean....
the ability to for the Ubuntu community to sustain their own interests even when Canonical
finds those interests can not pay the costs of commercial support. Hell, they might even do
such a good job at it that Canonical might find itself coming back in later to support sparc
again with commercial contracts. That's what trusting your community means as a business..
giving them access to the tools to find the better answers then giving them back to you to
support. Canonical should trust the Ubuntu community more.

-jef

Canonical's business model?

Posted Aug 20, 2008 6:28 UTC (Wed) by dlang (guest, #313) [Link] (2 responses)

not afraid to fracture the codebase, afraid to fracture the userbase (i.e. dilute their brand
name) until it got large enough to survive it.

even big companies worry about the dilution of their brand (which is why RedHat requies anyone
compiling their source code differently to strip out the branding)

as for ubuntu dropping sparc, so did redhat (and didn't redhat also drop PPC support?). why
aren't your screaming about that?

yes it would be better if all the tools were available, but the lack of that availability
doesn't make them evil.

Canonical's business model?

Posted Aug 20, 2008 7:08 UTC (Wed) by jspaleta (subscriber, #50639) [Link] (1 responses)

"as for ubuntu dropping sparc, so did redhat (and didn't redhat also drop PPC support?). why
aren't your screaming about that?"

Fedora has an open infrastructure and a process by which community can sustain additional
arches.
http://fedoraproject.org/wiki/Architectures

Passionate community members are working hard to get additional arches up and running using
that process and the open build infrastructure.

Red Hat can't provide the build hosts or the space for every arch that Fedora could build
on..resources are finite. But Fedora does have fully open build infrastructure software that
community can use if they are able to bring the necessary resources online to support the
building of an additional arch. The infrastructure allows for decentralization of the build
system, so motivated niche communities of ppc or sparc or arm or whatever can be in charge of
building the architecture they care about as part of the larger Fedora project effort. That is
community partnership in action.  Red Hat is honest and up front about what resources it can
bring to the table and then through Fedora builds an open process by which community can bring
their resources into the effort to extend the reach of the larger Fedora project into new
areas reusing the existing software that ties the infrastructure together for the whole
project.

Fedora is designed to be bigger that Red Hat, and the secondary architecture efforts underway
are the fruit of that truth.

-jef

Canonical's business model?

Posted Aug 21, 2008 17:05 UTC (Thu) by gouyou (guest, #30290) [Link]

> Fedora has an open infrastructure

Sure but it took a while to get there ...

Canonical's business model?

Posted Aug 20, 2008 8:03 UTC (Wed) by tajyrink (subscriber, #2750) [Link] (12 responses)

SPARC is now indeed a community supported port of Ubuntu, as is PowerPC, HP PA-RISC, IA-64
(and PlayStation 3):
http://cdimage.ubuntu.com/ports/releases/8.04.1/release/

Canonical's business model?

Posted Aug 20, 2008 10:04 UTC (Wed) by jspaleta (subscriber, #50639) [Link] (11 responses)

Correct me if I'm wrong. But isn't Canonical still providing all the build daemons even for
the releases moved to ports? What happens When Canonical eventually needs to think about
shutting down or replacing its sparc or ppc builders which they are providing? Is this the
sort of resource allocation that makes sense for Canonical as a single, yet to be profitable
corporation? Can they sustain these port efforts using only their own internal infrastructure?
Or is Canonical allowing community provided infrastructure to be used in the Ubuntu buildd
pool of builders and subsequent binary package hosting as was intended when buildd was
invented to facilitate the distributed community process that Debian developed?

-jef

Canonical's business model?

Posted Aug 20, 2008 11:53 UTC (Wed) by Hanno (guest, #41730) [Link] (10 responses)

What if, what if. You hammer on the issue of what happens when Canonical or Ubuntu is doing
something stupid or something evil.

Here's a prediction: If Ubuntu does something like that, it will annoy its users, lose them
and its importance will fade. Then, a different distribution will take its place.

It's that simple.

Canonical's business model?

Posted Aug 20, 2008 13:55 UTC (Wed) by ofeeley (guest, #36105) [Link] (9 responses)

Sure, but when they fade away what useful artefacts are left behind in the rubble? What
contribution has the large user base and the paid developers made to the pool of Free
Software?  That's really all that counts.

Canonical's business model?

Posted Aug 20, 2008 15:50 UTC (Wed) by dlang (guest, #313) [Link] (8 responses)

if nothing else what would be left from the rubble is the proof that a linux distro can be
made very user friendly and the code to do so.

as the article said, it's not that it was impossible for any other distro to do it, but no
other distro did. after the example of ubuntu, the other distros face higher expectations to
be considered user friendly.

on the other hand, if ubuntu is as much a freeloader with no added value as the critics claim,
there isn't anything of value for them to leave behind, including the code to launchpad that
you apparently covet so badly.

you can't have it both ways, either they provide nothing of value and are just a PR machine
(and therefor if they closed up today why should you care), or they are providing value in the
distro, which is entirely available to you (in which case the contents of the distro that you
have are valuable)

Canonical's business model?

Posted Aug 20, 2008 17:55 UTC (Wed) by ofeeley (guest, #36105) [Link] (7 responses)

I really don't see that Ubuntu is more "user friendly" than Debian or Fedora. As it stands it
just strikes me as marketing hype. Of course if you have some sort of metric showing that
Ubuntu implements some HIG or other better then that'd be interesting.

GNU/Linux distros are pretty much all on a par in terms of usability these days with the only
substantial differences coming in terms of release-cycles, rapid availability of upstream
changes, and the distro's practical, pragmatic contributions to Free software.

Canonical's business model?

Posted Aug 20, 2008 18:05 UTC (Wed) by dlang (guest, #313) [Link] (6 responses)

it's not that they modify the software to any HIG specs, it's that they made so much of it
'just work' 

yes other distros have closed the gap significantly, but ubuntu still seems to be leading.

this is the primary thing that is attracting people to ubuntu, and I'm saying this as someone
who is still running slackware on many of my personal machines. when I want to put linux on a
system that will be used by less technical people I select ubuntu (or a variant), I've tried
several other distros in the past and for all of them I've been in the situation of dictating
commands that the users write down on cheat-sheets to get things done, with ubuntu these same
users are managing to discover how to do things themselves. this is especially good for things
that I've never taken the time to do myself (the 'normal' user stuff like ripping CDs to copy
the music to a MP3 player, etc)

Canonical's business model?

Posted Aug 20, 2008 21:34 UTC (Wed) by Cato (guest, #7643) [Link] (5 responses)

Exactly - I'm just setting up an Ubuntu box for an elderly relative who used to use Windows,
and the great thing is that things mostly 'just work' - Flash, multimedia codecs, Java, etc,
are all installable with a few command lines available in a HOWTO on the Ubuntu forums.

The other major advantage of Ubuntu is the forums - they are incredibly active, but also very
well run, full of polite and helpful people. This is no doubt due to good policies and active
moderation, but it makes an enormous difference to people dipping their toes in the water...

Choice of distros is important and I would not want Ubuntu to become too dominant, but
breaking into the mainstream is even more important, to all distros and types of user.

Canonical's business model?

Posted Aug 20, 2008 22:57 UTC (Wed) by ofeeley (guest, #36105) [Link] (4 responses)

The great thing is that things mostly 'just work' - Flash, multimedia codecs, Java,

Well, as regards the Java part you can thank Red Hat for hiring the developers that worked on Iced Tea and the FSF for starting GNU Classpath.

As regards the other stuff you can explain to your elderly relative that the proprietary, closed-source Flash on Linux doesn't always work properly and may be responsible for exposing him to vulnerabilities.

Also, how is /you/ setting up your relative's box an example of Ubuntu being "easier" for ordinary users? You could probably just as easily set up a Debian, Mandriva, OpenSuSE or Fedora box and trivially install non-Free software. The interesting thing is whether the Free/Open software ecosystem will be able to evolve so that there is no need for dependence on closed-source or patent-encumbered stuff, or whether the cheaters in the population will cannibalize the common resources and then cause a population crash.

Canonical's business model?

Posted Aug 21, 2008 21:13 UTC (Thu) by Cato (guest, #7643) [Link] (3 responses)

It's great that Red Hat has put so much effort into Ice Tea, and we are all thankful for the
GNU projects.  It's also great that Ubuntu has put so much effort into usability.

As for Flash, I know it doesn't work perfectly, but what does in computers? Being able to use
YouTube and BBC iPlayer is a big benefit compared to the cost.

Setting up a PC is very different to using it - most Windows users simply turn the PC on which
has many apps pre-installed, but I didn't want to buy a Dell box with Ubuntu (didn't have the
spec I wanted), so I installed it myself.  In fact I have always configured extra applications
on the Windows box for this relative, so what I'm doing is really not much different.

I'm sure I could have used another distro, and have used many others in the past - I just
happen to like Ubuntu and I'm confident that it will be particularly easy to use, whereas I
can't say that for the other distros.  

A rising tide really does lift all boats - clearly Ubuntu needs to do more about working with
upstream, but it has done an enormous amount for Linux simply by making Linux easier to use
for the average person.

Canonical's business model?

Posted Aug 22, 2008 1:10 UTC (Fri) by ofeeley (guest, #36105) [Link] (2 responses)

Again, where's the usability?  The only things you pointed to the last time were the results
of Red Hat hackers' work on Java and then some dodgy Flash stuff and media codecs. The latter
are just as available in Fedora or Gentoo or whatever as they are in Ubuntu for those that
want that stuff.

I've used Ubuntu fairly recently (not out of choice) and am not blown away by any usability
differences between it and any of the other current major distros. I again invite you to point
to some metric so that this is not merely a yes-it-is-no-it-isnt exchange. Otherwise you may
as well merely shorten your post to "I have no problem with proprietary software and patented
codecs and I like the Ubuntu wallpaper."

Canonical's business model?

Posted Aug 22, 2008 1:22 UTC (Fri) by dlang (guest, #313) [Link]

it's lots of little things, the fact that the installer doesn't need to ask you a million
questions spread out over an hours time, but asks you a couple questions up front and then
goes and does it's thing is one of them. 

individually they are trivial, but togeather they make it easier for people who don't already
know where to go for everything.

you don't see the difference becouse you are already familiar with the tools and just go to
the right place. but if you were to setup two identical machines with different distros and
give them to people unfamiliar with linux, the _experiance_ (note, experiance, not
speculation) that people have is that Ubuntu generates less frustration and fewer questions
than the other distros.

you don't see it? ok, you don't. nobody is trying to force you to use ubuntu, you are free to
use the distro of your choice.

just do us all a favor and stop bad-mouthing the distro that others choose just becouse it's
not the one you like?

Canonical's business model?

Posted Aug 22, 2008 6:08 UTC (Fri) by Cato (guest, #7643) [Link]

I don't have the time or energy to defend my choice of Ubuntu any further - feel free to use
the distro you prefer.  Maybe it would be good to spend more time improving and evangelising
that distro rather than criticising Ubuntu?

My guess at Canonical's business model

Posted Aug 20, 2008 4:56 UTC (Wed) by robla (subscriber, #424) [Link] (3 responses)

I'm going to guess that what Canonical is doing is similar to Google or Pets.com.  They are
building a strong brand first, making sure to stay true to the brand before getting completely
wrapped around an axle about making money right away.

My chosen examples are two extremes of this strategy at work.  With Pets.com, pretty much
everybody is now convinced (including former investors) that a brand that means "get your mail
order dog food here" doesn't have a lot of value.  However, with the right brand (e.g.
Google), it's possible to monetize a winning brand.

For Canonical, I wouldn't be entirely surprised if their model depends on Linux becoming a
mainstream desktop operating system (e.g. >10% marketshare) before they try for profitability.
If/when Linux does go mainstream, there are a lot of ways to monetize having the leading
distribution.  It's obviously a very risky strategy, but a potentially large payoff on the
other end.  It's also a risk that Shuttleworth can afford to make, because even if he's not
successful, he at least has a full-time staff working to make sure Linux works on his laptop.
;-)

My guess at Canonical's business model

Posted Aug 20, 2008 5:59 UTC (Wed) by rgmoore (✭ supporter ✭, #75) [Link] (1 responses)

With Pets.com, pretty much everybody is now convinced (including former investors) that a brand that means "get your mail order dog food here" doesn't have a lot of value. However, with the right brand (e.g. Google), it's possible to monetize a winning brand.

I think that you've missed a key difference between the two. Pets.com had a brand and thought that they just needed to figure out how to turn that brand into profits*. Unfortunately, they were wrong, because brands aren't worth very much unless they're backed up by a distinctive and worthwhile value. Google had a brand, but that isn't what has turned out to be their big source of value. What they really have is great technology. They weren't profitable at first because they hadn't yet figured out how to convert their great technology into money. Once they figured out where the value proposition was, they were almost instantly profitable. Since their key profit center is serving ads, not search, they could probably be profitable even without a strong public brand.

*People who I know and trust about this kind of thing assure me that this is fundamentally wrong. They claim that the dotcoms were really legal con games. The VCs never really expected the companies to become profitable. Their real product was stock, and the goal was to make the venture capital plus profit back by selling it to greater fools in the IPO. If the companies turned out to be profitable that was great, but it wasn't necessary for the con men to make their money.

My guess at Canonical's business model

Posted Aug 24, 2008 0:01 UTC (Sun) by salimma (subscriber, #34460) [Link]

Since their key profit center is serving ads, not search, they could probably be profitable even without a strong public brand.

Not quite; without the brand, people would not use Google by default (Yahoo and MS Live are arguably as good as Google), and so they would not reap so much ads revenue. Google leveraged its technological lead at the time to create its brand; once the brand is secured, it does not matter if the competition catches up technologically; barring a major mishap, in most people's mind, Internet search == Google

My guess at Canonical's business model

Posted Aug 20, 2008 7:25 UTC (Wed) by gmaxwell (guest, #30048) [Link]

For Canonical, I wouldn't be entirely surprised if their model depends on Linux becoming a mainstream desktop operating system (e.g. >10% marketshare) before they try for profitability. If/when Linux does go mainstream, there are a lot of ways to monetize having the leading distribution.

I understand how someone can convert having a leading server distribution into decent income in an ethical, free software compatible way. If nothing else RedHat is pretty much an existence proof of that.

I don't see how that same support driven business model translates to the desktop market that Ubuntu has been so successful in. No doubt that greater minds than I are considering these issues, but Canonical isn't talking.

Of course, there are a lot of ways to monetize having a wide-spread desktop: After all, Apple and Microsoft are doing it just fine. ... But if you apply Apple and Microsoft's approaches directly you get lock-ins, resold captive audiences, proprietary widgets, patent FUD, and a lot of stuff that the majority of today's Linux communities would consider wrong wrong wrong.

Ubuntu has not demonstrated the kind of fairly strong philosophical commitment to free software that Fedora has, so an eventual monetization through proprietary-enhancements wouldn't necessarily be an illogical progression from where we are today, ... yet if this were a stated goal I think the negative reaction would be far stronger. I'm not claiming that this is likely, just that all things are possible in a way which isn't true for something like RedHat (which has a successful free software compatible business model, and a community structure and commitment which would inhibit even the first steps towards many kinds of baddness)

I'm sure we can imagine some ways which don't reduce to being naughty or simply levering the desktop to grab the server and beating RedHat. ... Collecting speculation on the answer wasn't really what I was trying to accomplish, I was hoping that Canonical had explained there plans somewhere in public that I missed. Seems like if they did the LWN readers have missed it too.

Of course, the concerns that Canonical might someday 'be evil' is paranoia and unjustified by their current behavior. But there is some risk and a lot of unanswered questions which don't exist for other major players (Novell and RHAT's SEC filings increase business transparency a lot), and so I think the business plan questions are meaningful in a way that fretting over lacking contributions are not ... It's arguable that the GNU, Linux, Debian developers, and the Ubuntu community are owed a response: After all, as uncompensated contributors to Canonical's products we are effectively investors in their venture.

Canonical's business model?

Posted Aug 20, 2008 5:14 UTC (Wed) by kripkenstein (guest, #43281) [Link]

> What is Canonical's business model? Long term? RedHat's agenda is fairly clear but I can't
figure out Canonical's business model at all. Perhaps I'm missing something obvious, but I
find myself pondering this every time they are brought up. 

I'm not sure it's much different than Red Hat's business model. I.e., sell support. If you
counter that Ubuntu can be used for free without support, well, there's CentOS, and I think
CentOS and Ubuntu being free are _good_ for getting paying customers, just like piracy helps
Windows - it increases market share, and once you have that market share, paying customers are
a part of it. In fact Ubuntu's model is the better one in that sense, since (just like Windows
piracy), the free users are experiencing your brand.

Aside from 'normal' paid support, there are also contracts for customized builds (in an
interview Mark or some other Canonical person said that this was more common on the desktop
actually). If you're using Ubuntu and want some modification of it, it makes sense to hire the
people who are the most expert at that, namely, the people making Ubuntu. This is also a
typical FOSS business plan.

Will this work? I don't know, but to have any chance of success Ubuntu must become a very
popular distro, and surprisingly enough it has achieved that goal. So it is at least possible,
and it'll be interesting to see what happens.