http://ostatic.com/blog/canonical-and-microsoft-is-sustaining-a-business-better-than-turning-a-profit-right-now

Canonical makes about 30 million a year they are just under a break even point. Shuttleworth hopes to have the project self sustaining or even profiting within the next two years.
If they can’t make that goal Shuttleworth has said he will fund Ubuntu/Canonical for up to 3-5 more years. After that I guess the community would have to be strong enough to step in and fund itself without Shuttleworth…

Shuttleworth was quoted a year ago concerning his vision of how a services channel around Ubuntu ought to work for Canonical:
http://searchitchannel.techtarget.com/news/article/0,289142,sid96_gci1310488,00.html

It’s a year later, any headway on that vision in terms of driving Canonical support bookings through partners? In actuality Canonical’s partner program is older still. http://www.desktoplinux.com/news/NS4371228443.html
Anyone done any recap analysis on what the trickle-back service revenue looks like at the 2 year mark across the range of partner tracks Canonical setup? Does a solution provider like Revolution Linux contract Canonical support services or are they basically handling all the support needs for their customer base? Who among the list of Canonical partners price-in Canonical support into their own product and service offerings?

Since there’s very little public information concerning the adoption rate of any of Canonical’s services, how would any of us really know? Canonical spends very little time actually talking about the performance of its business year-to-year. And the laypress spends even less time asking them about it. Everyone seems content to marvel at Ubuntu adoption numbers like they are equivalent to sales figures. They aren’t.

What is threatened by Canonical’s inability to perform as a for-profit business is the long term sustainability of the Ubuntu project. Like the US auto-industry I think Ubuntu is too big to be allowed to fail without serious repercussions. Hoping that Canonical somehow magically finds focus before Shuttleworth’s cash reserve is bled dry isn’t going to help. Continuing to ignore the fact that Canonical’s isn’t getting critical mass traction in terms of any of its service offerings is not going to help. As Canonical continues to cast its net ever wider for revenue..where is its current revenue strength to underwrite expansion into new service areas?

Does Canonical generate revenue directly from the Virtual Bridges resellers?

-jef

If the no acquisition cost of of Ubuntu makes it easier for Virtual Bridges to sell its own proprietary products and services (using a per client acquisition cost model) that’s great for Virtual Bridges and IT shops looking to squeeze their pennies in the short term. And its great for Ubuntu brand penetration. But in the long term, if the sales of Virtual Bridges equipped Ubuntu desktops aren’t funding core Ubuntu development manpower or infrastructure expenses necessary to keep the Ubuntu project rolling (bandwidth and disk aren’t free) then that’s a real problem..not just for Canonical but for the larger Ubuntu ecosystem. People buying Ubuntu bundled as part of a Virtual Bridges solution are paying real money. Is that real money helping to sustain Canonical and Ubuntu in any measurable way or it just cash in hand for Virtual Bridges?

There is a lot of subtlety in what is going on here and a question as to where the marketable product value in the software stack actually is. I fear that what is happening is that Virtual Bridges is making the case that the value is in its proprietary virtual desktop offerings layered over the Ubuntu desktop..which is being used as a gratis commodity element. I really hope that’s not the case. I really hope Canonical and Ubuntu are seeing a cut of the money as part of these bundles.

Over the next year, it will be interested to see how Red Hat’s competing virtualized desktop solution based on the Solid ICE technology fairs compared to Virtual Bridges. Red Hat’s approach is an integrated solution with an acquisition cost model… in reality not much different to what Virtual Bridges is selling. Except in the case of RHEL, when you pay for that solution you are paying to sustain the entire integrated solution stack from the kernel on up..and not just the virtualization layer on top of a commodity OS.

I expect to see Red Hat talking about its Solid Ice solution a lot more when RHEL 6 is ready to roll. They are being very conserative in terms of roll-out. But from the transcript of their last quarterly financial call, its clear there is demand pressure for their virtualization solutions..more than they anticipated if you believe the transcript. On top of that the virtualization server interoperability agreement with Microsoft should be taken as a serious statement about Red Hat’s commitment to providing a virtualization infrastructure solution that meets consumer demand for a mixed environment solution. Has Virtual Bridges made that sort of commitment with its VERDE technology in terms of certifying both linux and windows virtualized instances?

More generally speaking, what Red Hat has figured out how to do with its acquisition cost model for RHEL is make the case that the linux operating system has value worth paying for as the basis of an integrated solution. The price of a particular solution under the RHEL brand, even its Solid ICE virtualized desktop offering that competes with Virtual Bridges, is set such that the continued sustainment of the OS is accounted for..and not just the value-added software stack which targets a specific deployment need.

It’s not clear that Canonical has figured out how to do that with its strictly optional support services model. There’s no public evidence anywhere that Canonical support services are considered valuable enough to pay for by a significant portion of the population who are already willing to actually pay for services. I’m not talking about the technical savvy core of the Ubuntu community the majority of which aren’t paying a dime for anything. I’m talking about people who are contracting other service or product providers and thereby making use of Ubuntu as part of the service or product they are paying money for.

When someone contracts with a hosting provider which offers Ubuntu branded server instances for a subscription cost…how much of that goes to Canonical or to support Ubuntu development? Do you know of any hosting service that is paying Canonical for support services or landscape access as part of a standard client contract? I’d love to find at least one who is willing to go on record as a Canonical services customer.

When someone contracts with RightScale or Amazon and and pays for access to an Ubuntu branded cloud image… does any of that subscription money goto Canonical or Ubuntu? I’ve seen no evidence that it does. In contrast, for official RHEL images on EC2, the subscription cost includes a cut to Red Hat as part of that contracted subscription. The new Landscape integration with EC2 maybe great, it maybe be the best thing since sliced bread. But will people find its worth the cost as a service? The economics of a business based on service value does not automatically prefer the most advanced service offering…it selects services which are the best value for money. Are Canonical’s services good value for money? No idea and no one who has actually paying for their support services seems to want to talk about it. In fact I’ve yet to see any testimonials from any Landscape users at all.. good or bad. Have you? Canonical has yet to provide any numbers whatsoever with regard to paying Landscape users since its original introduction 2 years ago.

Can Canonical build a vibrant partner channel if potential partners are better served by not including Canonical support priced-in into their Ubuntu based products and services? The economics of Canonical’s strictly optional services business model may actually work against their ability to drive sales through partners.

-jef

What exactly are those reseller’s selling? Are they selling a bundle that includes Canonical support services priced in? Or is Ubuntu part of the bundle…gratis? The Ubuntu based solution that Virtual Bridges directly offers and prices on its own webside on its website does not include Canonical support. I asked.

So what are these partner resellers actually reselling? And is Canonical getting a cut of the sales price?

-jef