From the Belkin WIND thread today:
Matt Belkin <mattb@e...>
Date: Tue Apr 11, 2000 11:22am
Subject: RE: Wind strategic position
Thanks for your thoughts Judd. First, if you haven't done so already, I
would suggest taking a look at my first post on Linux, Java, Microsoft, etc
(message #47). The key takeaway is that embedded systems are not easy, and
that entrenched players like Wind River possess substantial leverage when it
comes to the market acceptance of new technologies. This means that if and
when Linux takes off, I'll bet my best dollar that Wind River will be among
the leaders in the space.
Now in evaluating Wind's positioning with respect to Linux, I think there
are two questions you really need to ask. Where is the money in Linux and
why would manufacturer choose to use it?
To answer the first question, let's look at the overall embedded space.
Customers who build embedded devices need three things - RTOS/OS, tools,
support/services. Wind plays in and gets paid on all three. Linux players,
desktop or embedded, get paid on 1 or 2, depending on what they provide. So
where's the money? Well it's not in Linux as an OS. It's in tools and
support/services.
Secondly, why would a company use Linux over a proprietary operating system?
Cost obviously is a factor. Open source is another benefit. But how about
reliability/stability? Not much going for Linux in that area. So in what
devices would manufacturers get away with limited liability for the software
they provide? Well, Microsoft has taught us that the consumer market offers
such fertile ground, but where else? I'm hard pressed to think of an
industrial application, telecomm/datacomm infrastructure device,
aviation/military/automotive, application that can afford to be so
care-free. When Ford is planning its next generation SUV, do you think they
are looking at embedded Linux to handle the anti-lock breaks? Doubtful.
Better yet, would you prefer to fly on an airplane that uses Linux, or one
which uses VxWorks? So looking at market opportunities then, we've narrowed
Linux's relevance largely to the consumer space.
Now, the consumer market represents about 5-7% of the overall embedded
marketplace. Communications -- the largest -- is about 40%. Growth in both
is comparable. The consumer market attracts a lot of attention since we (as
consumers) see and interact with such devices everyday. Likewise, the lure
of high volumes and a lucrative platform dynasty attracts many a
manufacturer to the space. So clearly this has captured the hearts and
minds of investors. But as a infrastructure provider/enabler, what does
this mean to Wind?
This question brings us back to our first -- what is it that these
manufacturers are paying for? With the Linux OS, embedded or not, they
simply aren't. As we all know, Linux is free (mostly). Why then would
Wind, or others, spend several million dollars to develop AND TEST a
sophisticated, highly-differentiated version of embedded Linux when they
don't get paid a dime for it? Doesn't make much sense to me, and certainly
not an area I, as a shareholder, want my company investing in.
So then, as Linux proliferates, provider/enablers will make money on tools
and support/services. No one is better positioned to provide cutting-edge
tool support and services for new technologies (i.e. Java) than Wind River
and if the market does over time adopt Linux en masse, I won't be losing
sleep over Wind's ability to accommodate this new GROWTH opportunity.
Finally, it is plausible that Wind may see some royalty for Linux floating
around the market. To this I offer the following -- first, there have been
royalty free RTOS's in the market for over 20 years - Linux brings nothing
new to the game. Second, royalty-free means the RTOS supplier must cut
corners somewhere, or increase costs elsewhere, to compensate for the R&D
expense of the actual RTOS. Not the best model in a market dominated by
mission-critical applications.
So folks, those are my thoughts on Linux. Do not fear it, do not hate it,
rather understand it for what it is, and realize that it just expands the
market opportunity for Wind and all embedded players (new and old).
Cheers, Matt. |
