Only The Strong Survive In Tougher Unix Climate
Date: 7/16/98
Author: Michael Tarsala
Technology advances and the ever looming threat from Microsoft Corp. are expected to blow some versions of the Unix operating system out of the market over the next few years.
As Microsoft's rival NT operating system gobbles up market share at the low end of the server and workstation market, competition is building at the high end as stronger Unix companies move up to more powerful 64-bit operating systems.
Some weaker Unix operating software competitors plan to hang in against NT for a while with 32-bit systems. But at some point, watchers say, they'll likely consolidate and use the more powerful 64-bit systems made by their stronger counterparts.
Ultimately, some of the hardware makers that developed their own Unix software to run on their servers and workstations could fade out of the Unix operating system market. Analysts say as few as four could matter by '01.
''Unix is going to be a handful of guys left,'' said David Wu, analyst with ABN AMRO Inc. in San Francisco. ''We have too many versions already. How many versions of chocolate ice cream do you really want?''
The surviving versions of Unix are likely to come from Sun Microsystems Inc., IBM Corp., Hewlett-Packard Co. and Santa Cruz Operation Inc. Analysts are split over whether Compaq Computer Corp.'s Digital Unix operating software will remain.
Already the consolidation has begun. Sun and HP stand out as those most aggressively substituting their operating software for those of the smaller Unix players.
Sun has announced that NCR Corp., Fujitsu Ltd. , Siemens AG , Amdahl Corp. and Toshiba Corp. will use a future 64-bit version of Solaris, its version of Unix. HP has signed up Hitachi Ltd., NEC Corp. and Stratus Computer Inc. for its 64-bit HP Unix system.
Despite the dire predictions, Unix is not on its last legs. Just because there are fewer variations doesn't mean there will be less demand, say industry executives and analysts. Unix can run more powerful computers than NT can, and it is less prone to failure, analysts say.
''It's a strong force now,'' said Chris LeTocq, analyst for Dataquest Inc. in San Jose, Calif. ''The server marketplace is growing like crazy. Unix certainly cannot be regarded as weak.''
Weeding out the less popular types of Unix software could be a boon for market leaders. Software developers might be more willing to develop Unix programs if there are fewer operating systems for which to write. That could help drive Unix sales in the face of stiff competition from NT.
''Most of our customers want less choice,'' said John McFarlane, president of Sun's software division. ''They want key partners they can work with, but less choice. There is value in having a few great operating systems. In software, volume is everything.''
Unix was the brainchild of AT&T Corp.'s Bell Labs in the late '60s, and became popular in mainframes at universities and research labs in the '70s. In the '80s, many companies began to use their own brand of Unix to run their computer workstations and servers.
Now the smaller hardware players will be forced to choose one of these, and pay their larger Unix competitors licensing fees.
Many Unix companies should survive whether or not they abandon their own operating systems. Silicon Graphics Inc. likely will offer its own Unix system designed for scientific and technical computers, as well as movie special effects. Sequent Computer Corp. is expected to use Compaq's Digital Unix in its high-end servers.
Unix on the whole is growing, but NT is closing the gap fast. NT software sales should increase 31% a year to $27.5 billion in '02 from $7.2 billion in '97, reports Framingham, Mass.-based International Data Corp. Unix is expected to grow 9% annually during that same time, from $24.7 billion to $37.9 billion.
More customers are using NT for jobs usually relegated to powerful Unix machines because they also can use them to run Microsoft's Word, Excel and other productivity software. The NT machines also can be less expensive than their Unix cousins.
There's a reason for that, says John Jones, an analyst with Salomon Smith Barney. NT is less powerful than Unix.
''All you have to do is use NT to know how bad it is,'' Jones said. ''It's good as a file server, print server and for stand- alone applications. And NT's cheap and PC servers are cheap. But if that's all I can do with it, it's an expensive piece of hardware.''
Another important factor in all this is competition among the Unix players themselves. It's become expensive for hardware companies to graduate to 64-bit systems, which can handle more complex instructions than conventional 32-bit systems. Stepping up to 64 bits will be necessary for Unix companies to set themselves apart from NT.
''It's a substantial investment - maybe $200 million a year for people like Sun, HP, IBM and ourselves,'' said John Rose, general manager of Compaq's enterprise computing business.
Some already are throwing in the towel on Unix development. They plan to use other companies' 64-bit systems for their hardware. Rose says development cost is the reason Sequent will adopt Compaq's Digital Unix for its high-end machines near '00 instead of sticking with its own.
There's another factor said to be contributing to Unix consolidation: Intel's upcoming Merced chip, due for release in '00. Merced is designed to work best with 64-bit operating systems - the ones being made by large companies. It's another deterrent for lesser-known operating system makers to advance their own Unix operating software brands.
All of the major Unix operating system makers except IBM have announced plans to support Merced. Even Sun, which refuses to support NT, will make servers with the Intel chips, as well as with its own Sparc brand. Some Unix companies - including Compaq and SCO - plan to use Intel's recently introduced Xeon chips in servers until Merced is ready.
''Intel is just consolidating all these runaway Unix-based servers,'' said Brad Day, an analyst with Giga Information Group. ''The consolidation is from the lower cost of ownership of the Intel technology.''
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