News

Economy, Virtualization Eat Into Linux Growth

• By Jeffrey Schwartz
• 08/27/2009

The expected growth rate in Linux server operating system subscriptions and non-paid deployments is expected to slow to just1.1 percent over the next five years, according to a report released today.

Contraction in server sales in 2009 is largely to blame for the declining compound annual growth rate of Linux servers, according to the report, released by IDC. The economic downturn is a key contributor but will have a lasting impact looking forward, according to the report.

The report comes just a month after IDC released another forecast finding the economy and reduced IT budgets are aiding the growth of overall open source initiatives (see Forecast: Cost-Cutting Will Drive Open Source Growth).

But contributing to the declining growth rate of Linux in particular is the increase in deployments of hypervisors and virtualized deployments that are reducing the number of overall servers.

"We've been given the uplift for virtualization," said IDC analyst Al Gillen in an interview. "The net result is you wind up with more instances of the operating systems, you just don’t wind up with more physical footprints of hardware."

IDC is also forecasting weak growth for Microsoft's Windows Server in the next five years, Gilllen said. "That doesn’t say the products are going away, we expect the growth to be in the low to mid single digits through the forecast period," he said. "Any time you have any, even if it's zero growth, it still indicates the same number of units are shipped."

While subscriptions are down, overall revenue growth associated with Linux system software will decline in the coming five years to a CAGR of 16.9 percent, down from 23.7 percent between 2007 and 2009. Revenues from Linux are expected to hit the $1 billion threshold in 2012, according to IDC.

The report also found that Red Hat and Novell accounted for nearly 95 percent of worldwide Linux revenues in 2008, with the two accounting for 90 percent of new server operating subscriptions last year. Nonpaid Linux server deployments last year accounted for 43.3 percent of deployments, up from 41.4 percent in 2007.

For its part, Linux is a key catalyst for Novell's growth. The company today reported its Linux revenues of $38 million increased 22 percent for its third fiscal quarter ended July 31 over the same period last year, despite an overall revenue decline of 12 percent, totaling $216 for the period.