Putting TCO Studies In Their Place

By: Brian Proffitt
Thursday, December 5, 2002 10:14:28 AM EST
URL: http://www.linuxplanet.com/linuxplanet/reports/4571/1/

Analyzing the Analyst

Microsoft's release of an IDC study that indicated that in certain IT situations, Windows 2000 was less expensive than Linux stirred up a lot of controversy this week among the Linux community. Attendees of the Enterprise Linux Forum in Boston heard about the study as a topic of discussion in several of the presentations, little realizing that one of the principal authors of the study, IDC Vice President of System Software Research Dan Kusnetzky, was among them at the Forum, too.

Kusnetzky, who spoke at the conference Wednesday, was not surprised that Microsoft released the results, since the study had a positive outcome for the software giant. Kusnetzky joked that most of the work that he and his fellow IDC analysts do is like an iceberg--usually the public does not see 95% of the reports commissioned by IDC's clients. Once in a while, when the numbers are favorable, the client will exercise their right to publish the data.

But while Microsoft may have reason to celebrate now, Kusnetzky was quick to point out that when examined under a broader context, the Total Cost of Ownership (TCO) results are no more than just another data point in the race between Microsoft and Linux.

Upon our first chance meeting at the Forum, I joked with him and replied that he was the one that the Linux community so "loved." He chuckled and replied that after the release of Monday's report (which I had not yet seen due to traveling to Boston), that faux-status was sure to be elevated. Later, after I saw the news on the report and saw the community reaction on Linux Today, I could see what he meant.

But regardless of what Linux business leaders and community members may think of the report, Kusnetzky is a man who firmly stands by his company's data and their conclusions--and actually looks forward to reading some of the community responses, and engaging some of the more thoughtful commentators. Kusnetzky, it seems, is a man that is always willing to learn something new.

What TCO Reports Really Mean

Kusnetzky sat down for an interview Wednesday morning to go over the report and what it really means for each of the warring parties. Before he went over the report, he laid down some background on TCO reports in general.

Over the years, as IDC has gathered data for hundreds of reports, Kusnetzky explained that most companies tend to fall into one of two categories, based on the answer to this question: "Is the company's data going to be turned into a product?"

If the answer is yes, then much of what the company does as an IT organization will be dictated by that data-as-product. Oft-times the company cannot rely on pre-packed applications, and will instead have to focus on developing their own custom apps to handle the data.

All of the IT processes, and much of the company's business processes, will be centered around the data. Once home-grown apps are built, only then (if applicable) will the company choose to purchase third-party applications. Finally, they will choose the platform. This last decision, like all of the others before it, will be made more on the needs of the data, and not but just cost.

For these types of firms, TCO studies are only marginally relevant, while return on investment (ROI) studies are very important.

In contrast, the other type of firm treats data as an ancillary component of the business process--a necessary evil that is ultimately treated like another expense. Such firms will always seek to drive the costs of maintaining data down as far as possible, and will choose the applications and platforms that handle the data based on that mindset alone.

For those kinds of companies, Kusnetzky explained, TCO reports are always going to be much more relevant.

Kusnetzky feels that whenever the public sees such reports, they should be framed in this sort of perspective. TCO analyses do not apply to all organizations, Kusnetzky emphasized.

This particular report is even more specialized than that.

Looking At the Win2000/Linux Report

For this report, commissioned by Microsoft, IDC surveyed North American medium and large companies only. ( A "medium" company, Kusnetzky defined, is one with 51-499 client systems. A "large" company has 500-plus systems.) The analysts interviewed over 100 IT executives from these companies, focusing on the workload areas of: network, file, Web, print, and security services.

After the data was gathered, Kusnetzky went on to explain, it was normalized per 100 users. A four percent increase in IT costs was factored in for each 100-user group, and projected out over five years.

While the study examined a specific Microsoft product, Windows 2000, it did not examine just one Linux distribution. Instead, an amalgam of Linux distros was examined. I asked Kusnetzky why this would be so, and he explained that to compare one company's product to another company's product would violate IDCs hard and fast "rules of engagement."

Under these rules of engagement, IDC will not compare one product to one product. Instead, a single product will only be compared to a range of products. This is done, Kusnetzky emphasized, to avoid any impropriety.

"Were very careful to avoid any appearance of bias," Kusnetzky said.

In the studys results, IDC found that in four of the five workload areas, Linux was "marginally more expensive than Windows 2000." Most of the added expense, Kusnetzky said, comes from staffing and training costs for Linux applications. In most IT organizations, Kusnetzky stated, hardware and software costs, where Linux traditionally shines, comprises less than 35% of the organizations IT costs. Staff costs, however, can be 50-70% of the total IT costs. If this IDC model is fact, then it would explain why Linuxs traditional strengths are outweighed by IDC's surveyed staffing cost figures.

Kusnetzky maintains that this is what IDC has maintained ever since it started surveying Linux and Open Source software--that the added costs in hiring and training Linux-proficient staff will offset the free nature of the software.

But, he adds, "This study is a data point. It is valuable for people concerned with the TCO. But it is not the only valuable data point."

Kusnetzky admitted that he was actually surprised that in the study, Linux was only marginally more expensive than Windows 2000. Based on other surveys of this type, he was expecting a much greater difference.

One of the other meta-trends that IDC has noted over the years is that the more centralized the product, the less expensive it will be in TCO. Given the de-centralized nature of Linux, Kusnetzky expected a much higher cost result for the open-source operating system.

As it turned out, in network service workloads, Linux was just 11% more expensive, and in the area of security, 22% more expensive. In Web services, Linux was actually 6% less expensive.

Based on earlier trends, "I was expecting Linux to be orders of magnitude more expensive," Kusnetzky said. That it wasn't, he added, "indicates that the Linux and Open Source community has done an excellent job putting tools together."

The survey's timing is also significant, Kusnetzky said. The survey was done last summer, before the advent of UnitedLinux and Red Hat Advanced Server. Done today, one wonders how the survey results would have differed.

As mentioned earlier, Kusnetzky is aware of the sharp criticism this report has received in the Linux community. But, after the initial round of complaints, he is counting on one of the communitys great strengths to kick in. "Most people [in the community]," he said, "will take the information and make their products better."

And, in the Linux arena, things can be made better very quickly, given the sheer size of Linux's development team versus a company like Microsoft.