Enterprise OS Segment Braces for Upheaval

The enterprise OS-scape could experience disruptive shocks during the next five years

The operating system (OS) landscape has changed significantly over the past decade, with the open source Linux operating system emerging as a potent force -- and an increasingly attractive substitute (or replacement) for proprietary Unix OSes -- and Microsoft Corp.'s Windows juggernaut barreling into the deepest recesses of the enterprise. In short, market watchers say, the OS-scape of today is drastically different from that of a decade ago.

Things are likely to evolve even more, as Linux -- which for a long time has been seen as a complement to proprietary Unix OSes -- starts to emerge as an outright replacement. Changing user behaviors and vendor-driven efforts to combat piracy will likewise prove to be disruptive as well.

"Unix to Linux substitutions, users' behaviors, disruptive technology, and anti-piracy endeavors will continue to shape the market and change the market dynamics," said Matthew Cheung, senior research analyst at Gartner, in a statement. Right now, Cheung says, Linux is the fastest growing server market segment. One reason Linux has been so successful -- against entrenched Unix operating environments, at any rate -- is because of its ever-improving cost-to-performance ratio, as well as the increasing availability of support resources. The result: an attractive TCO proposition that's helping drive adoption, Cheung says.

This year, worldwide operating system revenues should reach nearly $29 billion -- a healthy improvement (of more than 7 percent) over 2007's tally.

Even as it forecasts OS market disruption, Gartner is not projecting a market contraction: over the next four years, Cheung indicates, OS revenues will continue to surge, reaching an estimated $37.5 billion by 2012.

Instead, Cheung and Gartner say, several new and emerging technologies will help complicate the OS-scape -- virtualization and multicore processors foremost among them. On the virtualization front, Gartner suggests, a move toward embedding applications and OS instances inside of virtual machines (VM) should ultimately displace the standalone OS as the infrastructure layer of choice.

The proliferation of multicore chips, meanwhile, will force vendors to tinker with their software licensing models. Alternative delivery models such as software-as-a-service (SaaS) will transform the way software is consumed, once again displacing the centrality of what Gartner calls the "monolithic" OS.

In addition, 'cloud computing (nee, grid computing or utility computing), could finally emerge as an enterprise-ready business model, thanks (once again) to surging chip densities and the ubiquity of virtualization.

With so much disruption, how will vendors manage to grow their OS licensing revenues? Gartner sees a few opportunities -- mostly on the client OS front -- that could help offset revenue-sapping disruption on the server side. Take the upcoming end of life for Windows XP, which -- when combined with the stability, performance, and reliability improvements in Windows Vista Service Pack 1 -- could drive Vista sales and boost Microsoft's bottom-line. In addition, Microsoft's anti-piracy push is also paying off. As a result, Cheung and Gartner say, it, too, could help boost Redmond's OS fortunes.

"In the longer-term, government backed open-source initiatives and cost issues will drive adoption of Linux in some emerging markets, while the continual lowering price of hardware and the demand from emerging markets are driving sales of computing hardware and preinstalled/OEM-type OSs," the Gartner release says.

Vendor disruption could result in improved user consumption, according to Gartner. Thanks to virtualization, for example, companies will be able to more efficiently manage resources (a long-wished-for Holy Grail in many non-mainframe shops), which could result in purchasing fewer OS licenses, Gartner says. "Software vendors can prepare for these technology shifts by ensuring that they can provide offerings compatible to virtualized environments, by evaluating solid SaaS offerings, by planning open-source and cloud computing strategies, and by formulating new pricing schemes on multicore machines," Cheung concludes.

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