In-Depth

SCO vs. Linux: The Big Gun Hasn’t Fired Yet

Company backtracks, at least temporarily, on plans to send invoices to commercial users of Linux

• By Stephen Swoyer
• 10/21/2003

The SCO Group last week backtracked on plans to start sending invoices to commercial users of Linux.

In early September, the Lindon, Utah-based company said that it could begin invoicing commercial users of Linux by the end of the month. Last Wednesday, however, a company spokesperson said that SCO had no plans to start invoicing customers, largely because it had been pleased with uptake of its Intellectual Property for Linux licensing initiative.

To date, SCO has publicly trumpeted one, as-yet-unnamed, Fortune 500 participate in its Linux licensing program.

Also last week, the embattled vendor extended by two weeks a deadline for customers to purchase its Intellectual Property License for Linux at reduced cost. When SCO announced the Linux license in July, it set a deadline of October 15th prior to which customers could purchase Linux licenses for $699 (http://info.101com.com/default.asp?id=2477). Customers now have until October 31 to do so, after which the price will double to $1,399.

Analysts say that invoicing customers could open up several cans of worms that SCO isn’t yet prepared to tackle. “[Sending an invoice] is a very specific act with a very specific response that’s really required by companies. On one level, a company could ignore it, but if you are a company and receive a bill from somebody, frankly, it’s not very smart to just ignore it,” points out Gordon Haff, a senior analyst with consultancy Illuminata.

Customers that have been invoiced in such a fashion could take any of several actions, Haff says. “I could very easily see a company receiving a bill that it did not consider to be valid and referring it to a state attorney general for fraudulent billing,” he concludes. “Whether or not that’s a counter move that would necessarily hold up in court, it’s kind of part of a set of events that could be very well set in motion by invoicing in that way.”

Rob Enderle, a principal analyst with consultancy Enderle Group, is inclined to view SCO’s purported backtracking on the invoicing issue as yet another gambit in the PR war that it is waging against IBM and the Linux community. “For the most part, what SCO has effectively been doing is trying to increase the level of concern surrounding Linux,” he speculates. “They’re not trying to kill the platform, but what they’re trying to do is to get people to license the product from them, so they’ve become like an insurance company: You pay SCO money, you don’t have to worry about them anymore, your problems go away.”

Although Enderle innocuously compares SCO to an insurance company, other industry watchers take a decidedly less charitable view of that vendor’s activity. “They can sue companies until the cows come home. Unless and until it is proven in a court of law that Linux infringes on SCO-held code, and that the GPL is invalid, and that IBM was responsible for putting that code in, they are not licensing, they are racketeering. They are more or less doing a shakedown of companies for 'protection,’” said James Melin, a systems programmer with a county government that uses Big Iron Linux in a limited fashion, in an e-mail interview in August.

At least one long-time industry watcher—who spoke under condition of anonymity—says that there’s probably a method to SCO’s increasingly divisive behavior. He points out that each of SCO’s actions—the unprecedented $1 billion lawsuit against Big Blue; the letter in which Global 2000 firms were warned that they could be held liable for their use of Linux; the invoicing gambit—have drawn howls of protest from key players in the Open Source community. “I think their strategy here is to discredit before the fact a lot of the potential witnesses [in the Open Source community] that IBM is going to call in the lawsuit, because a lot of these guys are going on the record with detailed attacks against [SCO’s actions],” he suggests. “In a lawsuit, you want your side to stay quiet until they’re on the stand. Look at IBM—you’ve barely heard anything from them.”

Analysts seem to agree that it’s only a matter of time before SCO pursues a commercial user of Linux, if only to emphasize—a la the Recording Industry Association of America—the seriousness of its position. Because SCO’s Intellectual Property License for Linux hasn’t exactly been a rip-roaring success among Fortune 500 companies, analysts agree that the embattled vendor could strike soon to drive uptake of its new Linux licensing option among risk-averse customers.

“They’ve got apparently one Fortune 500 company to sign up, and who knows what kind of discount they were given. On the other hand, that’s 499 Fortune 500 companies that haven’t signed up, and, in fact, I would have thought that they would have signed up more than that,” concludes Illuminata’s Haff. “So it’s possible that they could do something to demonstrate to [Fortune 500 customers] that they’re serious about this.”

Enderle believes that SCO will eventually target a high-profile customer—one with a high-profile consumer brand—in a traditionally risk-averse industry. “They’re going to find a company that is very risk-adverse, one that has a very visible brand so that people will recognize it, and then they’re going to hit it with pretty much everything they’ve got, send a message back to the community saying, ‘If we can do it to this brand, we can do it to you,’” he says.

There’s evidence that SCO’s activity has caused some customers to reconsider their Linux purchase plans—although the vast majority of organizations say they’re proceeding apace with their Linux deployments.

A recent survey of 100 CIOs by investment banking firm Credit Suisse First Boston (CSFB) found that 73 percent had Linux implementation plans. Of these, 84 percent say that they have not re-evaluated these plans as a result of SCO’s litigation. Analysts say that this is largely good news for Linux, especially in light of the fear, uncertainty, and doubt fomented by SCO’s increasingly bellicose behavior.

On the other hand, notes Illuminata’s Haff, this means that nearly one-fifth of customers have reconsidered their plans: “While that [16 percent figure] is clearly the minority, that’s certainly a lot of people. If a survey came out tomorrow and said that 20 percent of companies are going to delay purchases of Windows because of security flaws, that would be big news, wouldn’t it?”