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Ovum analyst: Ignore SCO claims, common sense will prevail

• By Gary Barnett
• May 19, 2003

SCO has decided to "turn the tables" on IBM and the Linux community by asserting on one hand that IBM has deliberately set out to destroy it and on the other that Linux contains significant portions of code that belongs to it. As things unfold, I doubt that SCO will achieve the results it is looking for; I also believe that IBM and Linux are very unlikely to suffer significant damage as a consequence of SCO's actions.

The most likely consequences for SCO are a long and bitter legal dispute, a huge loss of confidence and loyalty in its customer base and, ultimately, disappointment.

Realistically the most likely "upside" for SCO is that it will reach a settlement with, or be acquired by, IBM for a sum that is a fraction of the $1 billion claimed in the lawsuit.

Some commentators will seek to raise the level of fear, uncertainty and doubt (FUD) by attempting to create the impression that users of Linux are in immediate danger of legal action. This is nonsense. If you are a Linux user, you are not in immediate danger, and you can rest assured that IBM's lawyers will be doing plenty of groundwork for you.

People using Linux do not need to call their lawyers -- they have plenty of time before this issue comes to a conclusion, and it is very unlikely that it will ever get that far. Even if there is merit in SCO's claim, I doubt the case will go far enough for there to be any tangible impact. It will be several months before the true merits of SCO's case will be established, and a great deal is likely to happen in the interim. It is very unlikely that SCO will ever be in a position to take legal action against users of Linux.

The next layer of FUD comes from those who claim that this action will have an impact on Linux adoption. More nonsense. If there is "offending" code within the Linux kernel, it will be fixed very quickly. The Linux community is more than capable of reengineering the kernel to remove the offending code. The speed with which amendments can be made to the kernel suggest that it will take the Linux community days rather than months to replace any proprietary code that is identified. Indeed, the Linux community is already calling on SCO to identify the code it claims to own so that they can get to work on replacing it.

If you are currently using Linux, continue to do so. If you are evaluating Linux, continue to do so. For users of SCO Linux, however, there is work to do. Irrespective of any "change of heart" that SCO may have, the company has given up any credibility that it had as a distributor by its willingness to threaten Linux. If you currently use SCO Linux or Caldera, find an alternative. If you use SCO Unix, you should begin considering the alternatives. SCO's long-term future was uncertain before the lawsuit was announced; it is now extremely uncertain.

SCO's action has all the hallmarks of desperation, rather than being a well thought out commercial move. While the merits of SCO's case are as yet unclear, I don't believe the case will ever see a final judgment in a court of law. SCO's action represents an enormous gamble that has a limited upside and a disastrous downside.

The best that SCO can hope for is an out-of-court settlement or acquisition. The financial scale of these resolutions is impossible to predict, but it is worth considering that SCO has a market capitalization that is roughly one twentieth of the $1billion claim it made against IBM.

In the meantime, SCO has embarked on a strategy that, in one fell swoop, will alienate every Linux user and every one of the 1,500 corporations that was sent its "warning letter." While most observers will accept that the idea of deliberately copying proprietary software is wrong, it is generally agreed that "going after people accompanied by lawyers" is among the last tactics you should consider. Threatening to take action against 1,500 firms for unintentionally using proprietary software is an entirely different matter. It doesn't take a Masters degree in brand management to predict the likely impact on customer loyalty that this class of behavior is likely to produce.

Part of SCO's argument is that IBM, in supporting Linux has behaved in an "anti-competitive" manner. This is a tough case to make for any vendor, but even tougher since SCO was acquired by Caldera, which, when floated, stated in its prospectus that "Our goal is to become the leading provider of Linux for eBusiness." SCO's motives are unclear, and its strategy blurred. Messages from the company that indicate that SCO is "ready to be acquired" do little to promote the notion that SCO is motivated purely by a desire to see justice done.

SCO's strategy with respect to the lawsuit is better described as a bundle of tactics. By initially asserting that it had no intention of pursuing Linux, then changing its mind SCO has done little to convince anyone that it is operating according to a plan.

No doubt this story will run and run, with plenty of people seeking to create lots of fear and uncertainty, but rest assured, common sense will prevail.

Gary Barnett is IT research director at Ovum Ltd. (http://www.ovum.com), a United Kingdom-based consulting firm.

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