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IBM Builds Dedicated Sales Channel For Red Hat, Novell Linux

IBM elevated Red Hat and Novell to its strategic alliance program, unveiled its new subscription models for selling those firms' Linux distributions in combination with hardware, middleware and services and promised to open up significant sales channel and access to IBM centers in emerging countries such as Brazil, Russia, India and China. In exchange, Red Hat and Novell will push IBM's Geronimo and Derby open source projects

Linux middleware

In a three-part announcement on Wednesday, IBM elevated Red Hat and Novell to its strategic alliance program, unveiled its new subscription models for selling those firms' Linux distributions in combination with hardware, middleware and services and promised to open up significant sales channel and access to IBM centers in emerging countries such as Brazil, Russia, India and China.

As part of the announcement, the two leading Linux vendors agreed to promote IBM middleware including two open source projects -- the Web Community Server based on the Apache Geronimo J2EE application server and Derby database. The two Linux vendors will also continue to promote IBM's open source development environment project, known as Eclipse.

Red Hat and Novell are among IBM's top 10 partners out of a pool of 100 strategic alliance partners globally, a roster that includes Cisco and SAP. IBM has 90,000 partners worldwide.

IBM plans to make its "one-stop shopping" offering available globally after January 1, 2006. The company is currently building a dedicated sales force. Some activity has begun in the U.S. but will be expanded to Europe and Asia Pacific beginning next year.

In the past, IBM's partners and customers could configure IBM servers with those Linux distributions but they would not be able to purchase subscriptions directly from IBM in conjunction with support and hardware offerings, IBM claimed.

IBM signed modest agreements with Red Hat and then-independent SuSE of Germany in 1999, which have grown into global relationships. With the strategic alliances, IBM will try to accelerate subscription sales while its Linux partners push IBM's open source middleware stack more aggressively.

"They earned the right to be elevated to the strategic alliance level. It opens up new sales channels for Red Hat and Novell, and its pretty obvious what impact that can have," said Scott Handy, vice president of worldwide Linux and Open Source at IBM. " IBM announced Wednesday that its Linux revenue surpassed $1 billion during its third fiscal quarter, representing a significant milestone for the company. In 1999. IBM shook up the industry with a startling pledge to invest $1 billion in the then-nascent open source Linux operating system.

IBM also said Wednesday that it ranks number one in Linux services revenues, with 29 percent market share, up 30 percent year over year.

The announcement comes as scores of open source consultants, Novell channel partners, Red hat resellers and open source application services shops try to capitalize on the growing Linux-related services business.

The Armonk, NY, company claimed that IBM Business Partners won't run into conflicts in the field with IBM sales force or IBM Global Services beecause they will be authorized to resell the offering.

IBM will increase Linux subscription sales as the "lead channel" directly through its sales force and business partners, said Mark Elliot, general manager, Global Solution Sales, IBM Sales and Distribution, during the conference call Wednesday. He said tier-two resellers will have the option to resell the subscriptions and IBM won't create any "noticeable" price difference.

According to a release issued by IBM, the one- and three-year Linux server subscriptions will be sold on IBM server hardware, or they can be sold with IBM Global Services' SupportLine offerings, which support Linux running on both IBM and non-IBM server hardware.

IBM said the new subscription model is aimed at benefiting IBM's large enterprise and small and medium business clients "desiring to purchase operating system subscriptions and support as part of a more comprehensive industry-specific solution from IBM," according to the release.

"Customers said they want single point of contact for the whole solution," Elliott said. "We're creating these combinations to make it easier for customers."

Some observers viewed the announcement as a veiled attempt by IBM to grab hold of a growing open source application server and middleware market now dominated by JBoss.

IBM did not discuss that publicly but hinted that it is important for the partners to better align their mutual interests. As part of the middleware deal, Novell agreed to distribute Geronimo in its next SUSE Linux Enterprise Server 10 and Red hat agreed to certify Websphere Community Edition on Red Hat Enterprise Linux and actively promote Geronimo and Derby.

"It's important we align on a solutions standpoint,'" said Handy.

Microsoft, IBM's other major operating system supplier, declined to comment on this story.

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