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The Business of Linux – Series Start

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I will be at LinuxCon 2010

It’s become quite clear to me that I’ll never fit all I want or need to say about the business of Linux in my LinuxCon talk. In fact I could make it a full day workshop and still not cover everything there is to know about making money on products your customers can get for free.

The solution is to begin evaluating what information really needs to be in the presentation and what would be better here. In some cases I’ve begun shucking slides from the deck and for others I’ve decided that there needs to be a better explanation of what I’m trying to cram into my allotted time.

With today’s post I’m going to start addressing some of the topics that could use a little more depth than what time will allow. I also hope that by exploring the topics here I’ll have a better grasp on what is most important to convey when I stand at the front of the room next month. ~Karlie


Midmarket Companies are the Key

Less than a month ago, eWeek published an article titled “Midmarket Companies Steady on PC Purchases, Report Finds.”

This article is based on The NPD Group’s Small and Medium size Businesses (SMB) Technology Report.

As you can guess from the name, the midmarket is made of up of companies who sit right between Mom-n-Pop operations and big businesses. They’re generally smaller than 500 employees and actually make up most of the US economy.

The first bullet on the slide above is fairly easy to understand – Buying is going up this year. While that’s good news, it’s the next two that set my heart all a flutter. They show me some really good numbers – Let me explain.

The biggest reason I’m in a very good mood following this report is that the percentages give me a starting point for basing a financial model off of.

Yes, 40% is less than half, and on first look can seem sort of dismal. The thing we need to understand is how big that 40% could really be.

According to the US Census Bureau, there are nearly 5 million businesses with 499 or fewer employees. So if we do a little math, 40% comes out to be approximately 2 Million potential clients. It could be even more if you set your pool to include business with over 500 employees.

We also need to factor in that the estimated market share for Linux is just about 1%. If we assume the market share is the same with SMBs, we’re looking at about 20,000 firms to get your feet wet with.

I’d also go out on a limb and suggest that if SMBs began adopting FOSS technologies that 1% market share for Linux would rise rapidly. How far? I don’t know exactly, but for every percentage point it jumps you’d be looking at another 20k or so in your national customer pool.

The lesson here is not to get hung up on what constitutes big or small in the business world, or even take a percentage at face value until you understand what those numbers actually represent.

20-Thousand businesses may not seem like that many either, but could you handle that many clients? Probably not while you’re just starting out, so 20k is really a fairly large number for you to grow into… Especially if you can grow the Linux adoption rates while you’re at it.

Written by Karlie

July 5th, 2010 at 8:06 am

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  1. […] my previous posts, (1, 2) I’ve been talking about why Small and Medium Sized Businesses (SMB) need Linux and Open […]

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