Miracle Linux president sees more growth ahead

Two years ago, Japanese Linux server operating system developer Miracle Linux decided it needed to better promote its local Linux distribution. It developed two aims, according to Miracle's president, Takeshi Sato.

One was to attack Red Hat's dominance in the Japanese Linux market for enterprise servers, the other was to kick-start a pan-Asian fight-back against U.S. dominance of the global IT market, he said.

When Sato became president, on June 1, 2003, Miracle Linux had 23 percent of the Japanese market for server installations using Linux compared to Red Hat's 50 percent, Sato said, quoting estimates from Japan's Yano Research Institute Ltd.

In 2004, his company joined with China's Red Flag Software to develop the Asianux Linux 1.0 distribution, which provides a common kernel, library and packages for server operating systems.

Asianux hit the region a year ago and is sold by Miracle Linux in Japan under its own brand name. To sell Asianux, Sato also gets help from Oracle Japan, which has a 58.5 percent stake in Miracle Linux. Oracle provides certification for Miracle's Linux products and offers them for sale with Oracle products.

Japan's growing Linux market and the support from Oracle appear to be paying dividends. In the year to May 2005, Miracle Linux doubled the number of new licenses it sold compared to the previous year, according to Sato.

The release of Asianux 2.0 in Japan this September may boost the company's business again as cost-conscious CIOs (chief information officers) dump Unix in favor of Linux, he said.

But challenging Japan's Windows server market remains a dream, Sato said, in a recent interview with IDG News Service. Following is an edited transcript.

What's changed for Miracle Linux over the last couple of years?

In 2003 there were about 47,000 (total Linux) licenses in Japan. It's still a small market. At that time uses were mainly for Internet infrastructure, things like file, print, Web and application servers. Miracle Linux's strength is in the business application area. Because we are a subsidiary of Oracle Japan, our users use Oracle with Miracle Linux. Red Hat has a very strong BTO (built-to-order) model, especially with global ISVs (independent software vendors) such as HP, IBM and Dell. In 2003, we decided to adopt the BTO model and have become very successful following the introduction of Asianux. A year ago, Veritas and BEA gave us certification. Our share has grown a little bit and Red Hat's share has also grown a little bit, but TurboLinux has declined because it can't get certification from Oracle, which we got last July. We also enhanced our support, which is crucial for Linux. Miracle Linux has been able to differentiate itself from Red Hat. When there's a problem, our kernel engineers are in Japan. Red Hat's are based in the United States. That's the big difference.

Who has what share of Linux installations in the Japanese server market?

Microsoft has over 70 percent. Unix is around 20 percent and Linux is around 10 percent. So Microsoft is very strong.

What are you doing about Microsoft?

Linux is starting to move to high-end mission critical areas. Linux is growing because it's eating the Unix market. The users' point of view is based on TCO (total cost of ownership). Linux has a very good evaluation. But Microsoft has many applications packages and Linux doesn't have so many, and Windows applications are difficult to migrate to Linux. Java applications are so different from the .Net environment. However, in the next two to three years the situation will be solved.

Have you had any big customer wins?

Tsutaya (a national video rental chain) was using Unix and Oracle, it was a big system in terms of size and expense with lots of hardware and the Oracle Unix database. Two years ago they migrated to Linux and got a 75 percent or 80 percent cost reduction. There was a huge server consolidation, but their capacity was still improved, using Miracle Linux.

How about government business?

Specific names are under NDA (nondisclosure agreement). But we had a big order from the public sector involving over 1,000 licenses, that was a year ago. This is a public agency related to the government. We provide bulk licensing and a separate servicing contract. They wanted long-term support for seven years. The license was one-time, but the support is renewed annually. It's a very good business model for us.

Why is Asianux three months later in Japan than in China and South Korea?

We are taking time to prepare manuals and for certification. Our package includes ISV software, and it's taking time to finish the certification tests. It's ongoing and it's on schedule. It's no problem.

What's better about Asianux 2.0 than 1.0?

Well it's three things. It's RAS -- reliability, availability and serviceability; all are improved. It will implement carrier-grade and FT (fault tolerant) functions, and CJK -- Chinese, Japanese and Korean languages.

What will be the impact of Asianux?

It's going to be great. Two years ago we were only a local distribution, now we're a global distribution. We are getting a lot of new enquiries. Asianux is targeting to be the Asia-standard Linux and that's being received well. We are getting various ISV certifications. So this will lead METI (Japan's Ministry of Economy and Industry) to adopt Asianux to break the monopoly of Microsoft.

So has METI agreed to adopt Asianux?

Yes, yes. ... METI has entrusted the Linux market to the principle of free competition, to make a stronger IT market generally. The Japanese government sees its role as making the Japanese IT industry strong. Most of the IT industry comes from the United States. We don't have Microsoft, we don't have Oracle, we don't have SAP. The idea is to make Japan strong in the 21st century. Open source is a new game. If we are to change the rules of the game, METI believes we need strong open source vendors like us.

So open source is Japan's chance to "fight back"?

Yes. We will compete against the U.S. and Europe, so in the 21st century, Asia will be the leader of the IT industry, and we are targeting to make standards from Asia.

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