Wednesday, October 23, 2013

Why I think Canonical will go bankrupt by 2016






Why I appreciate Canonical

If you follow me on google+ you've heard me make some rather snarky and negative remarks about Canonical.  You probably expect I'll spend this entire post ripping on the company.  I will be negative later, but I thought I would temper that with a discussion of what I appreciate about Canonical.

I have to admit Mark Shuttleworth has done the Linux community and the world a service by creating and funding Canonical.  The creation of an easy package managing system that makes Linux more approachable has been very helpful. They have helped develop some useful utilities and have funded other open projects. Despite the fact that I don't think they will succeed I am glad they are working on MIR and Ubuntu Touch. We need a replacement for X and the more people trying the better.  Also, a truly open mobile platform would be excellent.  If there was no Canonical there would probably not be Linux Mint, my distro of choice.

I wrote a list of things to say in this section and at the very top I had, "helped popularize Linux". But after some thought I realized that isn't true.  Linux still has less than two percent of the desktop market.  If you count Android as Linux yes it has a dominating position in the smartphone arena but that really had nothing to do with Canonical.  There are Linux servers all over the world but most of those are RHEL(Redhat Enterprise Linux), Debian, or CentOS.


What I don't like about Canonical

All the above being said, I have reasons to dislike Canonical. Over the last few years Canonical has been taking an increasingly controlling almost proprietary view of Ubuntu.  A classic example of this behavior can be seen in the Unity user interface. They had shown hints of it in the Ubuntu netbook remix but I don't think must people saw coming the announcement that Unity would be default user interface in Ubuntu.  Despite significant backlash from the community Canonical has stayed resolved to their determined course. When the community requested the ability to move the dock Canonical refuse thinking that their internal design decisions were more important than community desires.  Canonical seems to have an our way or the highway mentality.  You can see this attitude in other projects Canonical have thrown over the wall. Wayland wasn't going how they wanted so instead of working with that community they go off and do MIR. If you had a parent teacher conferences with Canonical's teacher I think you might get feedback like "doesn't play well with others".

Whenever one of these controversies explode and the community gets into an uproar, some official from Canonical gives an interview or writes a blog post. Whether it's Shuttleworth or perhaps Jono Bacon I get the same vibe every time, an odd mix of both arrogance and defensiveness.  I had an example url but I've since lost it.  They oscillate between claiming they are revolutionary and the greatest thing ever and then whine about how mean people are to them.  I admit this is a more petty annoyance but this is my blog.

I am going to keep the above paragraph just for the ironic timing.  Just recently Shuttleworth posted a blog post that represents exactly what I am talking about.

 13.10 is a very special release for me because I think we are leading the GNU/Linux world into a very important arena, which is mobile personal computing. Canonical has its fair share of competitors and detractors who love to undermine the work it does, but I think that wiser heads appreciate the magnitude of the effort required to break this ice, and the extent to which it has taken courage and grace under fire for this team to deliver such a sharp 1.0 of the mobile experience for Ubuntu.
 We are the greatest thing ever and people are so mean to poor little us.

Mir is really important work. When lots of competitors attack a project on purely political grounds, you have to wonder what THEIR agenda is.

Why I think Canonical will go bankrupt by 2016

Now for the meat of the matter. Being a private company it is hard to get a real take on Canonical's financial direction and plans.  We don't get to see actual expense accounts, budgets, etc. We have to go on what we can see from the outside and what Canonical chooses to disclose.

I highly recommend checking out this article from wired UK. A very interesting read that tells us that Canonical isn't currently profitable and gives some insight into Shuttleworth's thought process. We can figure out Shuttleworth's early plan for profitability by looking at Ubuntu's famous Bug #1. "Microsoft has a majority market share." What does this tell us about the early direction? Canonical wanted to capture a good chunk of the desktop market.  Obviously a very different strategy than Redhat and their push toward the enterprise server platform. Even with offering the the OS for free there would have been many ways to make money after capturing half the desktop market. All those machine with Ubuntu One on them would have been a nice steady stream of money. Agreements that could have been made with various third parties to include software etc would have kept the cash flowing.  If by some chance Ubuntu could have become popular as an enterprise desktop just imagine all those support contracts.  Alas the linux share of the desktop has only increased slightly since the Ubuntu was released.  Linux sits at an anemic 1.66%.

Despite the lack luster performance of Linux in the desktop space, Canonical has continued on its mission. They've branched out to take a small share in the server market. In recent years, it seems almost as if they have been randomly trying out ideas. Canonical has talked of TVs and embedded devices.  Now they are making a big push into the phone/tablet space. At the time each of these seemed like a desperation move and they may well be.  What has become clear is that Canonical is banking its future a creating a unified system across several different types of devices and in capturing some significant share of the phone/tablet market.  In order for this to happen Canonical has to do two things.  First the "easy" part. Actually create a unified experience across phone, TV, and laptop. Secondly they have to acquire a sizable share of the  market.  I can see number one being accomplished. That is just a technical challenge and the open source community tackles those well. The problem will be getting a wide adoption of this new platform.  Let us a take a look a bigger more successful companies attempt to enter this market.  Microsoft entered the modern smart phone market almost three full years before Canonical. Microsoft a company with massive reserves of cash, the ability to advertise like mad, and make backroom deals(say purchase a phone company) with third parties to try and force the adoption of their product and they have failed to take more that 5% of the phone market. Canonical lists a number of member for it's Carrier Advisory Group but what this actually entails is not clear. So what we have is a company with an order of magnitude less resources entering a market far too late to make an impact.

At some point soon the realization will dawn on Shuttleworth that his dream of profitability for Canonical will remain but a dream. He will need to cut his loses and shutter much of Canonical.  Will they actually declare bankruptcy?  I have no idea. As a private company we can't see their financial statements. I have no idea what their current debt burden is. But he can't keep pouring money into a sink, even if it produces many good results for the overall software community and the world.  I see him reducing Canonical to only the profitable sections or shutting it down completely. I see the Ubuntu touch/edge as Canonical last big push to profitability and after that fails, an ending.




The Canonical logo is trademarked and used here in accordance with Canonical's intellectual property rights policy.  Obviously I don't work with or am associated in any way with Canonical. Yes I actually read it :)