Brazilian Government to Adopt Linux
SourceIn early June, the Brazilian government announced its decision to use open source software. The 3-year plan will substitute Microsoft Windows’ operation systems with Linux in 80 percent of the computers in the ministries and state-owned companies.
The Brazilian government created the Implementation Chamber for the Free Software (Câmara de Implementação do Software Livre) to oversee this project. It estimates that the country’s total public and private computing service payments reach roughly US$1.12 billion.
The Brazilian government has a 2003 IT budget of about R$2 billion (approximately US$730 million). However, the new Presidential administration has been clear that it will reduce IT expenses this year while also focusing on digital inclusion initiatives for the general population. Results are already being seen. The Rio Grande do Sul state decreased IT costs in their schools by more than 45 percent with free software and recognized savings of US$10 to US$20 million on their corporate network (due to e-mail and online catalogs). São Paulo city hall has Linux and OpenOffice in telecenters that offer e-mail, Internet access, and basic IT training.
Market Impact
Linux has been more about hype than reality. But the Brazilian government’s announcement will have far-reaching repercussions in Brazil, as public and private entities rethink their IT policies especially in times of fiscal pressures. This is clearly a good sign for open source software vendors who will experience increasing market interest in software based on Linux.
Vendor Winners/Losers
· Microsoft will be challenged to increase government revenue. This Linux initiative clearly hurts Microsoft’s future opportunities, although the company says that the Brazilian government doesn’t represent more than 10 percent of their R$878.5 million (US$331 million) license revenue in the local market. However, the company did expect to increase its share of the sector this year.
· Linux distributors will benefit from more exposure. Brazilian Conectiva, a major player in the local market, expects to increase revenue 40 percent in 2003, compared to R$10 (US$3.5 million) in 2002. Following will be companies such as Red Hat. The company entered the Brazilian market in 2003 and will benefit from worldwide OEM server subscription with IBM, HP, and Dell.
Vendor Conclusions
Although there is still no definite consensus about the value of open source solutions, more Brazilian enterprises are moving toward Linux. Demand for Linux in 20 percent of Brazilian Oracle database installations with Red Hat and UnitedLinux (SuSE, TurboLinux, SCO, and Conectiva) platforms shows the potential of the system.
Some desktop computer makers already have seen good results, with unit costs ranging from US$120 to US$350 less than a Windows system. This is significant considering the volume of government purchases. All interested vendors must make the government a top priority.
Vendor Recommendations
· Focus on Web services. Enterprises recognize that a good area to try Linux is Web services. Vendors should start here, without jumping into more advanced mission-critical systems or other areas that put performance or security at risk.
· Encourage local development. The position of the new government on social issues is clear; the digital inclusion program is a means to guarantee access to new technologies. The open source software initiative stimulates the development of local software houses.
Competitive Recommendations
· Microsoft should rethink its policies and prove that their solutions can cost less as a whole. Microsoft should state the value of their products and government services as well as provide evaluation tools such as TCO that show the company is worth the investment.
· Every player should assess the total cost of ownership. Although open source software means no license fees for the operating system, migration plans have to consider all infrastructure costs. Of course, support and maintenance, training, consulting, and all project and operation activities come with a price. The fact that there are different application servers implies different TCO measures (Web, communications, security, network, printing, e-mail). This can bring the real value of the solution to measurable levels and establish a base of comparison between proprietary and open source software.
Enterprise / Government Recommendations
· Look at the trade-offs between Microsoft and Linux in the North American market. For the most part, American corporations were disappointed with Microsoft’s Licensing 6.0 plan. As a result, new installations and upgrades, which were previously guarantees for Microsoft, may go to Linux. Brazilian IT executives should take a close look at the U.S. sectors most likely to adopt Linux, such as SMBs, the government, and academic and healthcare institutions.
· Learn from local success stories:
· State-owned and public companies are adopting Linux in their operations. Banco do Brasil, the largest bank in South America, uses Linux in its European operation and will be negotiating in July to choose between MS or Linux for all of their branches in Brazil. Petrobras, one of the world’s largest petroleum extraction, refinery, and distribution companies, uses Linux for high tech applications in its exploration and production areas. Metrô de São Paulo, the São Paulo subway system, moved from Microsoft Office to Star Office, reducing equipment TCO by 50 percent and saving R$700,000 (US$245,000) per year.
· HSBC (with 1,800 branches), Brazilian retailers Casas Bahia (which is migrating 1,500 terminals), Lojas Renner (with 24 servers, all workstations and POS) and Lojas Colombo (3,200 POS and 290 servers), and the carrier GVT (e-mail, security, firewall, database, and mission-critical applications) are some examples of enterprises that have implemented Linux for some systems.
· Investigate how the use of Linux has evolved in the public sector in other countries. Germany has a high number of open source software pilot projects. In April, the country renegotiated their Microsoft deal with lower prices no commitment to use MS products exclusively.
André Miyajima
Information Technology Latin America
Research and Consulting