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GROUP 8: Fernando Chvarri, Andrea di Marco, Alejandro Flores, Cindy Gallin, Theo Safar, Gaurav Verma

QUESTION 1: IBMs core strategy is to supply hardware, middleware and professional service to its

clients. However, due to the Internet boom, the market has changed. More concretely, customers are

now more knowledgeable and want speed, flexibility, and ability. The combination of these three

element foster innovation. In order to address this disruption, IBM needs to improve its software and

middleware business by deploying them on a neutral platform, meeting customers needs.

In order to gain the confidence of the market, IBM should follow the trend of creating and sustaining

open standards. This open source landscape is considered essential to innovate and network centric

computing. Hence, Linux is exactly what IBM should be looking for. The alliance with the Linux

development community would enable access to IBM to the open source development community,

taking advantage from Linuxs high growth potential and penetration in the PC segment and lower-

end server market. Moreover, open source translates into larger saving costs.

IBM should also leverage on the positive experience with Apache. The companys executives

understood that open source was a software easier to customize. Following IBMs President words:

Our strength is the breadth of all our business. Our competitive advantage is our ability to bring all

of our global resources to bear on our customers opportunities- the firm should position its strategy

closer to the customers and in this sense, Linux would definitely help them to reach this goal.

The alliance with Linux would help change IBMs reputation by not appearing as dinosaur anymore.

IBM needs to be able to adapt to the new times by being customer focused. By doing so, IBM could

further increase its customer base with free software supporters, thus improving customer penetration

while maintaining a low cost structure, and a thorough and sound performance level.

Linux is potentially faster in terms of speed to market than Windows, and as its operating system

was free and open coded, support was widespread, facilitating upgrade paths for users and system

Only with the help of the Linux community, IBM can develop a new business model based on the

voice of the customer, thus changing its attitude as the new CEO asked. Furthermore, the creation of

synergies among the hackers and programming talent from the Linux Development Community with

IBMs core business could be used to gain access and grow within the software and middleware

segments on a neutral platform.

QUESTION 2: Linuxs alliance with IBM should be leveraged to keep growing and maturing the

growth of its operating system. Firstly, IBM as a multinational organization that has an enormous

customer base, historical R&D capabilities could provide a structured approach and working

methodology (as opposed to the virtual dictatorship) to the Linux Development Community.

Secondly, even though in the short run it might seem that IBM could undermine LDCs identity as it

had little experience dealing with open source communities, if we take a long-term approach and

consider that IBM collaborates with academic communities, IBMs engineers can contribute to open

source development and functionalities (expansion of the open source ecosystem and standards for

community collaboration) aimed at enterprises and corporations. In other words, collaborating with

IBMs network of customers to define, deliver and deploy innovative Linux solutions that meet their

unique business needs.

Thirdly, IBM could help formalize the technical support as in that time it was a matter of chance and

availability of volunteers (only Red Hat had commercial support contracts with no legal entity

assuming responsibility), providing reliability, robustness and stability of the service. Excellent

customer service that takes during the journey is a vital component and is a source for delivering

competitive advantages. IBM has the financial and human resources to ensure that its hardware can

work flawlessly with Linux.

QUESTION 3: From an IBM standpoint, the main risks are the following: (i) Linux long term

sustainability. Despites Linux success in the lower end server markets, it is not certain that the
software will register the success required in the mass market as well as the development and support

very ad hoc services; (ii) Reliability of Linuxs software: there isnt a corporate vendor for support

and bug fixing; (iii) Control risk due to virtual dictatorship of Linux and the fact that only people that

Linus Torvalds trusted had the power to commit code, the point of control; (iv) No customer service

dedicated and technical support, therefore theres a need to create a dedicated and specific unit.

On the other hand, from Linuxs standpoint, the collaboration with IBM, could potentially undermine

its LDC identity as a free and open software. These people were worried that once IBM arrived, it

would negatively affect Linuxs status and freedom, decreasing both. Finally, the Linux supporters

would be, at least initially, opposed to the alliance because of the historical non existing relationship

between Linux and IBM.

To sum up, the main barriers related to the strategic and cultural fit must not be undervalued. Some

members of the open source communities viewed IBM as an enemy, plus IBM employees were

unaware of open source services. Likewise, the concrete risk is that the unstructured and nerd Linux

approach would be difficult to implement into the highly structured and historical Company as IBM.

Linus Torvalds might also be seen initially as a stepping stone due to its lose and risk of control.

Finally, some companies might view Linux as an unattractive product due to open software operating

system, difficult to implement in the business world.