Wind River alliance stuns industry watchers

Chicago — Are embedded open-source partnerships really better the second time around? That's what software executives and industry analysts were asking this week after Wind River Systems Inc. announced that it will team with Red Hat Inc. to develop a Linux-based embedded software platform by early 2005.

The shocking partnership announcement, delivered during a Wind River earnings call, set the industry abuzz with speculation as insiders tried to determine whether the move represents a major tactical blunder by both companies or a brilliant maneuver signaling that the upstart Linux operating system is coming of age.

The partnership pairs Wind River's leadership in the embedded community with Red Hat's presence in the open-source world, said Stephen Balacco, an analyst for Venture Development Corp. "It appears to leverage the strengths of both companies," he said, echoing a generally positive reception among analysts.

Still, hard questions remain for the partners, both of whom failed in previous ventures in the embedded open-source arena, as a competitor was quick to note. "This is like two drowning men trying to save each other," said Bill Weinberg, director of strategic marketing for MontaVista Software Inc. (Sunnyvale, Calif.), which competes with both companies in embedded Linux. "Here you have an embedded company that failed to do Linux, and an open-source company that failed to do embedded. And now they're clinging to each other, hoping each will save the other."

Wind River (Alameda, Calif.) mounted an open-source effort in 2001 when it acquired Berkeley Software Design and its BSD/OS, but it quickly retreated the following year, calling Linux "a phantasm" meant to trick developers into believing software could be free. Similarly, Red Hat (Raleigh, N.C.) dabbled in embedded four years ago, when it acquired Cygnus Solutions and its open-source eCos operating system. But the company later spun out that segment of Cygnus and recently said it would assign the eCos copyrights to the Free Software Foundation.

Wind River executives said they signed the deal with Red Hat Feb. 20 after most of the country had closed for business. They then announced the partnership in an earnings call at 5:30 a.m. PST on Monday, coupling the news with announcements about Wind River's new VxWorks 6.0 operating system and Wind Power 2 IDE. The embedded software giant also unveiled a new licensing model that gives customers the option of eliminating royalties.

The partnership announcement, however, was the morning's shocker, reportedly eliciting astonished reactions from some who were on the call. Wind River executives defended the choice of Red Hat as a partner, saying studies had called Red Hat OS products the most popular Linux distribution used in current embedded projects.

Indeed, analysts at Venture Development Corp. (VDC; Natick, Mass.) said that Red Hat has been the most popular Linux provider in their surveys in May 2002 and December 2003. But VDC's Balacco warned that the results should not be seen as a sign that Red Hat enjoys a strong presence in the embedded community.

"A high percentage of those who cited the use of Red Hat are not paying for it," Balacco said. Figures from December 2003, he said, showed about two-thirds "downloading it for free, and then using it as a baseline for their development projects."

Past problems

The partnership is unlikely to confer booming success on either company, skeptics said, in part because both abandoned earlier open-source embedded efforts.

Executives from eCosCentric Ltd. (Cambridge, England) said that in view of Red Hat's actions two years ago the Wind River/Red Hat alliance confused them. Red Hat laid off the eCos engineering staff in May 2002, they said, announcing Red Hat's withdrawal from the RTOS market.

eCosCentric executives said their spin-off company has subsequently employed an updated version of its operating system in a variety of applications, ranging from Mercedes S-class automobiles to MP3 players to fingerprint access systems in Volvos.

"In eCos, they [Red Hat executives] had a profitable embedded operating system and a very vibrant user community, and they withdrew from that market," said Daniel Morris, sales and marketing director for eCosCentric Ltd. "Their stated intention was to focus on the enterprise market, and now they're striking up a partnership with an embedded company."

Red Hat considers the Wind River partnership different from its eCos acquisition, a spokeswoman said last week. Red Hat is building its platform across a common code base, she said, and eCos was not consistent with that vision. In contrast, she said, the new product, to be engineered by both companies in Red Hat's Westport, Mass., development facility, will be consistent with the common code base effort.

"eCos wasn't a good fit for us, mainly because of that lack of a standard code base," the spokeswoman said. "But we're looking for some quick progress with this new partnership." She added that the new product, to be known as Red Hat Embedded Linux, is due to roll out early next year.

Wind River's new course follows three years of financial struggles and, in the past year, a change in leadership at the top. CEO and president Tom St. Dennis resigned last June while Jerry Fiddler, who co-founded the company in 1981, stepped aside as chairman in January after Ken Klein came aboard as president, chief executive officer and chairman. Competitors and industry insiders insist that Wind River settled for a partnership, rather than its own brand on a Linux-based operating system, because of past anti-Linux statements by Fiddler and other executives.

Wind River said last week that it chose Red Hat over other Linux distributors, such as LynuxWorks, Metrowerks or MontaVista Software, because Red Hat offers a broader technical and business foundation.

"We wanted to have a unified set of tools that could not only deploy Linux, but could be used for VxWorks and other products," said Michel Genard, senior director of platform marketing for Wind River.

Wind River has said it plans to market Linux products in tandem with its proprietary VxWorks operating system. Its new Wind Power IDE 2, announced last week, will aid the effort by allowing customers to deploy both VxWorks and Linux.

"It gives them a common desktop environment, no matter what their underlying operating system is," said David Fraser, Wind River's chief product officer.

Despite missteps by both companies over the past two years, industry analysts last week generally reacted positively to news of the partnership.

"It's a win-win," said Daya Nadamuni, senior analyst for Gartner Dataquest (San Jose, Calif.). "It gives Red Hat a distribution channel in the embedded systems space with a known, branded vendor. And Wind River can now take a well-known desktop Linux distribution and help its customers integrate it."

Nadamuni noted that over the past four years developers have been willing to invest in Linux despite the cost associated with it. Moreover, she said, vendors have learned that Linux' real profits will be made not in distribution but in the surrounding tools and services. She believes those factors, together with Linux's growing popularity in corporate and government cultures, bodes well for the Wind River-Red Hat partnership.