Wind River embraces open source, adjusts business model

Wind River embraces open source, adjusts business model
By Charles J. Murray, EE Times
February 23, 2004 (10:42 a.m. EST)
URL: http://www.eetimes.com/story/OEG20040220S0041

Chicago — Wind River Systems Inc., once a staunch opponent of open-source software, is expected today to detail plans for weaving Linux into its product lineup. During an earnings call for the last fiscal year, scheduled for Monday, the struggling embedded giant is also expected to unveil a new business model that gives customers the option of eliminating royalties.

The dramatic changes, which evolved over a difficult year marked by the resignation of the company's chief executive officer, are viewed as necessary if Wind River is to regain the dominance it displayed in embedded software three years ago. Besides the new licensing model, the company will unveil today its VxWorks 6.0 operating system and Wind Power IDE 2. The 6.0 version of the flagship real-time OS can now be integrated with Linux. The new integrated development environment allows customers to deploy both VxWorks and Linux.

"For Wind River, this is a huge change," s aid Daya Nadamuni, senior analyst for Gartner Dataquest (San Jose, Calif.). "If nothing else, it's going to give their competition something to think about."

"There's going to be a real 'holy cow!' reaction to this from a lot of people," said Dave Fraser, Wind River's chief product officer.

For customers and industry insiders, the most surprising part of the Wind River announcements will be the new licensing model. Known as Enterprise Licensing Model 2, it builds on a subscription-based, per-seat model that the company adopted late in 2002. But the new model goes further, essentially giving customers the option to eliminate royalties by paying slightly higher up-front costs.

"Wind River has always been known as a company that has downstream royalties or production licenses," Fraser said. "But this will give customers the choice of whether they want to pay for those production licenses or whether they want a pure per-seat model."

Wind River originally introduced the per-seat su bscription model as an alternative to so-called perpetual licenses. It gave customers access to operating-system software and development tools, but still required that they pay production licenses on the back end. The new model will change that. Customers now will choose between a development with no production license, or a reduced-cost development seat with production licenses tied to product volume.

"There are customers out there who didn't want to consider Wind River in the past due to those downstream production licenses," Fraser said. "This gives them a way to work with us."

On the Linux front, the company also said that it plans to extend its product platforms to embrace Linux even as it shows a continuing commitment to VxWorks by rolling its latest version.

Wind River said last week that VxWorks 6.0 will incorporate a number of fresh features, including new levels of memory protection, customizable application programming interfaces, new error detection and reporting mechanis ms, and a scalable message-passing architecture. The product, going out to top customers in March, will also offer integration with Linux operating systems, for those customers that want it.

Similarly, executives said last week that Wind River's new integrated development environment, Wind Power IDE 2, will also allow customers to deploy both VxWorks and Linux. The IDE is built on the Eclipse open framework, a universal tool platform. "It gives them a common desktop development environment, no matter what their underlying operating system is," Fraser said.

Recovery plan

Industry analysts last week agreed that dramatic changes were necessary at Wind River in light of its abysmal performance over the last two years. According to statistics from the company, total corporate revenue for the year ended Jan. 31, 2003, was $249.1 million, down from $351.1 million the previous year and $438 million the year before that. That's a dismal showing even in an industry scarred by a cripplin g downturn, analysts said.

Because nearly half of its business was focused on communications markets, Wind River's declines were said to be about twice those suffered by many of its competitors, which diversified into other areas. "They were aggressively going after telecommunications and network infrastructure," said Dataquest's Nadamuni. "And those were the two markets that were hit hardest during the downturn."

Wind River's revenue has plunged in the last two fiscal years, but it's still embedded leader.

At the same time, Nadamuni added, Wind River executives also resisted the idea of embracing open-source software. Co-founder and former chairman Jerry Fiddler repeatedly denounced Linux as recently as a year ago, referring to it as "a phantasm" tha t gave developers the false idea that software was free. Nadamuni said the blind spot about Linux combined with a reliance on struggling markets made for a devastating one-two punch.

The company did an abrupt about-face last October, saying it was introducing a set of debug tools for Linux. Wind River chairman, president and CEO Ken Klein, who replaced the departing Tom St. Dennis, said at the time that he supported the new move toward the popular open-source OS.

Some industry analysts said last week that the acceptance of Linux could help Wind River with the large group

of developers who have been creating their own operating systems. "People are finally moving away from the roll-your-own software idea," said Bill Claybrook, vice president of Linux strategy for Harvard Research Group (Harvard, Mass.). "Those people wouldn't have switched to Wind River previously, but many of them will switch to Linux."

Competitors, however, expressed skepticism that Wind River will benefit from its Linux tilt. Dan O'Dowd, founder and CEO of Green Hills Software Inc., said that Linux won't help the company in the automotive and aerospace markets, for example, because the OS is too big and too slow to be used there. "I can't comprehend why they are doing what they are doing," he said. "This isn't going to help them." Green Hills will never consider a similar shift because its Integrity OS is well-suited to traditional real-time, small- kernel embedded applications, O'Dowd said.

Analysts said that Wind River's Linux strategy will take time to sort out, but its new licensing scheme could show more immediate results. "My sense is that a lot of customers will be interested in the royalty-free licensing model," Nadamuni said. "Wind River might take a revenue hit initially because of that, but it should be balanced out by the number of new customers they bring on board."