| MontaVista buys into royalties |
Apr. 28, 2005
MontaVista will offer royalty-based licensing, and expects to derive half its revenues that way, according to an article at CNET. The article also discusses recent and pending updates to MontaVista's product line. MontaVista is the largest embedded Linux provider, CNET says, accounting for half of embedded Linux revenues.
In the past, most embedded Linux providers chose to offer per-seat licensing of development tools, rather than royalty bearing OS licenses, the CNET story notes. In fact, much of commercial Linux's appeal has been attributed to its royalty-free licensing model, according to VDC analyst Chris Lanfear, as quoted by Stephen Shankland, author of the CNET story. According to Shankland, Lanfear noted, "The developers we survey routinely say the royalty-free aspect of Linux is the top reason for them selecting it."
Per-seat licensing streamlines the purchase process somewhat, since only the engineering department need be involved. About two-thirds of LinuxDevices readers said they would not consider paying royalties in 2004, while almost 60 percent said they would consider paying for support.
Royalty-bearing licensing, in contrast, can reduce up-front costs, the CNET story says. Traditional embedded vendors such as Wind River often refer to it as a "pay-as-you-go" approach.
Ironically, MontaVista was a strong opponent of royalty bearing licenses early on. In a February, 2000 interview, LinuxDevices asked founder and CEO James Ready, "Given that you're not going to charge royalties, how will you generate revenue?" Ready replied, "The opportunity with Linux is to not increase the cost of the customer's product, but rather to decrease it, by not having runtime royalties. Our goal is to develop a business relationship with these customers that satisfies our financial needs in other ways -- via our 'subscription' program."
MontaVista the early leader
The CNET story notes that MontaVista is the early leader in the nascent embedded Linux market, citing VDC estimates that it earned about half of the $65M spent on embedded Linux products and services in 2003. The company has 220 employees, and is growing, according to the CNET story.
However, MontaVista's Dev Rocket development tools are "comparatively weak," and MontaVista faces increasing competition from Wind River, Enea and TimeSys, according to the CNET story. TimeSys and Enea both sell tools that made EDN Magazine's hot 100 list.
MontaVista last week introduced Mobilinux, it's distribution for phones and other mobile devices. The company launched a vendor ecosystem around Mobilinux in February, so the move to royalty-bearing may have been prompted by a desire to offer integrated licensing in tandem with third-party software available only under royalty bearing licenses. On the other hand, MontaVista's growing focus on phones may be responsible -- mobile phones have some of the highest volumes among all consumer devices, if not the highest.
Additional details about MontaVista's evolving product strategy can be found by reading the story at CNET, here.
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