By now you've witnessed firsthand the march of the penguins -- the growing number of Linux servers in corporate shops. Linux, and the open source movement it inspired, has become so popular that you'd be hard pressed to find a Fortune 2000 company that isn't using it in some capacity.

For VARs, this means that Linux expertise is no longer an optional skill but a necessary one. Yet the question remains: How can a so-called "free" product be the basis of a vibrant solution-provider business? The answer is that you have to change your definition of "free."

"Open source doesn't necessarily mean free. It means free sharing of the code, and that vendors can freely modify, develop and enhance this code," says Diane Lees, senior category manager responsible for Linux at Ingram Micro. In other words, when it comes to Linux, free is a gold mine. Distribution makers, led by Red Hat and Novell, have crafted enterprise-class support programs in which their users do not pay for software li censes. Instead, they pay for maintenance subscriptions on updates, patches and technical support.

"Our business partners make margins on subscriptions the same as they do on proprietary software," says Fran Phillips Wilson, senior program marketing manager at Red Hat. "When you look at volume resellers, you see that they're selling millions of dollars of Red Hat subscriptions." Both Red Hat and Novell SUSE subscription prices start at $349 and rise from there. Red Hat, for instance, charges $8,499 for premium support on its Application Stack product.

But subscription margins are the small stuff. Open-source solution providers say they routinely earn 20 percent to 35 percent margins on services, and customers are waiting in line.

Opening the Door
"If you think about a project for a customer -- say a halfmillion- dollar content management system -- in the past the customer would have had to spend 70 percent of its money on the content management system software," says Dave Gynn, director of enterprise tools and frameworks for Optaros, a systems integrator and custom software developer. "With open source, that price will be lower, which means there's more money available for consultants who can customize the system to meet the unique needs of the customer."

Because of the lower software costs, "projects that were not economically feasible before now become feasible. So there are more projects available," Gynn says, adding, "If you want to be a developer and make money, there's tons of work available. Optaros is a great example. We've been able to hire 100 open-source developers, and we've room for plenty more."

Those sentiments are echoed by hardware VARs as well. Network integrator Plummer Slade has been using Red Hat Linux for its customized all-in-one firewall/e-mail servers since 1998. "We can put our customers onto a server for half the price of competing options," says principal Alicia Slade.

Adds James Simzer, director of partner sales for Novell: "We have VARs making tremendous amounts of money with Linux. One of our VARs had a server-consolidation customer moving 1,500 servers to Linux and saving hundreds of thousands of dollars in the process. When you are looking at a project that saves the customer $200,000, $50,000 in service revenue is inconsequential.

A Bundle of Choices
Linux has been around since 1992, but its current "must have" status is a recent development. In November of 2006, Microsoft and Novell signed a landmark deal in which the two promised to make it easier for customers to run Novell SUSE Linux and Microsoft Windows in the same environment. "This is about interoperability," says Lees of Ingram Micro. "Everybody has to work with everybody else. You go into almost any business, almost any data center, and you are going to find both Windows and Linux. Microsoft has come to understand this."

At the same time, anti-Linux chest pounding, particularly legal maneuvering by SCO, has petered out. The fear of being sued over Linux usage "is a barrier to adoption that has gone away," says Gynn.

Most importantly, industry giants such as IBM have given Linux their fullthrottle support. IBM, a $5.6 billion software company in its own right, counts more than 15,000 Linux customer projects to date. "With Linux service revenue and units growing at multiples far greater than Windows or the overall server market, it's a great platform for our partners to build out their capabilities," says Mike Dolan, IBM worldwide Linux and Open Source strategist.

Toward that end, IBM's approach has been to bundle software (its own and open source) on its hardware running Linux. For instance, data warehousing is a hot bundle for IBM solution providers, particularly IBM's Balanced Warehouse C-Class. The C-Class C1000 is an easy-to-deploy data warehouse geared to the SMB market through channel partner delivery. It combines IBM DB2 Warehouse and Business Objects Crystal Reports Server configured on an IBM System x3500 running Linux. In fact, the C-Class is available only on Linux at this time, Dolan says.

Another hot IBM bundle is the Integrated Stack for SUSE Linux Enterprise (ISSLE), a Novell product stemming from a collaboration with IBM. It combines SUSE Linux Enterprise Server 10 (SLES 10) with software from IBM (WebSphere Appli cation Server Community Edition, IBM DB2 Express-C), which can be plunked on the VAR's choice of IBM server. The stack is interesting because it was tweaked to play nicely with Windows and even includes Centeris Likewise Management Suite to integrate easily with Windows Active Directory. The subscription retails at the regular SLES rate of $349 a year, which includes the IBM software.

The Server Consolidation Play
Bundles like this, and the movement toward running multiple virtual servers on a single physical server, make server consolidation a hot area for Linux VARs. VMware is clearly the virtualization market leader, although it is proprietary software that runs only on Windows and is priced accordingly. Because VMware's hypervisor virtualization software supports Linux servers, it has not only been a driver for profitable consolidation services, but has allowed experimentation with Linux servers and open source software as virtual machines.

Still, last year the open-source Xen hypervisor came barreling into the market. Novell integrated it into SLES 10 at no additional charge, and the recently released Red Hat Enterprise Linux 5 also includes Xen-based virtualization.

"Customers inquiring about Linux often ask about server consolidation," says Novell's Simzer. "With SLES 10 we can virtualize Windows and Linux on the same server." This means that an SLES 10 SP1 server can be the consolidation point for virtual Windows 2000 and 2003 servers, as well as virtual SLES 8, SLES 9 and Red Hat Enterprise Linux 4 servers, according to Novell. Support for Red Hat Enterprise 5 is slated for the fall. Worth noting, too, is that Intel has produced software tools and drivers for fine-tuning servers to Red Hat and SUSE Linux generally and SLES 10's Xen specifically.

Linux is hot in other technology areas, too. Application services, middleware and web hosting are the biggest horizontals moving to Linux, according to a recent report by CMP Media's Institute for Partner Education and Development (IPED).

The Linux software-as-a-service mentality has created new services that VARs can offer as well. Plummer Slade, for example, provides subscription renewal management services for its customers. Renewals are obviously used by Plummer Slade’s mainstay Linux partner, Red Hat, but also by its e-mail server partner, CommuniGate Systems (formerly Stalker Software) and mainstream security providers such as McAfee and Symantec. While Plummer Slade does earn margins on renewals, the motivation is to give customers white-glove service.

Calling Microsoft Partners
Windows VARs may face the greatest barrier to building a Linux business. For those with little or no UNIX background, Linux is not only a whole new world, it is many new worlds. Each distribution requires its own expertise, says Andrew Barth, platform development manager for OEM systems integrator MBX Systems. MBX builds custom hardware for software developers turning their wares into appliances. As such, MBX uses just about every Linux distribution available, and engineers such as Barth must master them all. "If you want to get into Linux fast, there are course offerings out there from beginner to advanced," he says. "I'd recommend that."

Barth also warns that Linux distributions vary greatly when it comes to implementing them on hardware. "The biggest hurdle is actually the hardware vendors' driver support. Sometimes we can get the source code and do the driver compiles ourselves, and sometimes the source code isn't available for a variety of reasons," he says, adding that if hardware vendors claim to support Linux, they most likely mean support for Red Hat and Novell SUSE.

Ingram Micro and its vendors offer a wide range of training. In addition, solution providers entering the Linux market can expect sophisticated, multitier channel programs from the major brands -- with wickedly low entry-level commitments. Novell's Linux reseller program, for instance, is based on its classic three-tier model (Gold, Silver, Platinum), plus an entry level it calls "Ready," for which VARs make no minimum sales commitment. Its Silver Linux Special ist partner designation scraps any requirement for traditional Novell training (such as becoming a Certified Novell Engineer). This sweetens the appeal for Microsoft VARs who have never been Novell dealers. Similarly, Red Hat's two-tier channel program calls its entry level "Ready" and requires no minimum sales commitment. Its second tier, "Advanced," offers solution providers a more strategic commitment.

So by all means, don't let a need for training stop you, Red Hat's Wilson urges. "Growing our channel is absolutely critical to us in the fiscal year that started in March 2007," she says. "If you need skills development, you don't need to make a big investment."

Low investment. Big payoff. That's the economic reality for today's Linux solution providers.