Mark Shuttleworth is relinquishing the CEO slot at Canonical Ltd., at a critical time for the company.
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Canonical has won acclaim with its popular Linux desktop but is striving for credibility and market share in data center servers where Red Hat Linux dominates the Linux segment. And, the company, funded by Shuttleworth, has yet to turn a profit.
RedMonk analyst Stephen O'Grady said Canonical's dual consumer/enterprise focus imposes tensions that are difficult to manage but could result in long-term benefits with the general convergence of consumer and enterprise interfaces, he said. A slower ramp-up of server business is to be expected since data centers are conservative, he added.
Tony Iams, senior analyst with Ideas International Inc., Rye Brook, N.Y., said Canonical's challenge will be competing in an IT market that is fragmenting. Following Microsoft's desktop/server model is "retrograde" in this era of virtual machines and multi-core processors managed by hypervisors, he said.
Shuttleworth said server adoption is a seven-year process, with several years yet remaining. Ubuntu's LTS (LongTerm Support) versions (which require less frequent upgrades) will shorten the path to credibility, he said.
"We have a way to go to get to the heart of the data center underneath Oracle and SAP," Shuttleworth said. "We are some distance away from the preferred platform but our focus is on volume like Java Web servers and the cloud and we are the biggest single platform on Amazon EC2 today."
Current COO Jane Silber will step in as CEO in March 2010 and run day-to-ay operations. Shuttleworth said on a conference call he'll still head the Ubuntu Community Council and the Ubuntu Technical Board.
"Canonical's focus on the enterprise customer has been growing fast the last few years," Silber said. "What will change is our relationships with customers and partners and how to satisfy them. We'll continue to build our ecosystem of enterprise, OEM [original equipment manufacturers] and consumer markets."
But, Shuttleworth, who has been the very public face of Canonical, does not intend to vanish. Although he admitted spending less time on his blog in the last few months, it's "still my ambition to deliver on that storybook line…and be right out front" in the reshaping of the company, he said. "This [role change] plays to my strength in product design."
Silber joined Canonical in 2004, the year of Canonical's founding, and the two have shared responsibility and leadership over the years, with Silber's present functions of business development and operations, customer support, marketing and partnerships "ample preparation for the leadership of a larger organization," Shuttleworth said.
During the past few months, Shuttleworth said he was energized by his discussions with partners in Asia and his work with Canonical's cloud developers and wanted to focus his attention on those specific areas rather than overall management of a company whose workforce now tops 300, he said.
Shuttleworth and Silber said they expect the change to be seamless, with some differences in leadership style, but little impact on data center users. However, Shuttleworth said he anticipated that Silber would bring a "new eye" that will result in change, resulting in better performance and growth.
Although Canonical is still in the red, Shuttleworth said the company's top priority is to make the investments needed to achieve a comprehensive platform rather than pursuing the fastest route to profitability. The company's goal is to get Ubuntu installed on more hardware through OEM agreements and expand enterprise adoption for mission critical and cloud computing, which should, in turn, boost support revenues, he said.
"Everyone's expectation is that Jane's focus will be on finances as much as operational performance," Shuttleworth said. "That's what I want."
If Canonical focuses on growing market penetration and higher revenue streams, it can become a profitable company, O'Grady predicted. And Silber's discipline and focus will help Canonical as it strives to boost adoption in the enterprise, he added.
Iams said Canonical's leadership change is a reflection of its maturity. Shuttleworth is Canonical's visionary and, by narrowing his role, he's handing over the daily tasks in running the company to someone who has the "technical chops and the operational background" to do the job, Iams said.
"There are huge risks if a company is focused on the old ways, but there is potential opportunity for upstarts like Canonical through alliances and OEMs," Iams said. "It's a lot of partners and deals and a lot of hard work requiring certain management skills and, hopefully, that's what Jane brings to the table."
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