MALAYSIAN STEEL DEALER DROPS LINUX FOR WINDOWS SMALL BUSINESS SERVER 2003, SLASHES TCO BY 50 PER CENT

“Linux was giving us more than we bargained for – difficulties, that is. We were surprised to discover the total cost of ownership for the Linux solution was almost double that of Windows Small Business Server 2003.”
T.H. Thong, Managing Director, Peng Hong Hardware Sdn Bhd

When Malaysian steel dealer Peng Hong Hardware Sdn Bhd wanted to reduce its IT infrastructure costs, it switched to the Linux platform from Windows. But the company discovered that the reality was vastly different from the hype associated with Linux as various technical, support and cost issues soon surfaced. Peng Hong Hardware realised what it really needed was a user friendly, reliable and cost effective IT platform. Some 10 months after its move to Linux, the company went back to on its decision. Since deploying Windows Small Business Server 2003, the company has slashed the total cost of ownership by 50 per cent and improved productivity and efficiency.

SITUATION
Peng Hong Hardware Sdn Bhd is a leading dealer in ferrous and non-ferrous metals in Malaysia. Since its establishment in 1976, it has diversified from being a family-owned steel trading business to a company which offers an extensive range of steel products and services.

Peng Hong Hardware has sophisticated and advanced machinery catering to customers looking for high quality and fine tolerance steel services facilities. The company’s 400 plus customers include semiconductor fabricators, mould makers and general engineering workshops. It has about 50 employees.

For many years, the company’s information technology network was running on the Microsoft Windows platform. Its estimated 20 IT users include the administration, sales and R&D personnel.

In the last quarter of 2003, Peng Hong Hardware decided to upgrade its IT infrastructure. And like some SMBs with limited IT budgets, it was attracted to idea of free Open Source software. So it migrated to the Linux platform, running Red Hat Linux 9 and Samba as its file and print server. The company engaged a freelance Linux service provider to set up the system.

Peng Hong Hardware Managing Director T.H. Thong explains he opted for Linux because “we did not have to pay the software cost and could have an unlimited number of users.”

There was also a lot of publicity about Linux’s benefits then, especially claims about the cost savings companies could enjoy, he adds. “We had never used Linux before, but based on information provided by friends, we decided to switch to Linux.”

However, the company soon found out that the reality failed to match the hype generated about Open Source software and Linux. Over a period of 10 months, Thong encountered a catalogue of problems with the new Linux platform which caused him to grow increasingly disillusioned. He eventually decided it was time to ‘cut losses,’ and move back to the Windows platform by deploying Microsoft Windows Small Business Server 2003.

Unexpected Complications
Thong realized that a switch back to Windows was necessary when he had to call in third party support to handle simple tasks like adding new email user accounts, and adding new hardware devices such as printers. Thong, who handles the company’s IT matters, says these were routine tasks which he could easily perform under the Windows environment.

“Linux was giving us more than we bargained for – difficulties, that is,” he explains.

Thong says that the Linux environment was “too complicated for us” and not user friendly. He acknowledges that Linux does not have a user interface that was as intuitive and simple as Windows. Much of the commands under Linux were text-based, making it especially difficult for those who were not trained in Linux, he says.

“With Linux, I can’t do a lot of things which I could do in the Windows environment,” he adds. This meant he often had to summon and pay the Linux specialists to handle tasks which he could have easily handled under the Windows environment.

“Like most SMEs, Peng Hong Hardware is not big enough to hire an IT specialist. As such, it is important to have a user-friendly IT platform which does not require extensive technical support,” says Thong.

Hidden Costs of Linux
Peng Hong Hardware also discovered that although the acquisition cost of Linux is zero, the cost of services needed for integration, support and maintenance was very much higher than expected. The perception that Linux was more cost effective than Windows turned out to be way off the mark, admits Thong.

“Over a 10-month period, we were surprised to discover the total cost of ownership for the Linux solution totaling about RM8,000 was almost double that of Windows Small Business Server 2003,” he adds.

Though Red Hat Linux 9 and Samba were free, the company had to pay over RM2,000 for a freelance Linux service provider to set up the system. It also called the freelancers to the office an average of twice a month to deal with a variety of problems afflicting the Linux system.

“At a rate of RM250 per visit, that works out to RM6,000 a year. And that figure would have been higher if we had engaged established Linux services companies rather than freelancers,” he adds. This figure also does not take into account the downtime and productivity losses arising from the frequent problems cropping up on the Linux system.

In contrast, Thong says the Windows Small Business Server solution has been relatively problem free. “After the initial deployment, we have not needed to call on the reseller to troubleshoot our Windows system,” he adds.

Peng Hong Hardware’s experience of ultimately paying more for Linux compared with Windows mirrors the conclusions of an increasing number of independent studies on TCO comparisons between Linux and Windows (See endnote).

And this was something that Thong was unaware of when he decided to migrate to Linux. “These were hidden costs which we were not aware of when we implemented Linux. The reseller didn’t explain that this would be the case,” he adds.

Security Weaknesses
Thong was also unaware that Red Hat Linux was an “end of life” product which was no longer supported in terms of security alerts, patches, bug-fixes or enhancements. “The reseller did not tell us that we were running a Linux Operating System which is not supported anymore.”

And over the period that Peng Hong Hardware was using Red Hat Linux 9, the company was potentially exposed to security vulnerabilities as there were no longer upgrades, patches and bug-fixes available.

Thong subsequently discovered that the only way to get supported versions of Red Hat with the necessary upgrades and patches was to buy an entry level subscription to the Red Hat Network. For Peng Hong Hardware, this would work out to at least an additional RM1,300 per server per annum.

Looking back, Thong admits that the company was at risk as it did not migrate to the supported versions of Linux. “We thought our Linux software was secure but now we realize that was not the case.”

Lack of Device Drivers
The lack of device drivers for the Linux environment also turned out to be a big headache for the company. A simple affair like adding a new printer would escalate into a major problem if the device driver was not available for Linux, he adds.

Thong remembers a similar scenario when he had to get a faulty network card replaced. However, they could not get new card to work because the device driver for Linux was not compatible. As a result, the server was down for a number of days.

“Our customers were complaining, asking why we didn’t respond to their emails and when our server would be up. This episode adversely affected customer satisfaction.” Fortunately, the customers were sympathetic about their predicament, he adds.

“However, if these problems were to recur, our customers may no longer be so understanding and we will lose some business,” Thong says.


Solution
As a businessman focused on expanding his family business, Thong was troubled that he was spending too much time and money on a technology which he thought would improve his bottom line. “Since Linux was giving us a lot of problems, we decided to look for something better,” he adds.

He found the ideal solution Windows Small Business Server 2003 which not only provides Windows Server 2003 and Exchange Server 2003 as integrated components, but also additional capabilities at essentially no additional cost. “What attracted us was its extensive functionalities and attractive price,” says Thong.

The migration back to the Windows platform was completed in August 2004 without any major hitches. “For a company of our size, the Windows environment is definitely easier to handle,” Thong testifies.

Benefits

User Friendly and Cost Effective Platform
Already, Peng Hong Hardware has seen the difference in the new platform. “I can now add network devices and set up new email accounts myself. It is very easy and unlike Red Hat Linux 9, I don’t have to pay a third party to set it up for us,” he says.

For example, the company is now regularly backing up its data as Thong has installed an external hard drive with a USB connection. “With Windows it was easy but we couldn’t have installed this in our Linux set up as there was no device driver support,” he adds.

Since the initial deployment of Windows Windows Small Business Server, the company has not had to summon the reseller to resolve the mundane tasks. And this represents immediate savings for Peng Hong Hardware which used to fork out about RM500 monthly for such support.

Thong is pleased that the switch to Windows Small Business Server 2003 translates into substantial savings for his company. “We now have a user friendly, reliable and secure platform that cost more than 50 per cent less in terms the total cost of ownership compared to the previous Linux solution,” he says.

Secure and Supported
With Windows Small Business Server 2003, Thong no longer has to grapple with issues like lack of support for “end of life products”, security vulnerabilities and costly annual payments to get patches and bug-fixes. “With Windows Small Business Server 2003, I am assured of continuous development and improvements in the software,” he says.

From the security aspect, Thong is happy that any patches and bug-fixes for Windows Small Business Server 2003 is available for free and can be configured to be automatically downloaded. This means that the system is protected and any security vulnerabilities plugged speedily without Peng Hong Hardware having to pay an annual subscription like in the case of supported Linux distributions such as Red Hat.

For Peng Hong Hardware, the switch back to Windows has been comparatively smooth and beneficial. With a secure and trusted IT platform firmly in place, the company now spends less money and time on its IT operations. Instead, it now concentrates on what is really important – providing quality customer service and expanding its business.


Integrated Functionalities
The integrated functionalities of Windows Small Business Server 2003 means that Peng Hong need not purchase add-ons unlike Linux which requires companies to incur the costs of integrating additional features into the solution.
For example, Thong plans to make use of the remote network monitoring tools built into Windows Small Business Server 2003 which allows for remote administration through PDA phones. “With my previous Linux set-up, I’d probably have to pay someone to develop such a feature or to get an external application integrated.”
The fax server integrated into the Windows Small Business Server 2003 will allow them to free up one PC which is presently being used as its current standalone fax server.
Thong believes the additional functionalities of Windows Small Business Server 2003, which comes at no additional cost, enables his business to run more productively and efficiently. “This helps keep our IT operations and expenses under control.”

Endnote
In early 2004, Forrester conducted in-depth discussions with 14 companies that had been running Linux platforms for more than a year. Only five of the 14 kept detailed metrics – and each of those five found Linux to be 5 per cent to 20 per cent more expensive than their current Microsoft environments. In addition, preparation and planning activities took 5 per cent to 25 per cent longer for Linux than Windows.

An independent, non-sponsored Yankee Group survey of 1,000 IT administrators and C-level executives worldwide revealed similar views. It found that in large enterprises, a significant Linux deployment or total switch from Windows to Linux would be three to four times more expensive and take three times as long to deploy as an upgrade from one version of Windows to newer Windows releases.

The Yankee Group also commented in the same April 2004 report that “All of the major Linux vendors and distributors (including Hewlett-Packard, IBM, Novell [SUSE and Ximian] and Red Hat) have begun charging hefty premiums for must-have items such as technical service and support, product warranties and licensing indemnification.

Overview
Country: Malaysia
Industry: Steel

Customer Profile
Peng Hong Hardware Sdn Bhd is a leading dealer in ferrous and non-ferrous metals in Malaysia. Established in 1976, the company offers an extensive range of steel products and services.

Business Situation
In 2003, when Peng Hong Hardware decided to upgrade its IT infrastructure, it opted to migrate to the Linux platform from Windows because it was attracted to idea of free Open Source software. But the decision turned out to be a costly one.

Solution
After 10 months running on Red Hat Linux and encountering a slew of problems, the company decided to switch to Windows Small Business Server 2003.

Benefits

• TCO Reduced by 50 per cent
• User friendly and reliable platform
• Better security than Linux
• Integrated functionalities

For More Information
To access information using the World Wide Web, go to: www.microsoft.com/malaysia

For other case studies in this series, visit
www.microsoft.com/malaysia/business/casestudies

For more information about Peng Hong Hardware’s products and services, call +6(03) 9075 6800 or visit the Web site at: www.steelsc.com.my