We'd like to pay, please (Mandrake Club)
Because I did my compulsory military service in the non-combatant or civilian service, the story of the birth of Mandrake Linux has always fascinated me. The founder of MandrakeSoft, GaÃ«l Duval, has said that the idea of a Linux distribution of his own was born in 1997 when he was doing his civilian service and consequently had a lot of spare time. That sounds familiar, but for some reason I never came up with an idea to fill my hours by founding a company that would change the world.
Of the four major Linux brands, Mandrake is clearly the youngest. GaÃ«l released his first Mandrake Linux in the summer of 1998. He was a fan of the KDE desktop environment, which had just seen the release of the 1.0 version. The then market leader Red Hat hadn't made KDE part of its Linux, because there were some political differences about the licensing of Trolltech's Qt library, which KDE used.1 GaÃ«l took Red Hat's then 5.1 version, added KDE to it together with some other additions. He put the package he had onto a public Ftp server, called it Linux-Mandrake 5.1, and went off on a two-week summer holiday.
When he returned, his mailbox was full of enthusiastic responses! It was clear that "Red Hat with KDE' had tapped into a need. With FrÃ©dÃ©ric Bastok and Jacques Le Marois, GaÃ«l founded a company called MandrakeSoft to continue the work with Mandrake Linux, and by 1999 Mandrake was one of the most popular Linux versions, winning several awards and honorary mentions and finally, in 2000, achieving the same sales figures in the US as the market leader Red Hat.
The third quarter of 1999 generated a profit of â‚¬100,000. Not bad for a little company celebrating its first birthday! But that would be the last profit-making quarter in the Mandrake books for a long time to come.
Because this was "new economy' madness at its most heated, Mandrake enjoyed the wheelbarrows of money that venture capitalists brought to the company's door. In interviews, GaÃ«l spoke of listing the company on the Nasdaq. With new investors, the company also got a new management, whose job it was to make the money invested in the company work. A lot of new programmers were employed to further the development of the company's popular Linux distribution. Money was also invested in new fields, such as Linux training and eLearning in particular. Education on the Web was one of the big things among the businessmen of the "new economy' in the year 2000.
The "world-class management team' - as GaÃ«l was later to describe the leadership in sarcastic tones - worked hard. Mandrake's turnover grew quickly, but unfortunately mostly on the expenditure side. Only a year after the first quarter being in the black, the company had a quarter that made a loss of â‚¬3 million, achieving an even worse quarter the next year: â‚¬5 million in the red!
When the new management had the bright idea to "cut losses' by dropping the development of the company's own Linux distribution, in order to focus on eLearning, the original owners reached breaking point. The management was told to pack their bags, and GaÃ«l once again took control.
From the start, Red Hat had been very loyal to the Free Software ideology and published all its programs under the GPL licence, but Mandrake went even further. Red Hat used to release excerpts of its future Linuxes in a package called Rawhide. However, Mandrake opened up the entire development process to interested independent hackers. Through mailing lists set up for the purpose, anybody could get involved in planning the future of Mandrake Linux. In addition to good ideas, the company also accepts code from volunteers, although their own employees, of course, do most of the work.
Does this sound Utopian? Would you do something for free, hand it over to a company, then buy the product they make from it back from them? It doesn't sound very likely, but already in the first year more than 200 eager hackers were involved in the Cooker project. Whether that's such a good name for the project is another question, considering the old adage about too many cooks spoiling the broth. Nonetheless, it's thanks to this strategy that Mandrake Linux has always been very close to its users and striven to respond to their needs - and after all that's what Open Source is all about.
From the start, part of the Mandrake strategy was to make the latest Mandrake version available on the Internet as soon as it was ready.2 This set it apart - in a good way - from Red Hat, which at the time used to delay the release of its online version until the physical CDs had reached the stores. In a number of interviews GaÃ«l said he thought it was good for the company to make the new version available on the Web as soon as possible, rather than artificially (mean-spiritedly) withholding it for months. And that way of doing things was also in line with the principles of openness.
The Mandrake strategy must have played a part in its rapid growth in popularity. But one would expect such a strategy to have had a negative impact on the sale of the physical CDs, which were always late. However, the most loyal users understood the principle of reciprocity, and as soon as the CDs were available they went and bought them just to support the future of their favourite Linux. Besides which they were happy to pay for such a good product. The CDs themselves were obviously of no use to them, since they'd already been using the downloadable version for several months. They just happened to understand that without any revenue their favourite Linux couldn't stay around for long.
This principle of reciprocity gradually grew into the idea for a new business model: the Mandrake Club. CDs are slow to manufacture, and many of the buyers didn't even need them; they only bought them to support Mandrake. So, why bother them with having to buy the CD at all, since the manufacture, packaging, and physical distribution of CDs all costs money. The Mandrake Club is for Mandrake users, who pay what is essentially an annual subscription fee ranging from $60 to $1,200, with most users paying either $60 or $120 a year.
There are some practical benefits to being in the club. Using your Mandrake Club password you can download versions of Java, RealPlayer, Flash, Acrobat and other programs that have been adapted for Mandrake; programs that are free but not freely distributable. Without the club, a Mandrake user would have to surf the Internet to pick up the same programs and install them one at a time. A feature that has proved very popular among club members is RPM Voting - the chance to vote on which Open Source programs should be included in the next version of Mandrake Linux. This allows even those Mandrake users who lack the level of programming skills necessary to participate in Cooker to influence the future of their Linux distribution. But, in addition to this and some other relatively small benefits, there is no actual reason to pay the membership fee.
Briefly, GaÃ«l Duval's argument for the Mandrake Club was: "Following the principles of the Free Software ideology we wish to give you Mandrake Linux completely free, without any catches. We also want to give our products the necessary security updates freely and for free, without any catches. In the long run we won't be able to do this, however, unless somebody pays our employees. Therefore we ask that you support the Mandrake Linux, which we have given you for free, by joining the Mandrake Club.'
Once again, that sounds Utopian. Who would pay to belong to a club if there were no benefits to be had? As in the case of Linux Weekly News, the Mandrake Club has shown that Linux users are willing to pay for services they have enjoyed for free if the service or product is worth it. In 2003 the Mandrake Club had some 14,000 active members as well as a couple of corporate members (who pay a higher subscription fee).
That is a small number compared to the several million people who use Mandrake Linux. Even so, if each of those 14,000 users has paid an average membership fee of $120, that's $1.68 million a year, which is quite a lot for a company the size of MandrakeSoft! And the good thing about it is that the income goes directly to paying the salaries of the company's programmers, rather than to paying for the manufacture of superfluous CDs.
Although the company rid itself of the management team that had almost bankrupted it, some of the commitments they'd already made were not so easy to shake off. The eLearning deals, for instance, required payments to be made for years to come and despite MandrakeSoft severely streamlining its operations, the old sins cast long shadows in the form of many accounting quarters in the red. But GaÃ«l's long-term commitment to the principle of openness had created a group of loyal Mandrake users and they were the ones who kept the company going through the hard times.
During the worst period Mandrake even had to beg its clients for donations. Mandrake never listed on Nasdaq, but at the end of 2001 the company stock was on sale, on the slightly less well-known French exchange Euronext, to the most loyal supporters of the company, its own customers. In the long run they may prove to be better owners than the "world-class' venture capitalists. When the capital raised through the stock issue was spent and there were still bills to pay and commitments to honour, the company's founders had again to plead with its Mandrake users, who hurried to buy club membership and other company products. Again, in December 2002, the company asked its customers for support, and even this third time the Mandrake users supported them.
First the Mandrake Club, then the fundraising, and through it all Mandrake's customers remained staunchly loyal. In the tough IT business, not many companies would dare hope for so much from their customers, but as the Mandrake experience so clearly demonstrated, one does reap what one sows. From the outset, the company had been open and fair with its customers, and in return the customers helped it to survive.
Despite the help, MandrakeSoft had to apply for debt restructuring in January 2003 to protect itself from the last eLearning liabilities, which were due to be paid within the month. A little over a year after that the debt restructuring was completed and, even better, after a break of some five years the company again started to show a profit. With Red Hat moving away from the home users to focus on expensive corporate server architectures, many previous Red Hat users have become Mandrake customers and after a long break the company seems once again to be a strong Linux contender. Since the restructuring programme, their accounts have been consistently in the black, and in 2004 the company branched out from being the favourite Linux for home users to doing some rather more lucrative corporate business by making big Linux deals with two French government departments.
Verdict: MandrakeSoft has been the most open of the commercial Linux distributions and is strongly committed to the Free Software ideology. The company was born of its time, and survived the years of the Internet bubble which created a lot of froth for Mandrake. Through its Mandrake Club strategy the company built, on purpose, a business model similar to the one Linux Weekly News was later to chance upon. Both LWN and Mandrake are proof that if work is done openly, fairly, decently, and most of all if it's of use, then loyal customers will willingly pay and support it, even when it's in trouble.
- 1. Qt was not at the time being distributed under the GPL licence, which is why for several years the entire KDE project incurred the wrath of Richard Stallman's Free Software Foundation.
- 2. The company made an exception to this principle in the autumn of 2003, when it released the 9.2 version. At first, Mandrake 9.2 was available only to members of the Mandrake Club and was only released for completely free distribution at the same time as the CDs became available.