MandrakeSoft: An inside look

MandrakeSoft recently emerged from the bankruptcy protection it sought last year. To find out what happened and why MandrakeSoft is enjoying success, I caught up with MandrakeSoft CEO François Bancilhon, and Mandrakelinux co-founders Jacques Le Marois and Gaël Duval.

Ed: for the sake of brevity, Joe Bolin’s questions appear in bold font and the MandrakeSoft management team is identified by their initials: FB is François Bancilhon, JLM is Jacques Le Marois, and GD is Gaël Duval.

Tell me a little about MandrakeSoft the business. It’s a relatively small company, correct?

FB: Yes and no. We currently employ 60 employees, so in that aspect we are small. However, MandrakeSoft has a huge worldwide user base. So from that aspect we are a large company.

JLM: If you look to the legal entity, MandrakeSoft is a small company. If you look from the community standpoint, Mandrakelinux is a huge project. Even with a small number of employee, MandrakeSoft is able to compete with Microsoft and others Linux player because of the clear choice of the Free Software model.  Around MandrakeSoft there is very
strong “virtual company”. The R&D is deeply enhanced by
thousands of contributors through the “Cooker project”
since 1999, and it benefits from the whole Free Software community.
The marketing is easier because there are strong interactions with
the community. And the main sales force is our user community, which
represents several million people. Last, since the company is
publicly listed, many users and contributors have become
shareholders. As a result, this makes a powerful combination.

A GPL-based business isn’t the easiest model to be successful at; what makes it successful?

FB: A GPL-based business has lots of advantages, such as benefiting from a huge contributor team who help develop and improve our products, and also communicate.

JLM: If you look to the history of Linux distributions, you
will see that the fastest growing are the ones which follow the Open
Source rules. Most of the proprietary ones have completely failed.
Caldera/SCO is a good example.

What have been the hardest obstacles for MandrakeSoft?

FB: Our growth was too fast and badly coincided with the Internet-bubble explosion. As a result, our expenses were way too high and it took several years to lower the expenses enough.

GD: The hardest obstacle for MandrakeSoft was to switch from a one-man project to a real company with a structure and a professional
offering, such as services and so on.

What has been the biggest lesson that MandrakeSoft learned as a GPL-based business?

FB: We learned the hard that even in a GPL-based business, or any corporation, you have to follow the standard rules of business.
Everyone here has a solid core belief in the company and a commitment
to bring Linux technology to the masses. This is why Mandrakelinux
was created and why it became popular. As long as we keep these
commitments we will be successful.

JLM: I believe that a GPL business needs both to follow standard business
rules, providing products and support like any software company, and
also be creative by exploring new models with no a priori — such as our subscription-based Club.

What advice would you offer to someone who is contemplating starting a GPL-based business?

FB: Where
do I start? (laughs) First, clearly define a solid type of business
model for the type of product or service you want to provide.
Secondly, one pitfall people make is that they can use a service
business model to propel a product. If you create a product, then a
product-geared business model is needed, and if you sell services then
a service model is needed.

GD: Adopt
a business model that is in harmony with Open Source Software; do not
try to do proprietary with Open Source Software. And if you don’t
believe in OSS, don’t do OSS!

JLM:
I would suggest looking at all the successful business models,
such as the Club model, dual licensing, and vertical market
businesses.

The bankruptcy issue loomed over MandrakeSoft for a long time. What led to the bankruptcy filing?

FB: At the
time, we had to seek protection for a simple reason: There was no
more cash in bank, and our revenues were still lower than our
expenses. It was a matter of a few months, but it was needed.

GD: There
were financial troubles that ended up being a real threat to
MandrakeSoft. We started to restructure the company in 2001, but
restructuring was a long-term process and by the end of 2002, our
expenses were still a bit higher than our revenues, and we had no
cash anymore. The protection status was a successful
process for us, since we are now totally back to normal operations,
and MandrakeSoft is a profitable company.

This happens a lot in the business world doesn’t it?

FB:
Unfortunately yes. We are living proof that this procedure makes
sense and can be successful. It’s easy to look back now and say we
should have done this or we should have done that. But in retrospect
we should have started cutting costs earlier. We simply didn’t cut
costs enough and early enough.

GD:
Besides not having cut costs enough and early enough, I think that
the core of the problem was certainly to consider venture cash as
revenues, and thus growing the MandrakeSoft structure artificially.
There is an interesting anecdote: 1999 was a profitable year for
MandrakeSoft. It was also the year of our first increases of capital.
At the end of the year, when ventures understood we had made a
profitable year, they were very unhappy because we didn’t invest
enough! The word was “spend the money, spend the money.”
We did it, really.

In early 2003,
regarding MandrakeSoft’s bankruptcy protection, Gartner, a market
research firm, wrote:

Thus,
MandrakeSoft will likely shut down without further investment or a
merger that would allow it to refocus as a system integrator or
software vendor in some profitable niche (as TurboLinux has done, for
example).

How do you respond to that now?

FB: That’s
very interesting. In all fairness to them, the statistics were in
their favor when they made that statement. The success rate of
companies who file for bankruptcy protection is low. What saved us
was essentially two things. One, our special relationship with our
users and their willingness to support us in a time of need; and two,
during that time we sold a lot of small units and products.

GD: We
were lucky because the restructuring process had begun a long time
ago and we touched the bottom of the cash curve. Once again, it was a
matter of months.

JLM:
I was confident in our ability to get out from our financial
troubles because of the strong assets we’ve built from the beginning
of the company: a large and loyal user community with a strong
relationship. It’s far more than just a client/provider relationship.

It’s been
suggested that MandrakeSoft could be bought up in a similar way that
SUSE was by Novell. What is the inside buzz regarding this?

FB:
There is currently no such plan. We are definitely in a position to
grow in several areas and in market share.

JLM: And
we are currently more on the side of Novell, looking for
opportunities of acquisitions to grow faster.

GD: Of
course MandrakeSoft has been approached several times since 1999, but
really, it’s not in our plans to be bought up by a company,
especially since we’re profitable. We’re a very flexible structure.
We can innovate and we have the capability to grow quickly.

MandrakeSoft
recently resumed trading on the Marche
Libre and stock prices have been on the increase. Is it possible for U.S. investors to get involved?

FB: It’s
now easy to trade MandrakeSoft stock on the U.S. market. It’s traded on
the U.S. Pink Sheets under the
MDKFF
symbol.

MandrakeSoft
made posting asking the community to help them with their financial
woes. Some have said that MandrakeSoft essentially begged for money.
Any truth to that?

FB: Yes,
the community of Mandrakelinux users helped us, but they get
something in return: We’re still here, we improved much, and we keep
on providing products that fit their needs.

GD: The
most important thing is that we’re still here and now strong, and
that it was a great opportunity to expand the Club business model,
which is now very successful.

JLM:
When we created the Club we received several complaints such as
“it’s not a business model,” and “there is a no value.”
However, we got many subscribers from the beginning who fully
understood the spirit behind the Club, which was like an
opensourceware model, similar in some aspects to the shareware model.
Then we had more and more value-added services behind the Club, and
the same ones who complained earlier joined the Club. I believe that this
was the best solution: First starting with the “opensourceware
model” and then mix it with value-added online services.

Were Mandrakeclub revenues instrumental in the company’s financial salvation?

FB: Absolutely.

GD:
In fact the Mandrakeclub was born before it was used as a way to help
us getting out of the financial mess. But for sure it’s been a great
way to get support from our community of users, and we didn’t expect
it to be so strong. It also allowed MandrakeSoft to enter bankruptcy protection with big hopes. If we hadn’t done that, the
company would certainly have been sold for a small fee.

JLM:
The club seems to be the best match between the Free Software way
and a sustainable business model.

There seem to
have been a few complaints posted on Mandrakeclub recently in regards
to MandrakeSoft’s management, Web site functionality, club services,
and the use of BitTorrent. How does that translate back to the company?

FB: Anytime
people complain about us it hurts. When I read complaints I feel like
running through the building and yelling, “Let’s fix this, now!”
But we have to be level-headed and keep in mind that we have about
25,000 members. When someone sees these postings it can easily be
perceived as a large problem when in fact the issue only affects a
minority of our users. We realize that we aren’t perfect and we have
to keep improving things.

A year ago we had
a bad record. Our delivery agency partners had problems shipping
boxed sets and processing orders. Now 99% of our internal problems
have been fixed. We still have a lot of improvements to be made. This
is an immediate concern that is being addressed. We are in the
process of bringing new people on board to improve things.

Mandrakelinux
10 Official was recently released to Mandrakeclub members and will
soon be released to the general public. This marks the first version
under Mandrake’s new release scheme. How much did the earlier LG
CD-ROM problems influence this new release scheme?

FB:
It was definitely brought up during the heated debates we had
over the new release schedule.

GD: Our new development scheme is a guarantee against such an issue.

Mandrakelinux 10 Community Edition was simply a public beta with a fancy name, right?

FB: Just
the opposite. 10.0 Community Edition was never meant to be a public
beta. It was meant to be a complete usable and stable system with which
to build a better final release that we could then sell as a boxed
set. The new release scheme is a way of making our boxed sets better
than we ever could before and fit various users’ needs.

GD: Calling
Mandrakelinux 10.0 Community a beta is the same as calling previous
final releases of Mandrakelinux a beta. In the past we learned that
you can have the biggest team of testers in the world before a final
release, there will always be people who have issues with a special
hardware or in a special situation. There could also be very bad
issues that happen after a release, such as the LG bug in
Mandrakelinux 9.2. We wanted to improve all that. As a result we
decided to adopt the following development processus:

1) First, a “Community” version is released after the same
Beta/RC and QA cycle as we used before for all versions of
Mandrakelinux. This version is only available as a download and as a
DVD. It’s the perfect version all those who are used to Linux and are
interested in the latest features, but won’t be frightened if they
encounter a problem.

2) Then, several weeks later, an “Official” version is
released. It’s just the Community edition with all security updates
and several fixes from feedback we get from users of the Community
version. Most often, these aren’t big issues. We recommend this
version to all those who want to buy a full pack or aren’t expert
enough to deal with potential glitches.

As a result, we
please experienced users who need cutting-edge features early, and we
release a packaged product which is more stable and solid than any
previous version of Mandrakelinux.

What about the
problems with NTFS in the Community Edition?

FB: This
was something that never should have made it into the CE. This should
have been caught in our developmental process. We have some definite
improving to do.

Was the new scheme a success from your perspective?

FB:
The concept is a good one and the first results are there. Now our
execution has to be improved.

GD:
Based on the return of Mandrakelinux 10.0 experience, we are
currently thinking about potential ways of improving the
process. But the main goal has been reached and this already is a
good success for us and for Mandrakelinux users. The process has also
been warmly welcome by our community of users.

What is the
planned release date for the public version of Mandrakelinux 10
Official?

FB:
Mandrake10 Official boxed sets will be shipped out on about May 10.
The public download edition will be available shortly after as ISO
files.

GD:
And the full 10.0 Official FTP tree has already been released.

What are the biggest improvements for 10?

GD: It’s
faster, it’s easier to use, and includes lots of great stuff. I
suggest that users have a look at our Mandrakelinux
10.0 pages.

FB: We are really excited about the inclusion of Kolab
in our Powerpack+
edition. This will provide a new level of compatibility with Exchange
Servers for business users.

MandrakeSoft is involved in a name dispute with Hearst
Holdings, Inc. What started this?

FB:
We have been attacked by Hearst Corporation and King Feature
Syndicate for four years. They claim that using “Mandrake Linux”
is confusing users with the “Mandrake The Magician” comics.

GD: It’s
interesting to notice that the word “Mandrake” is used by
several other companies in the world and is also a common word of a
plant in the English
dictionary.

In
Mandrakelinux 10 Official, I noticed that all references to the word
Mandrake have now been changed to Mandrakelinux. Is this a result of
the order handed down by the court?

FB:
No, this is just us trying to be the good guy. We changed all mention
of the word “Mandrake” to be Mandrakelinux, Mandrakeclub, etc., because
in the first court session, we’ve been forbidden to use “Mandrake”
as a trademark. So while waiting for the appeal, we’re just trying to
be the nice guys through all of this.

MandrakeSoft
is hiring again. What areas are you looking to fill positions? How
will this improve the company?

FB: We
plan to hire a community manager to improve the Mandrakeclub
services, and Internet developers to restructure and improve our suite of
Web sites. We are also going to build up both our research and
development and our sales staff.

GD: We’re
hiring new people with a special care. We especially want to improve
our commercial activities.

Xfree86’s new license has caused a lot of grief in the OSS world lately. Is
MandrakeSoft going to stick to its guns and continue to
keep XFree86’s 4.4 version out of Mandrakelinux?

FB: Yes. We disagree with the new license with regards to the GPL.

There have been
some suggestions made on the cooker
mailing list to use freedesktop.org’s
X server. Are there any plans to do so?

FB: Not at
the moment, but we are keeping that option open and will see what
develops.

How have the SCO lawsuits affected MandrakeSoft?

FB: They haven’t. The SCO issue is all about money. They’ll stick to bigger money targets, like IBM.

Some Linux
distributors are offering protection for their customers. Will
MandrakeSoft offer protection as well?

FB: That’s
not an issue for our users right now. But if it does show signs of
having an impact on our customers then we will definitely pursue that
avenue.

Taking note of
the allegations that Microsoft aided the SCO lawsuits, and the suit
against Lindows (now Linspire), has MandrakeSoft avoided the “Redmond
radar” thus far?

FB: Along
with others we are among those being watched, I’m sure. We are
certainly one of the reasons that keeps Bill Gates from sleeping at
night. We like that.

GD: We
also think that the Open Source wave is huge and powerful, and it’s
going to be difficult for any company to go against history.

Is the “Wrath of Billy” a concern for MandrakeSoft?

FB: There
no real fear for MandrakeSoft. In the next couple of years we think
open-sourced software will gain 25-50% of the desktop market. That
will be beneficial for everybody, including Microsoft.

What are the
biggest obstacles facing GNU/Linux on the desktop?

GD: Linux
for the desktop is ready, but it seems that many independent software
vendors aren’t really ready yet. I always said that as soon as there
are enough end-user applications for the Linux desktop, we will
gain a big popularity boom.

FB: Users
will have to learn “something else,” but according to
what we’re hearing every day, they certainly want that.

At one time
MandrakeSoft shared U.S. store shelves with Red Hat and SUSE, but in
the past couple of years Mandrakelinux has disappeared. Can U.S.
consumers expect to see Mandrakelinux back on store shelves anytime
soon?

FB:
I can’t divulge any specifics, but I can tell you that we are
striking a deal with a major partner
and we will be making that announcement in the next few weeks.

But you won’t
tell me who, right?

FB:
No, not yet. I will say that users know them and will be very
pleased.

What is
MandrakeSoft’s main management focus right now?

FB:
Software development and improvement of our overall software
infrastructure. Club relations are a big focus right now as well. We
need to pay more attention to the club and develop new services.
Research and development and sales are also high priorities at the
moment.

What are the
future plans for MandrakeSoft?

FB:
We need to grow aggressively through our educational and corporate
service offerings. We will be introducing an exciting product line
for the corporate market this summer.

GD:
We’re also going to keep on improving to stay at the top of Linux
systems.

Thank you.