In order to pay developers to work on Ubuntu full time, Shuttleworth needed a company to employ them. He wanted to pick some of the best people for the jobs from within the global free and open source communities. These communities, inconveniently for Shuttleworth, know no national and geographic boundaries. Rather than move everyone to a single locale and office, Shuttleworth made the decision to employ these developers through a virtual company. While this had obvious drawbacks in the form of high-latency and low-bandwidth connections, different time zones, and much more, it also introduced some major benefits in the particular context of the project. On one hand, the distributed nature of employees meant that the new company could hire individuals without requiring them to pack up their lives and move to a new country. More important, it meant that everyone in the company was dependent on IRC, mailing lists, and online communication mechanisms to do their work. This unintentionally and automatically solved the water-cooler problem that plagued many other corporately funded free software projects—namely, that developers would casually speak about their work in person and cut them community and anyone else who didn’t work in the office out of the conversation completely. For the first year, the closest thing that Canonical had to an office was Shuttleworth’s flat in London. While the company has grown and now has several offices around the world, it remains distributed and a large number of the engineers work from home. The group remains highly dependent on Internet collaboration.
With time, the company was named Canonical. The name was a nod to the project’s optimistic goals of becoming the canonical place for services and support for free and open source software and for Ubuntu in particular. Canonical, of course, refers to something that is accepted as authoritative. It is a common word in the computer programmer lexicon. It’s important to note that being canonical is like being standard; it is not coercive. Unlike holding a monopoly, becoming the canonical location for something implies a similar sort of success—but never one that cannot be undone, and never one that is exclusive. Other companies will support Ubuntu and build operating systems based on it, but as long as Canonical is doing a good job, its role will remain central.
Source of Information : Prentice Hall The official Ubuntu Book 5th Edition 2010
Ubuntu Creating Canonical
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