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The Open Source Financial Year in Review
Normally I avoid stories about the businessy side of the whole
Open Source thing, but november sent us a pretty good year in review documenting the highlights (IPOs, Mergers, and Bandwagons, oh my) jokingly concluding that Open Source was simply IBM's revenge on Microsoft for screwing them on OS/2. Its a surprisingly good story, and worth a read.
At least they bashed Netscape 6 which along with Apache must be the most visible product of the Open Source community...
This response is actually a great illustration. People think that if one does not have blind faith in Capitalism, then one must be a Communist. As if they are mutually exclusive sets that we can divide all economic thinking into. It's just a model. Expect reality to diverge from it.
The "cue the foo posts in 3, 2, 1..." posts will commence with no subsequent foo posts in 3, 2, 1...
I doubt that Redhat is intentionally making the software hard to use now. But the only incentive right now for them to improve the software is that they are in a market losing position and need to leverage marketshare.
If they were in a monopoly position, that incentive would no longer exist. It would instead be their revenue stream dictating how to respond.
I actually rather doubt that the support services, even Consulting Services at Microsoft supply more revenue than their software sales.
Yes, they do make some money off of that support, but it isn't their primary source of income.
I also don't feel it should be any companies source of income. Look at some of the really big boondoogles like SAP, Peoplesoft, etc. They see most of their revenue coming from services.
These are also software packages that end up costing multiple millions to install at a company, and if you've ever had the chance to see them in operation... the quality sucks.
I think it's an exceptionally bad business model, at least from a consumer standpoint.
Hmm. I think Open Source as a business model is a failure, and it has nothing to do with RedHat and VA Linux stocks being in the crapper.
Actually they aren't in the crapper yet, as long as they still have a value above $1 they are listed on NASDAQ.
RedHat is similar to a Microsoft or Novell Solutions Provider.
They anticipate making money by selling integration and customization services.
The difference is just the amount of overhead. RedHat has choosen to take on all the overhead of developing the software, whereas most VAR's pass this on to a third company.
They could possibly make money, although they'll never be as profitable as a old-world solutions provider/VAR. Unless they can somehow make it up in volume, which again seems unlikely.
Unfortunately the whole market for consulting services and such has gone downhill since Y2K. I don't know if it will recover or not.
I think RedHat is likely doomed, long term.
VA Linux on the other hand is just a computer reseller. That's not a good market right now either, and the only way to succeed is to keep overhead low and volume high.
Bu again, VA Linux has to front the bill for the software development, whereas most companies pass this on to third parties.
We'll see.
Look at this from a financial perspective on the part of RedHat.
Your duty to your stock holders is for the company to make money.
You have a choice:
- Make the software easy to use and bug free, thus making customers happy because it requires less support.
- Leverage your software to increase your support services by making it difficult to use, install, and buggy as hell.
There is a contradiction in this mix.
Microsoft has encouragement to improve the quality of their software because support services add to their overhead. They would prefer it if you did not call them asking all kinds of dumb questions.
Long term I would prefer to see a software world which did not require support services. I don't have to purchase a support contract to use my car, my VCR or my microwave. Why should I to use my computer?
I believe that's the vision that Microsoft has, it is obviously not the vision that Redhat has.
I know that would suck from my point of view.
Dacels Jewelers can't be trusted.
Leverage your software to increase your support services by making it difficult to use, install, and buggy as hell.
I agree somewhat with your viewpoint, but think you might be going a little overboard. I think it might be more appropriate to say that Red Hat is possibly not as motivated to make things intuitive because of the support revenue. However, I doubt they're intentionally making the software buggy or hard to use. It's probably reasonably to say that there's potential for conflict of interest.
Microsoft has encouragement to improve the quality of their software because support services add to their overhead
Depends on the situation. For consumers, yes, it is a burder. For businesses, it's called "professional services," which brings in big bucks.
- Scott
------
Scott Stevenson
Scott Stevenson
Tree House Ideas
Nothing could be more free than air, yet companies compress it, scent it, or wrap bits of fried potato or flavored cream around air and sell air for outrageous sums.
Nothing could be more free than water, yet companies filter it, bottle it, flavor it and sell water for outrageous sums.
Meditate on this and perhaps you will see that the idea of selling that which is free is not so odd after all.
--
Someone you trust is one of us.
A group of us have come with what we think is an amazingly cool, unique, idea. We'd love to open source it, but we realize that we can't make much money off it if we open source.
We want adequate compensation for the time and creativity that went into it. Open sourcing doesn't seem to make sense, from the point of view of making money - unless you were redhat and could just resell something that was already done (with relatively little developmental expense on your part).
Wise sages of Slashdot, teach us how we can open source it and still make the money we think we deserve.
I actually think Open Source IS the way of the future for business, just think about it:
Red Hat et all give the software for free but they charge for support. Corporations save money on incredible expensive licenses and can instead spend it on real support.
The internet keeps getting faster, at about doble the speed per year... freenet or maybe some other not yet known programs will make it easy to download free soft. Big soft corps like MSFT keep losing sales to those free downloads. The faster the internet gets, the more business they lose... etc etc.
20 years from now all the money will be on support.
~~~Please pass the salt, I hate unsalted MD5s
I wonder who'll end up owning SourceForge. Or Slashdot.
Still, RHAT and LNUX may be around for a while. They both got so much cash out of their ridiculous IPOs they can coast for quite a while longer. Neither is on Downside's Deathwatch, even though the stock is in the tank.
If nothing else it takes advantadge of all the ill-will the MS has developed for itself over the years. It is like seeing people sitting on the sidewalk with signs that say "will work for free if it screws Microsoft"
The bad blood between the two companies is lengendary. IBM was developing OS/2 in cahoots with MS, and then MS wanted out, keeping many of their "better" technologies to themselves, and jumping into the market earlier.
[I am really fuzzy on the critical details, but I'm sure these are documented well enough around the web, etc.]
"It is a greater offense to steal men's labor, than their clothes"
At present I'm more worried about the poison of cynicism and bitterness spreading at the grass root level with no apparent reason. The feeling I get when I read Debian and linux kernel mailing lists as well as Slashdot is that of the paradise lost; something's wrong but you can't quite say what it is. It's like on a beautiful summer day when you suddenly feel the coming storm in the air even before the clouds themselves appear in the horizon.
What I am afraid of is that like so many fine and noble movements in the history, this one too will fall victim to internal strife and bickering over money, power and prestige and eventually come to nothing -- destroyed from within like Camelot.
I'm not an Ayn Rand zombie but I think she pegged this part of human nature correctly. People love collectivist schemes in large part because at some level they believe they're the ones who are going to profit at someone else's expense.
Is your company going to buy 150 Red Hat boxes for 150 workstations? No, but there's this idea that somebody is going to pick up the tab, out of altruism or cluelessness. Lots of people seem to think Eazel is going to make money by charging for their hard drive space service. Is there a single person out there who intends to pay for it himself?
Net Profits.....................: $0.00
Net Expenses....................: $0.00
Net Products & Services Rendered: $5,000,000,000.00
"...I really have problems understanding why companies like VA and Redhat are valued as they are."
"...an entire business model based on people's laziness to download the OS and on selling them tech. support contracts?"
First of all, there are no "companies like VA and RedHat". VA is a hardware company, RedHat is software. Two totally different ball games. VA makes money just like Dell/Compaq/Gateway--selling hardware at a slight markup. They have an advantage, though, in that the software they install has no cost.
RedHat's business model is totally different than VA's...AND totally different from what you describe. RedHat isn't trying to make money from users. Haven't you noticed all the "partnerships" and "tools" RedHat has announced in the last year? THAT'S where the money is. RedHat is giving away the blades AND the low-quality/cost razors and then hoping that Big Names will pay Top Dollar for high-quality/cost razors (or razor consultants, or razor-management tools, or razor-branding, etc).
--
MailOne
Non-meta-modded "Overrated" mods are killing Slashdot
(Hey Ryan! Here's your proof!)
<laugh> What goes around comes around, I guess. Although I never thought of Linux as an IBM conspiracy, I think it's pretty great that the once-monolithic company with the legendary suits (and the tag line "No one was ever fired for buying IBM") is now supporting something that's almost like the hippie movement. =) And Microsoft, although it still tries to think of itself as a fast, nimble start-up - and perhaps manages to pulls it off in some cases - is now the Bad Guy. Amazing role reversal.
There are, at most, a few thousand companies, worldwide, who need the level of billing software I'm working with. On top of that, each one of them needs heavy customization, which really means that each one of these companies practically has a custom billing system. This means there isn't enough "critical mass" to start an "open source" project to perform this level of billing, so there are going to be zillions of dollars in it for the foreseeable future.
What I'd like to see in the future is a day when Microsoft can't make money selling Exchange because nobody pays for basic email anymore. When I set up my company's internal email, it never occured to me that I'd have to pay a dime for the software. I have to pay for the hardware. I have to pay an administrator. If I want some feature that is specific to my vertical market, I'll have to pay some geeks (possibly myself) to create that function. And that's how I like it -- email is not an interesting problem anymore, but some quirky new feature... hey, that's geekworthy!
So, there's plenty of money out there, but Open Source means it's going to the people solving the interesting, new problems, not last year's basic, recurring problems. (Yeah, that's a bit worrisome to VA Linux and RedHat...)
- Unfortunately it's a financial review and last time I looked this wasn't News for Stock Brokers
A common "nerd experience" is the entry into the workforce, either as teenage "whiz kid" or shiny new college grad, and making the observation, "Wow! I can't believe someone will pay me to do something I'd do anyway!"Maybe you make a living selling beads at crafts shows and this "nerd" thing is just a passionate hobby of yours. Good for you, if that's the case, but for the majority of us who's profession is intertwined with their interests in Things Geeky, the "business of Open Source" is Stuff That Matters.
Perhaps I'm missing something here, but the business model for Open Source doesn't stand up to long term economic scrutiny very well in the same way that the business plans of many dot.coms don't either - if there is no revenue, nobody gets paid, etc., etc...
This means that to support Open Source businesses are going to have to get more into the service side of the industry which is absolutely terrible. This is terrible because service industries cost more to run, require more staff, and worse of all, requires the "consumer" to stump up cash for stuff that is free.
Perhaps I'm being ignorant, but I really have problems understanding why companies like VA and Redhat are valued as they are. A utility company being paid to deliver water to the tap is one thing, but an entire business model based on people's laziness to download the OS and on selling them tech. support contracts? This doesn't feel right.... please, explain to me how this works in an economic sense in the long term and how Redhat's "custom development, consulting, training" is not going to fail in the face of a geek with a compiler, usenet and some man pages?
In mechanics you can increase the momentum both either by going faster or by increasing the mass. In the context of this analogy, I'd say that the increased momentum of the Open Source Software has more to do with its increased mass than its innovation speed.
Furthermore, the ideological basis of the entire movement seems to be shaking. Just as it often happens with ideological movements, the Open Source community is fragmenting into more or less opposing cliques led by cults of personality such as RMS, Linus and ESR. With the implicit and sometimes explicit (Netscape) pressure from the corporate world as well as the growing discontent and disillusionment down at the grass root level, we've indeed reached the watershed. The community has got the visibility and recognition now. What to do with it? Where should it be heading? Back to the ideological roots or compromise and even try that suit on?
Now then:
A few hours ago, I learned that I am now (at least in theory) absurdly rich....That's interesting," said I to myself. "I didn't think we were going out till tomorrow." And I oughtta know; I'm on VA's Board of Directors
This sentence would explain why he is now, both in theory and in reality, no longer absurdly rich. If the members of the Board don't even know when the company is going public, something is wrong somewhere. Possibly it may be composed of morons.
VA had indeed gone out on NASDAQ -- and I had become worth approximately forty-one million dollars while I wasn't looking.
I don't think I congratulated ESR when that happened, or maybe I did because I was still using my Karma whoring account back then. Anyway, it appears that again, while ESR wasn't paying attention, the company's stock price fell into the crapper. That tends to happen when members of the Board not paying attention becomes a recurring theme.
Well, that didn't last long.
How prophetic.
Trouble with the "keep it quiet" theory is that I've made my bucks in a very public way.
First, ESR didn't make any 'bucks', he already said himself that he was wealthy on paper and not in reality. Given his current situation I'm sure he knows this though. That aside, shouldn't he be losing all of this in a public way as well?
I'm wealthy today because my efforts to spread the idea of open source on behalf of that community helped galvanize the business world
Now that he is broke, does this mean that his efforts were really a failure? Certainly this must be true, if his efforts really had galvanized the business community then what happened to all of these millions he paraded in front of everyone?
Fairness to the hackers who made me bankable demands that I publicly acknowledge this result -- and publicly face the question of how it's going to affect my life and what I'll do with the money.
Yet he hasn't publicly acknowledged the result of the stock price falling into single digits. How is that affecting things?
This is a question that a lot of us will be facing as open source sweeps the technology landscape. Money follows where value leads,
In this particular context he is using market success to validate Open Source's position as a legitimate competitor of proprietary software. Lately, the only sweeping Open Source has been doing in the markets is in the basement. We can also assume that proprietary software is now the value leader, as the money is breaking north for Open Source companies.
Red Hat and VA have created a precedent now, with their directed-shares programs designed to reward as many individual contributors as they can identify
Reward, ruin, whatever. Its all the same I guess.
So while there aren't likely to be a lot more multimillion-dollar bonanzas like mine,
For the sake of the economy I hope not.
Gee. Remember when the big question was "How do we make money at this?
That still is the question. As if anyone ever needed any proof that the people who keep saying that you can make money off of GPL'd software really don't know what the hell they are talking about, you have it right here. Here is a guy declaring a victory when the battle has just begun. He's also equating making money with the stock price of the company. Maybe these guys should take a few business courses, or maybe their mindset has too much of a socialist bend, I'm not sure how to educate them other than letting the market run them out of business over and over. Whatever, that question is yet left unanswered.
The first part of my answer is "I'll do nothing, until next June...I will be wealthy in six months, unless VA or the U.S. economy craters before then. I'll bet on VA; I'm not so sure about the U.S. economy :-).
More prophesy! The economy seems to be doing well but the outlook for VA isn't so rosy. Maybe there is a future for Open Sourcers in the business world: consultants. Whatever they say, just do the opposite. Hope you got out in June.
Assuming the economy does not in fact crater, how is wealth going to affect my life in six months?
Economy = good, VA share price = bad. Enough said.
Reporters often ask me these days if I think the open-source community will be corrupted by the influx of big money
Wonder if they still ask...maybe they ask the question but in past tense. Hard to tell.
And maybe a nice hotrodded match-grade .45 semi for tactical shooting.
This is something we agree on. A nicely modded 1911 is an excellent investment let me tell you. Even though I'm more of a rifle person myself, 1911s are amazingly well crafted guns. I sincerely hope he was able to purchase one before his wealth dried up. I would probably even sell ESR some handloads on the cheap, given his current situation.
I'm not going to minimize my attachments by giving it all away, though, so you evangelists for a zillion worthy causes can just calm down out there and forget about hitting me up for megabucks.
It must be a load off of ESR's mind now that these evangelists have no reason to call him.
Ironically enough, one result of my getting rich is that I will probably start charging for speaking appearances, now that nobody can plausibly accuse me of doing it for the money
Heh, I wonder if he is charging now or no. On one hand, he probably needs the cash, on the other, people can again plausibly accuse him of doing it for the money.
But enough trivialities; I'm going to get back to trolling.
Indeed, I will now do the same. I guess I should stop knocking VA. At least they didn't buy up a bunch of other companies with their overvalued stock (like RHAT) and spread their ruin around any. Oh wait...
Cunning linguists