Economic Slump hits Open Source

adamjone writes: "C|NET and Yahoo! are running a story about the hit that open source software is taking during this economic slump. Open source development is a hobby for me, not my full-time job. I find that I have more time to work on my project during times when my full-time job is slow, or we don't have enough work. Is open source truly being driven by those who make it their full-time occupation? If so, is there a happy medium for keeping bread on the table and still working within the open source community?" At least Microsoft is doing well.

Comments

Economic slump?

[alen]

It can't be. Has any open source company ever turned an actuall profit? GAAP or pro forma? Truth is it's like any other new business. 95% of the new companies will close their doors within the first three years and the survivors will probably survive for a while because they have good management and a real business model.

Re:Economic slump?

[ChaosDiscordSimple]

Has any open source company ever turned an actuall profit?

Sleepycat Software (makes of Berkeley DB) has maintained a profitable business based on open source since 1996. Cygnus Support (gcc, gdb) was profitable from its founding in 1989 through being purchased by Red Hat. Aladdin Systems (Ghostscript) made enough money for the author to retire.

Economics of Open Source

[under_score]

There are two fundamentally different approaches to Open Source: capitalistic and communal. In the capitalistic approach, people and companies attempt to earn money by using open source software. The "traditional" model has been to sell value-added services while providing the open source software for free or minimal price. In the capitalistic approach, of course an economic slowdown will be reflected in the open source business sector - just like almost any other sector. On the other side represented by the communal approach, participating in open source projects provides intangible or non-monetary benefits. There is the traditional "itch" factor: you work on an open source project to scratch an itch. There is also the motivation of gaining community recognition. These aspects will not be slowed by an economic slowdown. In fact, they might become even more important: there is not as much cash moving around so a more barter-oriented approach is viable. Corporations not actually involved in developing open source may start to turn more to open source as a solution to their financial constraints. I know that the company I work for does so. They may not directly contribute to the code base, but they certainly are taking advantage of it and therefore increasing the legitimacy of open source. Again, this process is accellerated by an economic slowdown.

Re:Economics of Open Source

[4of12]

here are two fundamentally different approaches to Open Source: capitalistic and communal. In the capitalistic approach, people and companies attempt to earn money by using open source software.

Quite so.

The capitalistic bent on open source is most successful in the use of open source as a lower cost alternative to proprietary software, much of which benefits from various lock-in aspects to increase its price.

It seems like attempts to make money by producing open source software as a sole line of business are fundamentally difficult. The markup is constrained by the costs of making CDs and internet connections, which are constantly improving (this bodes well for the long term future of open source software distribution).

Such companies and ventures are inexorably moved into a position where they sell their expertise as a service to those who wish to use open source solutions in ways that are technically beyond what their organization can muster internally in terms of people resources.

The communist bent is almost what I would call artistic in the sense that open source programmers almost feel compelled to produce a magnum opus. If others recognize their efforts, so much the better. If they get a lot of money for their effort, great. But, like artists in other sectors such as painting, sculpture, poetry, music, acting, and mathematics, most programmers of open source software are not going to become as famous as for their work as Linus Torvalds or Richard Stallman have for theirs.

I think many, if not most, open source projects are worked upon by people pursuing something that interests them, which may or may not bear directly on their main occupation or business. Like many musicians or actors, they have a "day job" to pay the bills.

It will be very interesting to see how increased usage of open source software in the corporate world feeds back into development. The existing base foundation is considerable, a very attractive framework on which to build a high quality and low cost software solution to many a difficult business problem. How many of the ranks of corporate IT citizens catch the fever to contribute further to building the community's assetts will be interesting to see. That "fever", to produce something useful, is what will drive the success of open source software to ever greater levels.

Re:Economics of Open Source

[mosch]

And there's another one that you've managed to ignore completely, despite it's huge presence.

Companies that pay employees to debug and add features to open source software, because they don't feel the need to reinvent the wheel just because they want two features that aren't in the original program.

Re:Economics of Open Source

[MrResistor]

There is also the motivation of gaining community recognition.

More than just community recognition, also professional recognition.

Until about 2 years ago I was strictly a hardware guy. I got into electronics when I was in highschool, and I focused on electronics my first 3 semesters of college, figuring I could get a tech job and use that to pay for my engineering degree. Yeah, right! Everywhere I went I got the same responses: "We're looking for someone with at least 5 years of experience in our highly specialized field" and "It doesn't matter what you know because we do things differently here". Don't ask me what they meant by "different", I could never get a straight answer about that. Almost 10 years later I still haven't run into any hardware that doesn't obey the basic laws of electronics.

Anyway, the real problem was not so much idiot managers who believed their hardware is fundamentaly different from anyone elses, as how to get experience if you can't get a job. It didn't matter that I spent a large portion of my spare time fixing stereos and VCRs and trying to turn my old 8088 into a digital sampler, I hadn't proved myself in a professional capacity.

I think Open Source gives programmers a way to demonstrate their skills in a verifiable way. You can say, "Look, here is a package that people actually use, and here are my contributions to it." That can be invaluable to someone trying to get a foot in the door, something that is going to get increasingly more difficult in the current economy.

Re:Economics of Open Source

[wytcld]

There are two fundamentally different approaches to Open Source: capitalistic and communal.

Are the capitalistic and communal fundamentally different, or aspects of a common creature? Consider our current 'capitalist' president. How did he get there? By being a part of three groups - the Yale-Harvard axis, the Texas-oil axis, and the Connecticut old-money WASP contingent - which look out for their communal interests. Those with wealth and power in our society generally get there by being communal with some significant group of their counterparts. It's how the capital is accumulated to allow for capitalism in the first place.

So the question for those of us in the computer trades is whether we can achieve a quality of communalism among ourselves that will make us a true center of economic and political power. In the 90s we were getting there, centered largely on new West Coast elites. Wall Street was threatened by this, so it blew it into a bubble in order to (1) take East Coast profits on it and (2) make it go away.

If we quit being communalist now we're being penny wise and pound foolish. Do we want real power down the line, or do we want to be the sadder sort of "honest tradesmen" who have to rent their basic tools before they go out to the jobsite?

Remember, capitalism isn't about being some mean-ass son-of-a-hound to all and sundry, capitalism is about accumulating capital. Tools are a form of capital, productive of future earnings. Sharing capital within your communal group is the proven method by which Bush gained shares in several oil companies and a baseball team. And it's why he will be so good at paying back his friends - these values run deep enough in his character that his friends were comfortable sharing their monetary piles with his campaign.

The bottom line is that computers can do tremendously productive work. Those who can make the computers do that work can always get a cut of it. We individually have more capital if our tools are better - and the more we can share this capital as a group, the more politically and economically powerful we become.

In the old European empires knowledge of trade routes was capital, to be merged with the monetary capital of those who'd - largely out of pursuing the communal interests of their class - collected and preserved it. In the new empires knowledge of computer routing is capital....

Don't blame the economy and walk away

[rmadmin]

Don't blame the economy and walk away. The economy ha been shit before. And Sept 11th really sucked. But god damnit, don't think that just cuz times are tough people are gonna give up. My mom worked for a company for 24 years, made it up to production supervisor of the entire plant. Two months ago her possition was eliminated. Sure.. lets blame it on the economy when theirs 2 guys that have been at the plant for 2 years, both are making 80K a year, and don't know a god damned thing about the company. My point being. I think alot of companies out there are doing stupid shit they dont' _have_ to do, they wanted to do it. And this gives them a good excuse to do it while its still wrong.

Linux, for example

[k98sven]

..started during the early nineties, during which Finland was in it's deepest depression since the '30s. Didn't stop Linus. And it won't stop scores of other hobby OSS developers either.

However, less corperate funding may retard development, but hey: in a recession everything else slows down too.

Open-source is parasitic

[Eloquence]

Currently, open source is used by many people who never give anything back, although they would be able to financially support development. The reason for this is not that people are malicious or exploitative, but simply that it's not convenient enough. Some sites have small "donate" buttons, but these give little feedback (a la Penny Arcade, only more detailed) and do not allow subscriptions or feature requests. The best implementation I've seen so far is Freenet, except that people only donate when they have a reason to visit the frontpage, which is not updated very frequently.

A sophisticated donation/subscription/feature request system which automatically suppports several payment methods should really be part of a collaborative development site like SourceForge. For using Amazon's Honor-System, which is very feature-poor, 15% of any donation go to Amazon. This would be an adequate level for something like SourceForge, and here people would gladly pay the 15% because they would know that they support important infrastructure. I really can't understand why SourceForge isn't trying anything of the sort, but I haven't noticed much innovation in their business strategy anyway.

Of course, in the long term, I'd love to see a standardized electronic payment client (with a Qt or GTK interface) which supports subscription management bundled with all Linux distributions. Then you could easily pay with a single click in your browser.

Re:Open-source is parasitic

[Eloquence]

No, what I mean is really a system for regular donations without (many) additional privileges. Subscribers could get some benefits, like free e-mail support or access to the wishlist.

Another area where subscriptions can be useful is in a Street Performer Protocol like context, e.g. Transgaming, where the code is GPL'd when a sufficient number of subscribers is reached.

Are the hobbyists really driving open source?

[Junks Jerzey]

Sure, there are some smaller and lesser known open source programs out there. Heck, lots of little solitaire games and remakes of Breakout (Arkanoid, for you young 'uns) are released under the GPL. But those are not the programs that give open source it's high profile. We're talking about:

1. Perl & Python
2. Apache
3. the Linux kernel
4. gcc
5. KDE
6. X

There are certainly commercial interests behind most of these, in that some people--not all--have full time jobs working on them. gcc especially wouldn't be anywhere near where it is today without the input of a number of large companies.

Re:Are the hobbyists really driving open source?

[Eloquence]

I think it is unfair to characterize open-source development as primarily driven by companies. After all, the projects you mention started as open-source projects without much or any commercial support. It was only when corporations recognized the benefit this software would give them that they jumped on the bandwagon. So what we see here is really a hybrid economy, where everyone who benefits from a certain piece of software, which is effectively in the public domain, has a self-interest to contribute to its improvement, either with money or with code. As I stated in my other comment, I'm afraid especially the "contribute with money" part is currently underdeveloped.

This is backwards...

[FortKnox]

Because a lot of people are getting laid off their jobs, I'd expect Open Source to skyrocket. When the very few jobs actually start hiring, they'll want people that kept busy, and aren't going rusty. Not to mention you can show you're great coding style on open source projects (ie - during the interview, say "yeah, I wrote anim.h & anim.cpp, please open them up on the website and see how I animated this spline using the super-quick algorithm").

If you unemployed are smart, you'd log off of slashdot, and get your coding groove on.

Re:This is backwards...

[NineNine]

Actually, no. If you don't have any money coming in, you spend ALL of your time trying to land something that pays. Programming for free is the LAST thing on your mind when you're unemployed.

Re:This is backwards...

[Syberghost]

It's not surprising that you think this. It's a common naive misconception in the Free Software community.

Understand, people; programmers work on Open Source either because they're paid to by a company that can benefit from it, or because they're scratching an itch. You don't have time to scratch an itch if there's not food on the table, and most programmers (and I mean the vast, vast majority, probably in excess of 90%) put food on the table by writing CLOSED SOFTWARE internally for corporations.

When reality doesn't agree with your preconceived notions, the smart thing to do isn't attempt to deny the reality; the smart thing to do is examine your preconceptions.

Services and Support

[SirSlud]

The OS community has learned that S&S doth not a profit make. But the universal conclusion seems to be that OS can't be profitable (after all, what else is there?)

Photoshop users know exactly how OS can be profitable. Corperate clients pay. Personal users do not. Since we all go to work, there should be at least some level of support from the corperate community. When we go home, it's free.

Xerox, laptops ... there are many products that work has paid for, that we, for all intents and purposes, get free personal use out of. Heck, Windows is like that (ie, so much personal pirating, MS gets most of its money from corperate clients.)

I think most people will disagree with me, but oh well.

Re:It's a recession, what did you expect?

[brunes69]

As muhc as some of you might mod this down as a troll as soon as you see te words "Communism", I'd suggest the opposite: This commentary is very true, as much as you'd hate to admit it. And no, Communism != Evil, as much as American history may have taught you otherwise

Surprise, surprise

[underpaidISPtech]

The economy is in the shitter. This whole article is nearly pointless. Open-source (the business model) was circling the drain before any other sector of industry was, and this is news?

And now to burn some karma....

I think that the open-source phenomenon will quietly, undignifiably, dissapear soon. It is a lofty and noble goal to be sure, however as a sustainable movement, I believe it will become less important over time. Why? Because the high-flying VC money and gold-rush speculation that drove those fat boomtime salaries are what really paid for open-source. The time to code the time to host it, the time to collaborate, just aint there any more during the dot-bomb hangover.

Open-source is an idea; that will remain. Linux the kernel, and any derivatives; they will remain. Unix is still with us after 30 odd years, and so too will Linux and OSS. Good. But, making money and supplanting a capitalistic machine that is designed for high proiduct turn-over, planned obsolecence, and not giving the customer what they want is the sustainable model, not selling services to free products. If you pay for the product, then you will pay for support. Get a free product, and you find out its not up to par or whatver, why pay for support, just get another free clone....

As an example, look at the mp3, CDR, DVD products out there. Is there a single product (game console, entertainment device or otherwise) that can play mp3s, read and write CDR, CDRW, DVD, DVD-ROM/RAM/RW and any other format? No. It is much better business sense to force the consumer to buy a couple of different devices than one do-it all device.

As with software, you want return customers, hence the excruciatingly long path to a stable windows platform (some may argue this point, although at this time I think it's the licensing/terms of use that is the problem not the OS itself).

There is alot of uncertainty around everthing right now, both socially and economically, and open-source is a real gamble. Will it become a security threat to use OSS? Of course it isnt, we know better than that, but we don't make the law.

Where does crypto stand? Do you want to continue to code for free, or maybe you're unemployed (or facing it) and would like to see a return on your effort? I dont think selling services is the way. I can just as easily support your software as you can.

Anyways flame away, mod me down for blasphemy, whatever, maybe I forgot my happy pills this morning...

Re:Surprise, surprise

[geomon]

I believe it will become less important over time. Why? Because the high-flying VC money and gold-rush speculation that drove those fat boomtime salaries are what really paid for open-source.

Now that we have heard from Bill Gates, perhaps we can pump a little more reality into the discussion.

When I started using Linux in 1994, the Information Superhighway wasn't on the radar. MOST IT jobs were in the same sectors that they are in now: database management. At that time, I saw thousands of listings on usenet for DB administrators and sysadmins. What the hell did those jobs have to do with open source? Nothing! People got paid for computing and open source projects were flourishing. This momentary dip in open source funding does not equate to a death knell for non-proprietary software development.

But now that you have done your obligatory dance on the open source grave, keep this in mind: As long as there are programmers who are willing to collectivly contribute their spare time to a project, open source will survive. That may seem alien to you, but people contribute to all kinds of collaborative efforts without the expectation of monitary gain ($1BUSD donated to Red Cross).

You might not agree with the cooperative sentiment, but there is 400 years of history behind the open source philosophy.

Re:Surprise, surprise

[ChaosDiscordSimple]

Open source software has been and will continue to be profitable. It may not be insanely profitable, it may not apply to every problem, it may be unconventional, but it works. It will slowly grow, because once open source moves into an area, it becomes very hard to dislodge.

Sleepcat Software's open source Berkeley DB has "been profitable since inception" in 1996

Using multiple licensing models L. Peter Deutsch is able to provide Ghostscript under the GPL and make enough money to retire.

Cygnus Support (now part of Red Hat), was founded in 1989 and was "profitable, increasingly profitable, every single year" before the Red Hat buyout.

It's very unconvential, O'Reilly must be happy enough with sales of books to pay Larry Wall to keep developing Perl.

Open Source works. Maybe not as well as VA Linu... erm... Systems wants it to, but it does.

Who found the Open Source b-plan?

[mnf999]

OK, the article is actually interesting. Having founded JBoss Group, a commercial entity behind JBoss I relate to many of the points.

But somehow the thinking is backwards still, thinking with old filters. One of the fundamental flaws of business in open source is that you give away your core competency.

But then OSS existed before companies tried to grow on its ground (Linux) and very succesful service companies existed independently of Open Source (EDS). So there must be a middle ground.

I believe part of the problem is that is that business folks out there (mostly VCs, I have met my share of arrogance back in the good ol days of the valley, confusion!) well VCs try to apply the old model of company building on the new way of producing software. It doesn't work. Open Source CANNOT support fat and overhead and corporate structures, just because IT CAN'T.

My (small) company is profitable and we are growing but I clearly see that I cannot AND SHOULD NOT grow with employees, just not flexible enough. As research on business plans goes, I understand that JBoss even though it is in the very rich field of enterprise software (and there is a lot of service), well JBoss for all its success cannot support a massive company right now. And again it is probably not the right structure ANYWAY. VCs got it wrong, most business men are scratching their heads, we at JBoss Group are trying, trying hard. Can't say we got it, we don't, but like many others in open source we make a living.

We offer many services around our free product are thinking about subscriptions and paying for information. The product is free, the service is not. The information is not (documentation, help, support, training (plug: http://www.jboss.org)).

Training is our biggest gig, people want to meet the developers of the framework. Also I don't think this would work with "GUI" frameworks. Just not enough customization to go by. If it is hard in the J2EE field, I can imagine how much harder it is in other fields.

Had I taken VC money (not that it was offered) or had I hired anybody left and right with borrowed money (what VC money is in the first place), well I WOULD BE DEAD TODAY.

It's a bitch out there, but I for one still believe, believe strong, we'll get it

marcf

Article equates success with $$$

[mactari]

NEWFLASH! Open source projects aren't making money when commercial ventures aren't making money, therefore open source is fading!

The author of the article referenced here takes examples like VA Linux and says, "See, open source is on the way out." The point should be that times were so wild for a while there you could offer Free[dom] software and *still* make money.

Quoting a quote from the article:
"The development model of open-source software is wonderful. But let's not confuse a development model with a business model. Basic business principles were forgotten by some," said Turbolinux Chief Executive Ly-Huong Pham.
[end quote]

Mistaking open-source for a business model is exactly what this article does. The fact that open-source companies are struggling is not a good indicator that open source is "fading". That's like measuring the well-being of the Catholic Church by how much the Pope makes each year, after taxes, of course. *sigh*

What about education?

[jefferson]

The articles only talk about Open Source in terms of companies trying to make money from it. But education, specifically university CS departments, are both huge users and huge resources for the open source community, and will help keep it afloat in hard times.

Not having to buy licenses for much or all of the software on their un*x workstations saves departments huge amounts of money. Moreover, they can build workstations from commodity components. This allows them to provide more machines for students, and simultaneously exposes huge numbers of CS undergrads and grad students to free software.

Also, the dot-com bubble bursting caused CS graduate school enrollments to swell enormously. Grad schools have traditionally been places where much free software is born, as student researchers put their work out there for everyone to see.

The problem is that only a few schools really do research in user interfaces and similar areas that will advance free software in the mainstream. But in a lot of less visible areas: like the core-OS, distributed computing, networking, scientific computing, high-performance graphics, AI and robotics, free software will continue to progress and improve through universities. In the process the universities will continue to graduate students who are used to working with free software, and who will wonder why they should buy licenses for software when so much is available for free.

Re:California dreaming...

[geomon]

I was laid off ten years ago (when I was 30) and went out and started a company. I was doing okay, but the bills were racking up fast and I needed to stem the cash flow problem. I took a job that I have held ever since.

Where would I be had I kept the company going?

Who knows?

It might have panned out beautifully.

Risk can be a good thing.

If these people are willing to take a short-term risk and keep coding, they may actually be in a better position in the long term.

If you think that certainty comes with age, talk to me again in 10 years.