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Can Open Source Companies Stay That Way?
JoeGee writes: "According to this article on ZD Net, more and more companies born from open source projects are beginning to move towards closed source products as a source of revenue. Version 5 of GFS will be closed source, and even SuSE's director of sales Holger Dyroff has a quote that seems to disparage the service model of revenue. The one company that refuses to change its operations is, surprisingly, Red Hat. Red Hat CTO Michael Tiemann says 'We believe the Red Hat brand stands for open-source.'" Yes, this is a dupe. Bad Tim! *whack*
My first experience with this model was when I was trying to get Corel Linux installed on my system.
I was not about to pay over the phone for support, and I found a few websites that did offer free messageboards.
If you think you're going to base your business off of service revenue, then you shouldn't make something and expect to sell/distribute exact copies of it.
I can see someone personalizing on a case by case business, and it would make sense to charge for the support then. People would basically have to come to you, or to someone else that can code at least.
It is too bad that so many companies are affected by this so much that they are going closed source and/or out of business.
I have 3656.9 Bogomips. How many Bogomips do you have?
Does moving towards Closed Source Products ensure every one will live happily ever after? Look at the number of Closed Source Product Companies that have shut shop. It is probably not the model, but the condition of the economy that is responsible for the poor performance.
In God I trust... on others I use dsniff.
I am aware of a number of medium sized software developers producing specialist systems for specific industries, who are considering 'going open' and charging solely for deployment and support. I come into contact with these systems pretty regularly through my work - and usually call the company to ifnd out what their plans are as much through noseyness as need.
They are considering it for a pretty simple reason - giving software away, and making it open so the client doesn't HAVE to buy your service agreement, gives the client great confidence in YOUR confidence in the quality of your service.
Most users of such systems understand that the service component of the charge is the 'expensive' part anyway. By going open source a company can relaunch, give away the software and offer 'as you need it' support at rates likely to undercut the opposition.
Open means customisable, which opens up another potential revenue stream to the producing company.
It also lets the pain in the arse customers do some modifications themselves. One or two of these can account for 60-90% of ongoing support effort for some of these companies.
You don't have to go 'open source' to follow this business model, but its a great shorthand, and a great differentiator. Anyone work in a firm thinking of following this route?
Why is that surprising? Red Hat have previously done the part-open/part-closed thing, and realised that it doesn't really help that much, and that well packaged all open source packages are just as marketable, cheaper to license and earn you good will in the community. Most of the other companies (SuSE excepted, as the YaST licensing was clearly designed to protect their market) are just ill-thought-out dotcom cash-ins struggling to cope with a dose of economic reality.
Athletic Scholarships to universities make as much sense as academic scholarships to sports teams.
How is this surprising? RedHat has always been one of the most staunch endorsers of Open Source/Free Software. Did anyone else watch the videos of the O'Reily OSS convention? The RedHat guy was amazing. And how about the comment posted yesterday (about RedHat willing to give Free Software to every school in the US) ? This doesn't surprise me at all, I don't see how it would surprise anyone.
I really can't believe he said that! If nobody (including presuambly SuSE) cared about profitability two years ago how can these people be serious about running a business?
I can only assume he was being somewhat facetious.
Comment removed based on user account deletion
without having to use a closed-source business model is to sell support and service contracts for the software. I work for a company that offers a free software product (it's closed source BTW). The customer has the option of downloading the software for free, or can purchase the same product and get live tech support (i.e. talk to me on the phone) for a year. I believe Red Hat is doing this already for Red Hat Linux. If Red Hat were to offer free support on every product that they gave away for free, they would not be in business for very long, and the only users of Red Hat Linux would be those who either work with the code or us anti-M$ /.ers who answer tech questions with "RTFM you moron!"
Why is it suprising that Red Hat should remain Free? They have always released all their source code and have cut paychecks for many an Open Source programmer. For them to remain steadfast in their policy is hardly suprising.
Personally, I don't use Red Hat Linux as I find it rather byzantine, but I have always held them in the highest regard when it comes to their ethical stance on Free software.
Since the last time this article was posted, I have worked out my comments a little more completely and posted them to Oomind. Basic summary: recession is bad for capitalist enterprises relying on OSS business models, but good for the community aspect of OSS.
Helping with organizational effectiveness is our job.
In the end there will probably be a small handful of business models that are really successful. But things are still evolving to quickly to really know what will work. Especially given the current 'irrational negativity' (in contrast to the 'irrational exuberance' of recent memory), it's too early to tell what will work and what won't.
RedHat is, in a way, in the same position as IBM. They've already established a strong reputation and consulting organization and don't need proprietary IP to compete. A small company with no track record can't successfully compete with RedHat.
The same isn't true for a lot of smaller Open Source companies. Small companies can spend a lot of time and money developing an Open Source product, and then find a competitor selling against them using the same product, but with no investment in R&D. The client can't tell the difference, so in the end it comes down to straight marketing, with no points given for actually having developed the product.
My company has faced this situation in the past and now we develop custom proprietary applications on top of an Open Source platform. We still believe in Open Source, but for now we need to keep some stuff to ourselves in order to compete effectively. I'm hopeful that over time we can swing back towards Free software - after all it does help to produce better software. Perhaps after we've had more time in the market and are a little more established. Or perhaps we'll open up certain pieces of the product while keeping more specialized functionality to ourselves. It's hard to say.
It is clear that Open Source/Free Software is here to stay and will take a big chunk of the software market, but individual participants have to find a formula that works.
It is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail. - Abraham Maslow
It's the developers you are paying. Why are we paying for software? It doesn't cost anything to copy software, just 5cents or so for the cd and however much for the printer manuals and box, if you even buy that part. We should be paying for developers time instead, this is where open source fits in.
Let's take an example. The Linux kernel is free, everyone can download it. So how do people make money off of it? Contracts. A company can hire out a person to write a kernel module for their new hardware. The developer gets paid by the hour to write the module and the module can be released open and free. Then later another company can hire someone else to make another module and add it to the kernel. All these contracts may be small, but they keep adding to one big project.
Now this only works with Free Open Source software that can be incrementally improved. A large game for end consumers won't work with this model. What company is going to pay a large group of developers to make a giant game and then release it for free? Maybe as Open Source, but not free.
So Open Source developers should get into contracting to work on open source projects that can help large companies. If a project is Open and Free, it can help everyone and save money for large companies as they don't have to pay for large software packages and then upgrades... and Open Source developers can still be paid.
Outdoor digital photography, mostly in New Engl
The point has been made many times here before, but bears repeating once again: Free Software and Open Source are two different things, regardless of what you might read on ZDnet.
- fr eedom.html
"Moving to a proprietary system also can spur ill will. Because of the freedoms afforded by the open-source movement, older versions of software may live on as competition. The Free Software Foundation, founded in 1984, continues to work to ensure open-source versions of programs live on as long as possible."
Not true. The Free Software Foundation was established to promote and support Free Software. They have nothing whatever to do with Open Source, and are careful to say so.
http://www.gnu.org/philosophy/philosophy.html
http://www.gnu.org/philosophy/free-software-for
The term "Open Source" is much abused, because it lacks sufficient precision. Everyone from authors that really want to encourage software freedom but do not always want to use the GPL, for entirely honest reasons (e.g. the BSD folks, Eric Raymond etc.), right down to parasites who care only about a quick buck (e.g. most of the shiny-suited salesmen who leaped briefly onto the Open Source bandwagon), call themselves part of the "Open Source movement". It's a conveniently huge umbrella under which even Microsoft might have fit, had they needed to. It was started by well-meaning people for the right reasons, but with a flawed charter, which may or may not be fixable at this point.
It's not necessary to agree with everything the FSF and Stallman have ever said to see that they are right about several things. One of these is that a genuinely Free Software license can be an effective way of reducing your risks, if someone decides to close part or all of the source of software that you or your business depend on.
Perhaps this is a necessary and inevitable shakeout, where we'll see a clarification of what the world wants from software freedom. It comes at a time when many different freedoms we take for granted are under attack, from many sides. In the case of software freedom, we will need to look hard at what we want, and what we're willing to do to defend it.
It was marked as troll because it dismissed a lot of very talented and experienced programmers as "geeks in their bedrooms," it made an inane analogy with farmers when we all know that software, unlike food, can be reproduced without cost and often requires maintenance, and it missed the whole point of Free software in general. If he had said, "Basing businesses around Open Source was a mass delusion," then he might have had a point and probably would not have gotten modded as a troll. But to most of us that have been using and contributing to Free software for years it has nothing to do with business, it is a community effort to build ourselves a computing environment that we control and can be happy with.
The vast majority of open source software available has been produced by individuals or not for profit groups. Look at most of the major projects, the Linux Kernel, GNOME, KDE etc. These are not funded by companies, and if all of the companies trying to make money off of open source were to disapear tommorow, they would carry on.
Sites like ZDNet are fundamentally biased towards thinking about the world in terms of companies and their success. This is how they have always worked and why they don't understand the os world.
Yes, corperate help can speed up developement of a system but it isn't critical.
The way I see it, there are three business models that can, and have worked, and two that won't.
The Red Hat way - Selling totally open systems with support and (shock!) manuals etc. Adding something to a fundamentally free product.
The IBM way - use free software as a base for your proprietory products. Why make your own UNIX when there is a free one. Mabey give developement back to the community.
The QT way - Create a product that people have to pay for if they make money out of it, but is free if they don't
The VALinux way - This is just another dot com and isn't really about open source, they just work off the open source community. The sourceforge model is broken in the same way as...
The sistina way - Provide a product that is both open and closed source. This will fork. Unless the closed version is a long way ahead of the open version people will not pay serious money for it. GFS is not protected by the GPL in the same way as QT. I could package GFS (gpl version) with a closed source product and sell it, I can't use QT in closed source without paying.
Of these, only the first three will work. Red Hat does not depend on a massive in house development effort to produce its product (unlike sistena). IBM and QT are both profitable companies. IBM is using Linux and Apache to reduce costs, and gives a little back in return, especially where specialist development is needed, but again it does not involve a major (relative) developement effort. Trolltech makes money, but gives its product away to people who do not make any money out of it, thus increasing its visibility. I hadn't heard of QT before KDE came about.
VA Linux is just a web publisher like any other. Sistina is fighting a loosing battle against its own technology. Once something is GPL'd you can't unGPL it.
Whatever ZDNet says. Open Source will continue for the same reasons that it got started in the first place, because people enjoy writing software and creating and sharing something, and mabey for the kudos. These are the same reasons that I want to start my own project (a developent env for Prolog), not for the money, but because I enjoy it, and it would be an interesting challange. OS has never been about the money. If it had been, GNU would not exist, nor Linux, nor any of the other major components of the OS panthion (*BSD etc).
End sermon
Paul Leader
I find the main problem with OS (Open Source) companies is that they tring to make money off of service for their product. While that is great when people have a lot of extra money but in a tight echonomy people will try to find less expensive means of support. While other companies like the one I work in. Although their is some OS development it main focus is on Suporting a companies infastructure.So basicly we give away our software because it helps our jobs but our revenu is created by actually supporting the companies computers ,Cisco, Linux, Solaris and NT systems and make them talk to each other and make sure that their network is secure, and they are getting maximum effiency out of their investment. OS development is only a small portion of our jobs but it exists and it works. but OS software works better as a form of advertising gimic (cringe) then as an actuall product.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
The point isn't whether Open Source companies can stay Open Source or not. The companies could all go bankrupt and it wouldn't stop Open Source. Before it had a catchy name, Open Source was just people writing programs that they wanted for their own purposes, and sharing them with other people. The loss of a few trendy business models won't change that.
In fact, it might actually help Open Source in general by sweeping out all the cruft, just like the current slump is cleaning up the dot-com fad. The people who are left will be the ones that develop Open Source software because they just care about having the software, not because they want to capitalize on a freely available army of developers.
Before, developers (or their companies) wouldn't openly release things that they felt really created a competitive edge. (Non-software companies didn't try to sell such systems either. They kept the advantage for themselves.) Now, these Open Source companies are trying to make a profit from creating software that, by definition, is their competitive edge. And they want to release all the source? Not likely. I don't want to sound like one of those people who yammer about how Open Source advocates shouldn't want everything for free, but it doesn't surprise me that these companies are dropping off and selling out. In the end, it doesn't really matter- the heart of Open Source exists outside of these companies.
--WH--
Lets use an example of why I think things are going wrong.
Supplier A "gives" software away and sells support.
When times are good customers pay for the support, well because they can afford it. When times are bad, people cut overheads, one overhead that could be ripe for major trimming is outside IT support. Now if a customer buys a new PC, or needs the software upgraded then they can do it themselves. Supplier A loses out on the support contract, because its argued they are not needed.
Supplier B sells software and support
Supplier B charges people for the software & for support. When times are good people will be convinced to pay for both, when they are bad they cut support. Now if someone buys a new PC, or needs the software upgraded they have to pay Supplier B not only for the software, but also for the cost of installing/updateing the software.
try to make ends meet, you're a slave to money, then you die
Why can't these guys see that the nature of the software industry is changing?
Let me spell it out:
If you have a software product which is very widely used, there is no business model that will be highly profitable in the longer term.
The nature of the IT industry is changing due to the Internet and the web. These changes may take a long time, perhaps 20, 30, 40 years. Unless draconian progress-halting laws are passed, the Internet is going to completely screw the 'old' software company business model.
The invention of new processes during the industrial revolution lead to the death of many industries and professions. The "Open source development model" is a new process for developing software. It has been brought about by the fact that software can now be copied and distributed at virtually zero cost, and multiple individuals from multiple companies and other organised groups from around the world can work simultaneously on projects of mutual benefit. So, if you hope to make a long term business based on selling a widely used software product, forget it.
They can't.If you make big modifications to, say, Qt, and want them to be part of the official Qt distribution, I'm sure Trolltech will ask you to give them the permission to include it in their proprietary version.
Naturally you can refuse, in which case your modifications will not become part of the Qt distribution, effectively forking the code base. And you're perfectly within your rights to do so, but you will have an uphill battle trying to gain acceptance for the forked version, which you probably won't be allowed to call Qt (a restriction which GPL allows - simply put, it's a different product, and you may not market it as Trolltech's Qt using their trademark). And even for big open source projects it's often good to be based on a well-known toolkit a company has made famous by marketing rather than rather unknown MyFoobarToolkitFork 0.9beta with a very uncertain future.
Read the YaST license sometime instead of spouting off something you picked up here.
Only this licence gives the Licensee the right to use reproduce, to
distribute or to amend YaST or works derived from it.
1. Usage
YaST and SuSE Linux may be used for personal and commercial
purposes if the copyright and licence terms of the installed packages
and programmes are observed. The use of YaST, even if a modified
version is used, does NOT exempt in particular the Licensee from the
duty to take due care with regard to the licence terms of the
packages or programmes installed through YaST or works based on it.
2. Processing
All programmes derived from YaST and all works derived from it in full
or parts thereof are to be filled on the opening screen with the clear
information "Modified Version". Moreover the operator give his name on
the opening screen, stating that SuSE GmbH is not providing any
support for the "Modified Version" and is excluded from any liability
whatsoever. Every amendment to the sources which are not conducted by
SuSE GmbH are deemed to be a "Modified Version". The Licensee is
entitled to change his copy from the sources of YaST, whereby a work
based on the YaST programme is created, provided that the following
conditions are satisfied.
a) Every amendment must have a note in the source with date and
operator. The amended sources must be made available for the user
in accordance with section 3) together with the unamended licence.
b) The Licensee is obliged to make all work distributed by him which
is derived as a whole or in part from YaST or parts of YaST to
third parties as a whole under the terms of this licence without
royalties.
c) The amendment of this licence by a Licensee, even in part, is
forbidden.
SuSE GmbH reserves the right to accept parts or all amendments of
a modified version of YaST into the official version of YaST free of
charge. The Licensee has no bearing on this.
So you can do what you want, short of charging royalties, but have to make it clear that the version of YaST you distribute is modified.
SuSE also contributes much to XFree86, ReiserFS and ALSA.
Sure, they don't distribute ISO's but you *can* do a network install via FTP even though it's a well kept secret.
If you don't care for SuSE, that's cool, but next time do a little research.
Good points made in regards to this comment.
/. as much as I used to be.
To me their CTO's statement was surprising because RedHat has always seemed to be viewed as being the Microsoft of the Linux world. That they would turn and embrace the community in spite of some of the community's resentments towards them (to me) demonstrates a remarkable (and sensible) dedication to principle. I am very happy these people are making money off of Linux.
In retrospect you and other posters are correct, RedHat have no need to change their model to a more commercially-oriented approach because they have always been commercially-oriented. I hadn't throught about it that way, and had I done so I would have chosen different wording.
As for the dupe, that's not Timothy's fault but mine for not being around on
Get off my virtual lawn, you damned virtual kids!
Ahh, nothing like the bastion of hardline journalism that is ZDNet...
According to this article on ZD Net , more and more companies born from open source projects are beginning to move towards closed source products as a source of revenue. Version 5 of GFS will be closed source, and even SuSE's director of sales Holger Dyroff has a quote that seems to disparage the service model of revenue.
And plenty of companies born from closed source software are beginning to move towards open source. What a world!
Any business model that sells open source software alone is flawed. If open source companies can't manage to make money, that's their problem. Business isn't easy, people.
Why doesn't ZDNet trumpet the demise of closed source? You can find hundreds of companies that are going out of business right now that sell nothing but proprietary software.
Open source is doing better than ever. And the companies that claim to be "it" are only a small percentage of the business generated around open source in general.
Everyone likes to bash RedHat, but how many other tech companies do you see out there which are alive and doing as well as RedHat is? Thats right, almost none.
They know their responsibilities, they know how to provide services and support, while still giving back to the community.
Have you looked at how much RedHat has contributed back? Last time I checked, they host projects like cygwin, gdb, etc and have turned important apps like anaconda and even rpm (as much as people say it sucks, but it is the most popular package manager out there) back into the community.
Brielle
Fah, that's ridiculous. The truly dangerous license is the BSD style licenses. There is no charging money for BSD code, and there is nothing to stop your competitors from grabbing your BSDed source, adding some proprietary extensions and selling your software. That's why Microsoft likes the BSD license and hates the GPL. Even more telling is the fact that the very products that you mention (Mozilla and QT) are both available under the GPL. The trick is maintaining yourself as sole copyright owner so that you can also release the software under a commercial license.
If other developers are likely to contribute then the trick is to force these outside contributors to your source code base to sign over their copyrights to you before their code can be accepted. The funny thing is that it isn't the commercial software houses that started this trend. The FSF has been doing it for years so that they would be the clear copyright holder in case of copyright infringement (a very wise move). It used to be that you couldn't be a GNU maintainer unless you were willing to sign (with ink and pen in front of witnesses) your code over to the FSF.
So QT, OpenOffice, Mozilla, MySQL and other simply do exactly the same thing, and then they can release the source under the GPL and any other license that they wish. This allows them to sell commercial licenses, and prevents their competitors from using their source code against them.
A prime example is the MySQL/NuSphere debacle. When all is said and done MySQL is going to be able to sell proprietary licenses for use in commercial products, and NuSphere is going to be forced to release the source code on improvements they make. NuSphere's version will forever be GPL tainted, and will basically kill it for use in commercial products. If you are MySQL (the originators of the code) this is a good thing. If you happen to be NuSphere, however, it is a bad thing. This is why so many developers say that the BSD license is business friendly. What they really mean is that the BSD is friendly to companies that want to scoop up your hard work and use it to put you out of business.
Take a look at the list of publically traded software companies, ordered by market cap. What do you see? Microsoft's market cap is almost equal to the market caps of all the other software companies combined. Oracle is way behind with over 1/10 of the software market. Most of the top of the list is B2B.
The moral of the story is that consumer software (other than maybe games) does not make money. It doesn't matter if your product is open, closed, shareware, freeware, whatever, because copyright law is pretty much universally ignored for consumer software.
At least explicitly making the source open gives you some good PR, and forces management to come up with a workable business model which doesn't presume consumers paying for software, which just isn't going to happen.
ok then your [sic] infringing on my copyright! Could you as [sic] me next time before STEALING my comments for your own?
has a good advantage and slight edge based on our old freind called: "Brand Name Recognition". (Plus it does not hurt that they employee some of the doers rather than the thinkers....)
I have to chuckle inside when I hear of a company going belly up because they can't make money from free software. It's like the California gold rush -- they think just because they made the trip to California -- they deserve riches and fame.....But in this business, riches and fame do not come from association -- they come from talent, the ability to do more with less, and some luck. I mean look at the cash Eazel went through ($11 Million Plus) just to try to get a file manager off the ground......Note to the masses: File Managers are best developed in the basement in the evening with a six pack of Dr. Pepper, an itch to scratch, and no overhead. How much VC did Linus have to work with when he got the whole ball rolling? -- I think I recall he did it because he wanted it....He did not see dollars and fast cars coming out of it....I think that the "hobbyist" business model is the best way to go here folks.
(+1 Funny) only if I laugh out loud.
You are mistaken. The triple licenses are just to get a wider audience.
If you have some GPL software, you cannot revoke the rights you have granted others under GPL; that is true.
But if you are the copyright holder, you can ABSOLUTELY stop issuing new versions under GPL.
This is where it gets tricky you see.. if I start an OSS project, and people start submitting patches to me... does that mean they are now co-authors, or have they given me said patches to include in my software? I believe in most cases, I am still the sole copyright holder, I bet. I forget where, but this has happened before, where a company has taken many changes from people, improved their product, then went back to closed source (of course the OSS version is still available.. they can't revoke that). But they did, effectively, steal the work of others.
The biggest problem with his statements is that he completely ignores why successful OSS projects are successful. If it was the bubble, then OSS would be dead. OSS was around long before and and will be around long after the "bubble". There are plenty of examples of OSS projects which are succeeding despite this "mass-delusion" -> Apache, Tomcat, Linux, MySQL, PostGRES...
...a form of collective geek madness. My favorite, a dismissal of success under the ambiguous "Those silly geeks". On the contrary, history will look back on it as a maturation of software development. OSS projects which serve useful puposes have, since the beginning of the "movement", been successful. Why? Because of they ARE useful and widely available without increased and wasteful overhead expense on "support" and "maintenance" which go largely unused...
The fallacy being spread is that OSS projects cannot, in his words organize and focus enormous human and financial resources on creating and deploying software technology sustained over the long term has been proven false over the lifespan of Linux. To say that great finances are critical also ignores aforementioned success.
A great product sells itself. Otherwise OSS really would be out the door.
Here's where the real difference lies - the strength big players is not (and does not need to be) in their coding,. MS has proven this to be true. But the rest of his statement blurs why popular OSS projects are so - they are so because they have been able to produce high-quality products. Last I checked, coding was pretty key here, as is focus and efficient utilization of resources. Can they maintain it over the long term? Linux is 10 uears old, Apache is up there, BSD...
Computer Science is Applied Philosophy
With Sistina, you have that sneakiness involved. People don't like feeling like they've been had- and what Sistina pulled tends to make people feel like they've been had. This feeling tends to make people take the GPL version and transcend the closed version- if this happens, there's little reason for buying the closed one (Certification? Anyone can go through and audit the code and run bounds checkers over it, if they've got time and money- then sell the certified copy plus consulting services, etc.).
In the case of Ghostscript, they were up-front about what they were about from the get-go and haven't made people feel like they were had. In the case of Sistina and GFS, we have the reverse and people are peeved about it.
I don't think Sistina's going to last with the current course of actions.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
*ouch!!!*
;-)
What did I do?! Okay, okay, so I took a three hour lunchbreak when I should have been at work, and I met up with a female friend which my (paranoid) girlfirend probably wouldn't aprove of, but hey, I'm only human!
Cheers,
Tim C
PS Yes, I know this is Offtopic...
It's official. Most of you are morons.
If several products are widely used, people will expect them come with a box
This is the old way of doing things. I doubt that in ten years time anyone will buy software 'in a box'.
Well, we've developed a thick skin over the years...
But our core principles have not changed. Back when Matthew Szulik first came on board, I was present in a meeting about company values. We were all kind of nervous to see whether our new boss "got it". One of the values people came up with was "no matter how big we get, we never lose our soul". When that one was read, Matthew just looked up, smiled a little smile, and gave a nod in agreement. Don't worry -- the people in charge here get it...
Of course, we've grown very rapidly. And we're finding that being a bigger company means you can't be as nimble as when the entire company could go out to lunch in two cars.
So if we screw up, please let us know -- we want to do the right thing while still making a living...
Ed
Actually, the standard business plan was:
Produce a sexy business plan > IPO > Sell stock to the unwitting public.
Many venture capitalists didn't fund businesses with the expectation of them ever making a profit. They funded businesses with the expectation of them going public and making a killing on the stock market. Many of these businesses were never built to be profitable. They were built to look good to the unwary investor. Now that the bubble has burst and investors are wary, only the profitable will survive.
The sick thing is that most people didn't care about the long-term viability of companies like VA Linux so long as they had an "exit strategy" for getting their money out (usually selling stock to the public). Now that the carnage has commenced, the people being burned are either idealists who really want to make the company work or greedy bastards that didn't get out in time.
The law of Wall Street: The bulls survive and the bears survive, but the pigs get eaten.
This
ianal, I've just been over this topic a lot...
Hey, it says 'life liberty and the pursuit of happiness', not 'consumption, restricting other people, and the pursuit of money', dig it? ;)
That's the main reason I keep resisting buying another copy of SuSE. But I find it sufficient.
.
I think we've pushed this "anyone can grow up to be president" thing too far.
It's more akin to 'assembling a tool kit that can be guaranteed to be there when needed, at no extra expense or rental expense or repossession'
What you DO WITH the tool kit is what earns you money. And having ownership and complete control over your tools (even if you got them from someone else) is your insurance against being extorted.
I quite agree that extortion is an effective 'business model', but getting immunized against _yourself_ getting extorted is a vital PART of a business model, and this you seem unable to see.
Clearly if you are offering something for free, then you shouldn't be surprised if some of the people who use it are cash-starved (or even just cheap). This had better be factored into your business plan.
... it might free them of maintenance costs [use the GPL here!]). You might like to have the right to reuse the code, so you could give them a cut rate if an Open Source license were used (they might release the code to you, with the proviso that if you reused it you would need to make the changes available back to them ... GPL would simplify the bookkeeping [with them as the original owner, so they could decide to release it, or a modified version of it, under any license that they choose]).
If someone downloads software from you, they have cost you
1) the price of a download, and
2) the loss of the chance that they might have purchased it (but some of those will purchase it if they like it).
If they get support from elsewhere, this isn't a cost to you. Your loss is that they didn't buy it from you.
Now adding these together, the total cost if someone is cash-starved or cheap, is the price of a download. This cost needs to be a part of your business plan.
The real question is, why should anyone purchase from you? That's the question that needs to be answered. There are 4-5 major distributions (of Linux), with slightly different flavors, which satisfy the answer "because it's easier". And there are numerous minor ones that may make enough to keep afloat, but probably won't be able to afford to become major. Several of these probably survive on being consultants. But that's Linux.
Text editors?(As an example of minor applications): One person can write a decent text editor. This may be a personal ad: "This is an example of my skills", but it's unlikely to be a major financial prop of anyone. A few companies live in this niche already, and there are many free examples, so it's probably full. But if you write a good one, you can probably give it away as free (the costs are sunk) advertising.
Larger applications? Either you are working as a part of some group, or you were hired. If you were hired, the company may not care whether or not the source code is given to others (or they may prefer it
Lots of special cases. Not many general ones. The real point is that Free Software isn't usually about making money, or even saving money. It's usually cost neutral, or a hobby activity. But in special circumstances, it can make money. Open Source is a bit friendlier to making money, but sometimes doesn't work as well.
However, Free Software can help you *SAVE* money. Used as components, it can reduce your development expenses. This is where GPL shines. And if it becomes popular, then your maintenance costs can descend to nearly nothing (but don't count on this one!)
So generally the only people who make money off Free Software are the consultants and the end users. But there are special case exceptions. The problem is, most software companies tend to think of themselves as being one of those "special exceptions", but they are rare.
I think we've pushed this "anyone can grow up to be president" thing too far.
I am very happy these people are making money off of Linux.
/. about particular open source companies being profitable almost never seem to get corrected, even when many of the readers know better? Is the profitability falsehood one that has been designated as socially acceptable?
They're not. Red Hat is losing money on Linux, and has been for years. Check out their profile: "For the six months ended 8/31/01, revenues fell 1% to $46.7 million. Net loss totaled $82.9 million, up from $37.4 million." Their loss more than doubled from the previous six months, and their loss was 177% of their revenues. Revenues are declining, though only slightly. Funny way to make money if you ask me.
Why is it that statements on
Tim
I have to reply to this. There are distinct advantages to having software in a box, and the big one is that when your machine goes down, you can always reinstall from your original media, with your original serial numbers easily found (if needed). This is especially relevant for me, as I must now reinstall my W2K partition after it took a nosedive, and I'm still gathering up all the packages, serials, etc, two days later.
This is made all the more difficult by the lack of a permanent medium for these programs, as many of them were downloaded (and one of them was $250 for the privilege of downloading and using it). Something for which I definitely wish I had a box.
GPL made simple: What was my stuff is now our stuff. If you improve our stuff, please keep it our stuff.
I never said they are making a profit ... Are they making money? They must be -- they are nearing breakeven, and expect to reach profitability (I believe) in 2002. Compared to most of the companies born of the dotcom era, especially during a time of shrinking global economies, the fact that Redhat are able to follow their plan and meet their projected growth is impressive.
I never said that VA Whatever-they-are-at-the-moment and most of the other companies that rely on Open Source are making profits.
Get off my virtual lawn, you damned virtual kids!
I never said they are making a profit ... Are they making money?
Um, er, what's the difference again? Making revenues is not particularly useful if they don't exceed your costs of doing business. There are definitely open source companies making revenues, but "making money" in its usual usage means that one is making more money than one is spending, and Red Hat is spending more than it is bringing in.
(Yeah, I know that's an oversimplification, but I don't feel like going into the whole issue of goodwill and intangible losses right now. Not all the money Red Hat is losing is money it is spending, technically speaking. But by GAAP it is losing money. This may change soon, or it may not.)
Tim
My point would be more clearly stated that RedHat is one of the few companies born of the dotcom era that has a model that looks to actually succeed in making it profitable?
Get off my virtual lawn, you damned virtual kids!