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How Open Source Drives Down Startup Costs
prostoalex writes "Reuters Plugged In article (usually syndicated to your local paper's Technology section) talks about the real impact of open source in the technology world -- cutting down startup costs for other developers. New ventures are coming out, where the startup costs range in five-digit numbers, not seven-digit figures, where venture capital financing would be required. The article talks about Project for Open Source Media, Blogger.com, Odeo and Asterisk telephone system."
I have been involved in several early-stage ventures since the bust and completely agree with the article. With open source software and equipment from ebay, $50k goes a very long way.
Actually making money with your product is still as hard as ever, but the financial risk associated with technology ventures has been greatly reduced.
"How Open Source Drives Down Startup Costs"
So were's my Open Source Broadband?
A lot of people (*cough*microsoft*cough*) would have you know that OSS software "costs more in the end" or something. I personally disagree, but yes- it's a duh type of thing that "free is less money than costly".
- dshaw
1) Programmer willing to work for percentage.
2) Midrange server on Ebay - $2000.
3) Apache/PHP/PostgreSQL - free
4) Electricity - Damn cheap...
5) Promotion expenses - $XX,000
Yep. I'd agree that startups now can be mighty cheap!
I have no problem with your religion until you decide it's reason to deprive others of the truth.
One thing I've learned over the years is that when you start any type of business you can't just go out and get desks, chairs and other equipment you'll never use if you aren't profitable.
It's almost always a good idea to start a business on a shoestring. Most businesses who fail before they start do so because they spent all of their capital on things you don't need or things you can rent or borrow.
Open source makes sense in this repect. Instead of starting with MS SQL server for example, start with PostgreSQL or your preferred free alternative. Migrate if you must later; but why spend top dollar on something that may never get paid for?
Get your Unix fortune now!
If you think of Google, their infrastructure runs on top of Linux on cheap commodity hardware. How much would it cost them to do what they do if they were forced to run on proprietary hardware and software? For example Sun on HP in 80s or early 90s? Not to mention how much Windows server licenses they would have needed if they went that route.
Another instance is Yahoo. They use a hodge podge of languages and databases for various parts of their online empire. There seems to be a trend towards open source solutions laterly, for example PHP and MySQL.
Yes, open source does save a lot. Not only now, but ever since the GNU C compiler system came out.
2bits.com, Inc: Drupal, WordPress, and LAMP performance tuning.
Wow, maybe the training should be inheriently valuable in and of itself. Then your employer will see it as an investment. I always found that funny. Consider admin people vs development people. Admin dudes are sent to every course under the sun to get certified. It's just considered standard practice. Oh, we want to use Cisco routers? Gunna need at least 2 admins with Cisco certification. Now think about programmers. Each one is expected to have his own specialties which he brings to the job with him. There's no sending them off to be trained as the need arises. Oh, the customer has required that we develop this next application in Java. Damn, better hire some more Java people and lay off some of the C# coders.
How we know is more important than what we know.
The tools need to be the best you can get for the price. Sometimes that may mean foregoing open source software, at others it means using it. What I'd like to see is a survey which compares the effectiveness of well-designed open source and closed source IT systems in business use. Take the top 5% of them that can be found and then see which is the most reliable, how much they cost and what is involved in keeping them working.
Click here or a puppy gets stomped!
One thing you need to watch out for is that you really own your own IP when you are working with GPL code. GPL is great, but it can make any code you create on top of it open source if you are not careful. If you are a CEO of a software startup that is looking to sell to a larger company and make your millions, then the IP issues around the GPL can literally be the difference between taking home millions and having a company with zero defensible IP. GPL code use can be the king of all deal killers if you are not VERY careful about how you use it. The GPL does a great job of what is designed to do, making sure that everyone who extends GPL code gives everyone else access to their code too. Just make sure that this is really what you want to do when you start.
If you can get a company going for five figures, you have my respect. I am trying to get a startup going and after doing alot of analysis, the cheapest I think I can do it is for just over 7.
Then maybe:
1) You have a sucky idea. The best ideas are actually little more than a logical culmination of pre-existing forces, and really don't require the loss of a kidney to bring to fruition.
2) You have lousy marketing. You should be able to cover much of your initial cost in the first sale or two. If you can't, you might see #1 above, or maybe #5 below.
3) You lost the idea of a "partnership". Typically, you have at least two guys: a guy with the marketing skills, and a guy with the tech delivery skills. There may be a third/fourth partner depending on the situation. These people get together and get paid with a percentage of the company. It's typical to moonlight to provide food money during the startup phase. If you're lucky, your "day job" complements your new business.
4) You are fatally unrealistic in your cost analysis, see my earlier post about card tables. I just commented on managing costs a few minutes ago...
5) Lastly, maybe your idea is too big in scope. Start with something a bit smaller, or maybe just part of your idea, and get it working and profitable before biting the whole banana.
I've started a number of businesses - some I've run quite well, some have run straight into the ground. Be cheap, work hard, and focus on turning a profit ASAP. If it takes very long to get to profitability, from where I stand, you're walking the wrong road.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
It's more than just price, it's also the functionality you get. Open source fuels new businesses.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
> Surely there are many companies that are using
> the open source code out there, putting it
> into their systems and then not releasing
> the fixes/changes back into the open domain.
> (I know of several companies doing that). So
> yeah, you can make money that way.. but it's
> not exactly following the GPL.
you only have to release your changes IF you re-distribute the GPL code in any way. if you only use it internally on your own machines, there is no requirement to release your changes.
that *IS* following the GPL. exactly.
obviously, if your product is software then you will have to release your changes and distribute full source code under the GPL along with the binaries....but if the software is just infrastructure used by your business, then there is no conflict, and no problem - the GPL software that you use is just a cheaper, more flexible tool that you can freely adapt to your own needs. you can optionally choose to contribute your changes "upstream" but you don't have to (it is often wise to do so, though - it avoids re-implementation costs when there is a new version of the upstream code, plus you might get the benefit of some improvements made by other people who use your changes. it's also a good way of steering the upstream project away from directions that are incompatible with your changes, or at least making sure that your needs/changes are taken into account).
- Linux over Windows will greatly reduce your startup costs, not just for your PCs but for your development kits as well. [...]
But if you're a software technology shop, it's not easy to base your company on a foundation that may be ripped out from under you and developed by a competitor who takes your source and repackages it under their brand.
What does this have to do with Linux versus Windows? You can write a closed-source app that runs on Linux, and it doesn't violate the GPL.Or did you mean open-source versus closed-source? But if you want your app to be closed-source, then of course you wouldn't use GPL'd libraries -- you'd use closed-source ones, or open-source ones that were released under LGPL or BSD. Otherwise you'd be the one ripping something out from under someone else.
And this is all assuming that a piece of software is the product you want to sell. Maybe you want to run an online retail store, or an online matchmaking service. Maybe you're just creating a business that happens to use computers.
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While the cost of hardware and software are coming down, people are becoming more important than ever. Great people set one company apart from another. If a business is too cheap on people they will get what they pay for.
Look at Google though.
It must of took, what, 3 years at least to even start making money with them. Now they have a market cap of over $40billion.
But yes, your advise is sound, but don't forget some of the best companies have been a complete gamble. Keeping costs low is always very important and if you can save $800 on your server setup with OSS, that could be the extra week than you need to survive in business and get that big contract.
IntechHosting - Free domain, 2GB, PHP, £4.95/$8.95
Being able to try things with little risk means that more things will get tried. This means more innovation and this is good for the economy. Innovation leads to growth and we all get a little richer.
This is not to say that large, well funded, companies do not innovate. They do. It's just that their innovations don't tend to be as radical as those of smaller, hungrier organizations. The small guys tend to specialize in disruptive innovations. It's those innovations that turn industry on its ear and increase our prosperity.
The latest guru on innovation is Clayton Christensen who has written a series of books on the subject. Two of them are "The Innovator's Dilemma" and "Seeing What's Next". Both are well written and understandable and give a clear picture of why small, innovative companies are very important to our continued prosperity.
One of the subjects in Christensen's latest book is open source in general and linux in particular. He shows that linux is disruptive and paints a bleak picture of Microsoft's future if they fail to cope with it.
I would theorize that lower startup costs mean more jobs, which is so straightforward it is almost not worth pointing out. Except for those who say the open source destroy jobs.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
Mostly irrelevant. Whether your sell widgets or software, you can use FOSS software to do stuff like have a website, track bugs and feedback, etc for free (more or less) - instead of spending money on Win2k3 Server, MS SQL, VS.Net 2k3, etc. Using GPL'd software wont encumber your product.
The Doormat
If you're not outraged, then you're not paying attention.
Hey, that's a great story. Thanks for sharing it.
But I have to point out, the 4-figure startup cost you cite is only the capital expense of your alpha phase. If you figure in what it cost you to live until Claris bought you, the value of Guy's contributions, and what Claris put in to make the product saleable, the number might seem more typical (that is the number required to bring the product to market). And let's give your wife credit for being a significant investor!
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
Nobody has gained more from open source than startups in India, China, and Brazil. With less available venture capital than in the US, they needed more than just low wages to launch a new venture, since M$ Windows and Office cost a *lot* there. Their software expenses used to compose a very big part of a startup's overhead, probably to the extent of prohibiting a lot of ventures from getting off the ground.
Open source to the rescue. Now with zero cost for software, overseas startups do not have to match US expenses in labor OR overhead. Expect the impact to be profound as soon as VCs realize how far their dollars can go there.
Want to form a high tech startup? Great. Go East young man.
Randy
Someone once said OSS was more about "code sharing" than "free software" But this obviously focuses on the secondary aspect of Open Source.
Also, this shows the maturity of a lot of Open Source projects. I wonder if any of the projects end up contributing back.