Open Source Forming a Dot Com Bubble?

sebFlyte writes "ZDNet is running an interesting look at the sudden upswing of investment in open source products and the ensuing debate as to whether the open source business model has given us a bubble (akin to the dot-com bubble) that is about to burst. The counter-argument is that the increase in investment is just the natural progression of a robust business model whose time has come. One point that few people, whatever their viewpoint, could disagree with is that the key to a financially successful open source project rests with the community, rather than just the technology."

Comments

Opensource isn't the problem...

[Nos.]

Lets face it, if venture capitalists are investing money in companies because of buzz words (is open source a buzz word now?), then the problem isn't with the product, but with the investors. Linux, Apache, and countless other OSS didn't start with a big investment by venture capitalists. It was started by a person or group that recognized and need and thought they could fill it. OSS will live on, with or without VC.

Re:Opensource isn't the problem...

[Karma_fucker_sucker]

I don't disagree with you because I don't have ESP and can't read the VCs minds. But I can tell you what their strategy is and why it may seem that there's a bubble forming.

VCs (and many entrepreneurs) use the law of large numbers. They'll sift through a hundred biz ideas just to get one that they'll invest money. They'll keep investing in a bunch of businesses with the hopes that one will hit really big. That's why when you get a VC contract, basically, they'll demand some percentage of return (like 40%+/yr compounded). Which means, even if the business is sold for a couple of million, the original entrepreneur (the one with the idea) will get nothing just so that the VC firm can get some sort of return that approaches their required return.

Re:Opensource isn't the problem...

[dslauson]

I agree with you that Open Source will live on regardless of money invested by venture capitalists. The question is, at what level. Hobbyists? Tinkerers?

Or can it exist as a robust business model that can compete with commercial competitors?

I've been seeing more and more paid programming positions advertised on my campus' job site for open source projects. As cool as I think it would be to take a job like this when I get out of school, I don't want to go somewhere where the floor will fall out from underneath me.

Anyway, I'm not trying to predict doom for OSS, I'm just saying that this is a valid discussion, and I'm curious to hear what people have to say.

AJAX

[iMaple]

Ajax , the biggest bubbles any detergent can produce :)

who pays for this stuff?

[boxlight]

I use lots of open source software, Apache Tomcat, JBoss, a bunch of Eclipse plug-ins. In fact, before I tackle most tasks I check to see if there's a free open-source project that has already solved the hard problems.

I'm really happy that these projects exists because being able to stand on their shoulders make me a much more productive and a better programmer.

But I have often wondered -- who are these people that pay (in money or time) to develop all this stuff? I'm really glad they do, but I hope all the "funding" doesn't all dry up someday. I'd have to do all that work myself!!

boxlight

Here's the difference

[bitspotter]

There may well be a bubble forming. That's business.

The difference is this: At the end of the dotcom bubble burst, there was a lot of proprietary code floating around, locked up in asset portfolios that would never see the light of day. At the end of an alleged OSS bubble, there will be a lot of open source code floating around *in the open*, where people can actually make use of it and build upon it, regardless of the solvency of the company that originally authored or contributed to it.

This may well actually give the supposed "bubble" more floating power, since one company that might not be able to properly handle an open source project might have their fumbles recovered by another company that can. This could happen immediately, rather than waiting for the former company's death march to complete, drying up the VC and selling off the company's copyrights to the code.

Re:I'm gonna have to disagree...

[Red Flayer]

"Not everything that increases in value like this is necessarily a bubble"

Actually, an increase in value doesn't make a bubble -- an increase in invested capital without a corresponding increase in value is what creates a bubble.

The second part of creating a bubble is speculation; people investing in something not because of value, but because of expected ROI due to speculation. I know (well, believe) that the P/E ratio of Google was too high for me to get a good return on my investment through long-term investing -- but I also knew that the perceived value of Google shares would net me a good ROI when I sold. I wasn't investing in Google; I was investing in the public perception of Google as a good investment.

Re:DRM

[salesgeek]

I think one of the arguments for an open source "burst" would be the reluctance of the open source mentality to accept things such as DRM. While I am very much with the typical slashdot mindset that thinks of DRM as bunch of BS, the corporate world is still heading in that direction.

DRM: Let's all erase nearly 10 years of incredible growth by closing and locking things down. DRM has ALWAYS been around. From the lousy copy protected floppies of the 80s to the parallel port dongles of the 90s to todays public key technology. It doesn't matter - it's all the same, and it is and always has been an utter and complete failure. A failure of customer service, a technical failure, a financial failure and ultimately a corporate failure. And despite everyone's best efforts, DRM will fail again.

There's no such thing as an open source bubble, BTW. Why? Because open source software, or at least the free variety, doesn't die when it's creator dies. What would happen if Mozilla.org, Apache.org, the MySQL guys went belly up or blew u Hint - development would slow for a while and would fork and then the strongest tines of the fork would continue. Open source software exists outside corporate control, and that is something that open source advocates need to explain clearly. An open source company is not about building a widget and selling it like proprietary software. It's about helping customers apply technology to their business exactly the way it should be instead of adapting to what someone working out of your industry, for a technology company thinks you should do.

Open source is not a business model

[jhoger]

FOSS is not a business model. It is way of licensing code that protects the user's ability to user and modify the software. It can also be seen as a vast body of resuable code for projects with compatible licenses. In the case of GNU/Linux it is also a software stack with $0 licensing fees, so conceivably it only costs as much as it takes to get it installed, maintain it, and extend it for a given business's purposes.

Paid support and customization of software IS a business model. It's called "software contracting."

That business model is well understood. It can be profitable, and can sustain most salaried engineers at a rate ABOVE their current salary, but not usually as profitable on a large scale as a software product company can be, because as part of the bargain we choose not to leverage the amazing power of government-granted monopoly profits.

However, given the success of the FOSS development model I wouldn't give mass-market proprietary software more than another 20 years unless the government(s) intervene to stop it, or consumers buy into locked-down platforms that will only run signed code.

From the programmer point of view it doesn't really matter. We seem to get paid the same whether our customer can make billions off of the bits we create, or only gets to charge a markup on our rate. Weird, huh? ;-)

-- John.