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Open Source Economics and Why IBM Is Winning
driehle writes "In an article published in IEEE Computer magazine I recently looked at the economics of open source. I argue that large system integrators will do best and that open source startups will keep struggling. For developers, open source creates independence and new career paths as committers, while non-committers will fall on hard times. The race is on!"
I came across Dirk Riehle's excellent article: "The Economic Motivation of Open Source Software: Stakeholder Perspectives" while reading the April issue of Computer on the train this morning. Thankfully, he's also put it online.
While there's certainly some truth in the example of how loyalties are shifting - and individuals might stay loyal to a project (or set of projects) across employers, just as IT professionals have always carried skillsets, language preferences, etc. across employers - I don't think this necessarily means more movement in this direction, for a few reasons:
1. Developers get involved in multiple projects. Core open source folks might start as contributors and become committers on a single project, but that is more a reflection of their interest in being involved than it is of their interest in that specific project - if the employment environment (quick Optaros plug here?) is explicitly supportive of that engagement across projects developers might discover new loyalty.
2. If the employer can uncover enough opportunities for developers to get paid to use their favorite project - for example, keep a developer busy working on Drupal based applications - they might accept the variety of new projects as compensation for the single employer. The joys of systems integration and consulting work is that if you change client projects frequently enough that it can be like changing jobs without all the paperwork.
3. How much of the whole "employees becoming 'free agents'" thing is really voluntary to begin with, at least on the IT side? Maybe a better way to look at this is to say that Open Source increases the level of portability of the knowledge an IT worker gains over time with any single employer, or decreases the barriers to leveraging that existing knowledge in a new firm.
Regardless it's a very good read for business stakeholders who struggle to understand why anyone wants to open source an in-house project or contribute to an existing open source project.
Please mod me only (+) Underrated or (-) Troll
Substitute restaurants, or retailers, and the situation is the same ... most smaller ones fold within 5 years, some extyablish a niche, some grow, and some get bought out.
This is so pre-dot-com and so obvious that its not even funny. What next: 2+2=4?
Whoever commits to OS projects is likely more involved in the whole process than an outsider who simply tries to skim off some of the profit. As a customer I'd rather spend my money on a company that is involved in committing to what I pay for. After all developers tend to know best what they have done so far.
Oops.. sorry, wrong link. Corrected here:
http://perens.com/Articles/Economic.html
If you keep throwing chairs, one day you'll break windows....
No, actually, I think Stallman is a good counter-balance to the 'earn money at all costs' types out there. His extremism balances out the other extreme and let's us normal people see both sides of the equation more clearly.
I may not like the man, and I may not like his zealotry, but when looked at as a piece of the whole, he needs to be there.
"If you make people think they're thinking, they'll love you; But if you really make them think, they'll hate you." - DM
I'm not too keen on Stallmans ongoing political agenda, but I cannot imagine an open source world without his keystone contributions.
His implementation of Lint (Splint) has reduced me to nervous wreck on more than one occasion, but it did improve my C coding skills.
About the only thing he wrote that I don't use is Emacs. I can appreciate its quality, and have taught its usage in the classroom, but I prefer Vim.
Thing is, politics aside, the guy is one awesome hacker, with few equals and fewer betters. Ok most of those achievements are in the past, but that can't be used against him unless the person making the argument has first exceeded his output.
You replied to your own post like that!?
Here, have an ego cookie...
Millions of people and businesses all buying the same software is economic insanity. It's not at all the same thing as millions of people all buying the same kind of car. A car has intrinsic value related to the cost of the components, software doesn't. Software sunk costs are incurred during development. Once complete the only ongoing costs, outside maintenance, are for distribution and the media. You don't have any intrinsic value of metal and parts in software.
Instead of paying money to buy software, a company can instead choose to pay less money to modify an open source project to meet their needs and leverage the contributions other companies have made modifying the same project to their needs. It's game theory in action. Five companies all pay a little to modify an open source project instead of all five paying a lot for some big box software solution. Collaborate with competitors in the same field for the common product they all need, then compete in pursuit of their market. Game theory.
What was needed for the theory to become disruptive to reality was a base of open source software to start with. We've had that for a while. All the pieces are there. And, as the author pointed out, it presents an opportunity for integrators.
Software really does fit the utility economic model better than a manufacturing model. Which is one of the things that really scares me about the US shipping manufacturing capability overseas and relying on a brain share economy.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
Look at his name...
It's not exactly rocket surgery.
MSFT also has very "innovative" pricing schemes. In one instance, paying a flat fee per every computer owned by the univ, whether or not it has Office installed, was cheaper than paying per copy of Office. Effect of such pricing is that, there is no incremental cost to a dept to run Office. To use any other software, the dept head has to budget for it and justify the cost to the bean counters.
All I know is this, MSFT is far more sophisticated in playing Corporate pricing games, budget games and such things than any simple model used for research purposes by Open Source advocates.
My most common grouse is that the key is Open Standards, not Open Source. If MSOffice and OS products conform to a open standard and anyone can develop applications that cleanly interoperate with them, the playing field will be level. There will be many vendors, some playing at the Open Sources and some in Free Software, some closed and for-profit players. Without leveling the playing field one can not see how Open Source is going to win. But what do I know.
If I am so smart why am I coding for a living instead of smooching with the bean counters in the country clubs?
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
IBM is winning because IBM sell hardware
Hate to burst your bubble, but IBM only makes a bit more on hardware than it does on software. IBM is winning because they sell services. Have a look at their 10-Q
In millions:
Hardware: 5,583
Software: 4,406
Services: 12,017
"While this explains some of the volunteer work, it doesn't explain why companies today employ people who contribute to open source projects on company time."
Maybe it is because the company sees the open source project as a strategic component to its product or service offerings and its in their best interest that the project succeeds and they can influence its direction?
"Il-Horn Hann and colleagues found that the salaries of Apache Software Foundation project contributors correlated positively with the contributor's rank in the Apache organization [6]. They therefore concluded that employers use a developer's rank within the foundation as a measure of productive capabilities."
For me, that is not right conclusion, or at least not the only one. It is often the case that people contributing to open source on company time only started contributing because they were told to by their employers. A developer salary at his company and their rank within the open source project are both determined by his technical skills and teamwork abilities.
The basic idea behind open source in not to write software to make money,
but because you need it. You open source it so other people that has the
same or simmilar requirements can chip in.
Then it doesent really mather that 98% of your users never contribute as
long as the projetcs commuity is large enough to drive the software forwards.
That said, there is ways to make money from open source, mostly by services
like consulting, customising og support.
Neither the article nor the summary mentions IBM.
theres latin grammar police in slashdot too now eh ?
Read radical news here
I especially liked: "Every dollar a system integrator saves on license costs paid to a software firm is a dollar gained that the customer might spend on services."
My vision for the future (from an independent consultant's viewpoint) is the development of such a rich open source ecosystem that the cost of building unique applications is drastically reduced. As development projects become less expensive, companies and organizations will fund more projects because the cost to benefit ratio gets lower - and "fringe" projects start to get funded.
The cash flow is not broken. The cash goes to those who deliver what the customer wants, and who charge for it. Firstly, IBM, Red Hat and the like. Secondly, the makers of useful products that charge for them.
The makers of useful products who give them away, on the other hand, I thank from the bottom of my heart, since you saved me filling out a PO and numerous levels of approval.They can! Feel free to charge for your product! If it's any use, somebody will pay you for it. But you can't both give it away and charge for it.
Don't get me wrong, I am not dismissing Free Software (which has legitimate political aims) or Open Source (which has legitimate practical aims), but as an individual you should only contribute where you would anyway contribute. i.e. in projects that qualify as "your hobby" (or "your mission" if you have strong beliefs)
If you are primarily selling services, software that you need to provide those services is a cost. If you commoditize software, you create more opportunity to make money from services. Those fancy four-color graphs are simply restating something Joel On Software said a while back in words.