Is Open Source Software a Race To Zero?

gozunda writes "My company is an open source software vendor/developer. We maintain a popular open source project and keep ourselves afloat by producing commercial products derived from or extending the value of the core project. Over time we've seen our business model eroding as other open source projects produce free versions of the same extensions and utilities that are our bread and butter. Something that was worth $5K last year is suddenly worth $0 because the free version is just as good as the paid. This same cycle is obviously having an impact on pure-play commercial software vendors. Is open source ultimately a race to zero? In ten years will there be any cost associated with commodity (non-custom) software? If not, will there still be a 'software industry' as it exists today, or will software simply be a by-product of the operation of other industries? Is that a good thing or a bad thing? As a professional developer, do I need to fear this or feed it?"

Comments

Yes, and there's nothing new with that

[KingSkippus]

Is open source ultimately a race to zero?

Yes, and there's nothing new with that.

Just because your software is open source doesn't mean that you get to sit on your duff and collect money off your paid extensions in perpituity. Just like any other software company, if you want to keep food on your metaphorical table, you've got to continue to innovate and improve. Otherwise, just like any other software company, your competitors (in this case, open source develoeprs) will eat your metaphorical lunch.

For what it's worth, though, nothing would be different if your software were closed source, except that your user base would probably be smaller and, depending on how necessary your software is, open source competitors would be even more eager to push you out.

Re:Yes, and there's nothing new with that

[eddy_crim]

Imagine if there was no open source. You would still have competitors and they would still be undercutting you. Remember the cost of reproducing software on CD or download is effectively negligible. So perhaps your competitors would sell for a dollar or whatever. The problem is the same. Keep innovating, sell something people want and the best possible price. Unless your selling something tangable its always going to be a race to zero for the item itself.

Working for an IBM business partner i see constant erosion of the products i work with by OSS. This means IBM must keep moving the products forward which i guess is a good thing.

Re:Yes, and there's nothing new with that

[nine-times]

I think you're right, and the idea of "copyright" in general is headed towards some kind of reform over the long term. Eventually we'll find ourselves in a world where it's not sufficient to have done some valuable work at some point, and then sit around and collect money for the rest of your life.

Now I don't know how long people will be able to hold that off, but I think it's just a matter of time. I don't think copyright is going away, but it's either going to be restructured or it's going to be ignored, as it's already starting to be ignored.

Lots of people used to ask whether FOSS could compete with proprietary software. I remember reading lots of people ask, "Will Linux be able to catch up to Windows?" I haven't seen that in a while, and for good reason. I think the fact that lots of people can contribute and no one ever really has to start from scratch means more consistent progress. So if you're a developer and your livelihood is based around building a highly in-demand software and sitting on old innovations, while hoping that FOSS won't catch up, you'll eventually find yourself in trouble.

So now to the big worry-- how are developers going to make money? I'm not sure. There will be demand for software development, and where there's demand, there's money to be made. I don't know if it's through support and services alone, or if there's something else. Maybe you just have a shorter term to make your money, and that term starts when you offer a new innovation first, and ends when other people get around to offering it.

...will eat your metaphorical lunch.

I thought we were drinking metaphorical milkshakes now.

Re:Yes, and there's nothing new with that

[novalis112]

The only problem with your rational is that if all the competition was from commercial entities, and not from people willing to work without compensation, then the bottom line would not be zero. Yes, competition would force the price lower, but the limit would be considerably nonzero. In theory all the competitors but one would eventually be weeded out as the company with the most efficient infrastructure (assuming the product quality was equal amongst all competitors) managed to sell the product for the lowest possible price while still maintaining the ability to pay for its business costs.

Re:Yes, and there's nothing new with that

[nine-times]

I don't see a particular reason to drag OSX into this, but fine, it only goes to illustrate the point. Apple was able to make OSX such a successful OS as quickly as it did only because it was able to build off of an open source base. Darwin is based on BSD Unix, Webkit is based on KHTML, and OSX is packed full of GNU tools.

But also I think Linux has become very competitive with both OSX and Windows. It seems like it supports a greater variety of hardware then either, it's just as easy to install, and it really is easy to use and attractive. The major downside to Linux that I see is still application availability, but I think that will only last for so long.

Re:Yes, and there's nothing new with that

[zappepcs]

Whoa there nelly. Linus got rewards for his efforts. Many people are getting rewarded. The race is to equilibrium, not zero. The price of functional software had long been inflated. That is not taking RMS's stance either.

There are trade-offs in the software business and RedHat, Mozilla, and others have shown that it's possible to work in that paradigm.

Some of this argument seems to be based on a notion that all work must be rewarded, and that the reward MUST be monetary in nature. It does not always work that way. Cellular companies are willing to give you a phone if you sign up for a contract. That's free right?

Skydiving analogy: You can buy a parachute rig, or use one that is given to you freely. Now, all things equal you can choose to pack it yourself or pay someone to do it for you professionally. Staying on point, the free one can be modified and changed, the one you had to pay for can only be changed/modified with parts from the original vendor. So with either rig you pay to get it packed, but with the pay-for rig you are locked into their cost paradigm. Which rig is more useful?

Sure, you want to make sure that the rig you choose will do the job and perform in the manner you require. With both rigs being equal, which do you choose? Some will choose the pay for model because they can blame someone if the rig fails. Others know that if you don't check your rig regularly and maintain it, it will fail no matter where you got it from.

This race is not to zero but it will force Microsoft and others to re-evaluate how they build and distribute software products. You only have to look at Sun and IBM to see that they are on track with the need to change. Whether they are making wise decisions is yet to be seen, but they are embracing the changes rather than fight them tooth and nail by creating their own standards and fighting against open standards.

The race is toward equilibrium. No matter whether a user pays for Windows or steals a copy. They end up paying to get the machine tuned and fixed. OSS just gives them the opportunity to do it themselves to skip the initial costs and lockin. F/OSS does not have a zero operating cost, but it's MUCH lower than other options.

One of the things that has destroyed the lattice work of market forces in software is Microsoft itself. They bundled so much software for free with their OS that nobody else could afford to compete. Those that could had to give away their product... and the non-monetary reward system was born. People started doing it for the luls or reputation of doing better than MS, or simply from the need to have better than MS. Some people are like that, and are happy to give it away if you have to see their name every time the app starts. The more that MS bundled, the more others did. They squeezed out the small players. Now we are racing towards equilibrium again. se la vie

So it goes.

[ZorbaTHut]

The world provides no guarantee that you can forever be profitable at the thing you currently make money on.

Many years ago, people spent their lives painstakingly copying books. Today, we have printers that can do the same thing at a tiny, miniscule fraction of the cost.

More recently, people made money doing repetitive calculations, over and over again, and compiling the results into books. Now, obviously, computers can do it faster, cheaper, and more reliably.

Perhaps you're used to writing operating systems for a living. Well, operating systems are now valuable enough that people are willing to spend effort to make them free - CEOs realized, hey, I *could* spend $100,000 on licenses of an operating system. Or, I could spend the equivalent amount of money by taking an existing operating system and improving it for me . . . and for all future users . . . and then not have to spend $100,000 on next year's licenses, but instead just spend a relatively tiny amount of money maintaining our local patches.

And, hell, I could submit those to the central repository too. And now they'll maintain it for us.

Here's what it all comes down to. The core software in a computer is now too important to pay for. If you pay for it once, that implies you can be asked to pay for it again . . . and again, and again, and again . . . and if it's that important, you may simply have no choice. You don't want to contract out the necessities to someone who can withhold them on a whim - you want them available to you, for free, whenever you desire.

I don't know about you, but if I had to pay some dude $50 every time I wanted to flush my toilet, I'd be buying my own toilet with free flushes pretty damn fast. And, at the risk of stretching the analogy, I think people are tired of putting up with Microsoft's - or any other large company's - shit.

No, the base software is open.

[Anonymous Coward]

And since the base is open, the investment in time required to make a competitive product is just the extension itself. Usually something a motivated user can and will do.

And no, it's not a bad thing. But it does mean a changing business model. I really don't think there will be much in the way of pure play software businesses in the future. I also think the "support" model is a mirage.

Software will be what it has always been for me and many others... a necessary component of a larger system or product that does have a barrier to entry (for me, that's embedded systems).

Re:No, the base software is open.

[loufoque]

If the cost of making the extension yourself is far lower than that of buying the extension, then obviously it's the price of the extension that is much too high.

And that's what the problem with that kind of things is in practice, extensions are priced much more than their real value to amortize the cost of the main product.
The solution is simple: just price the extensions correctly. If that means your extensions become super cheap, then why not make extensions that are actually valuable?

Plumbing

[Kupfernigk]

Do you remember when it took real skill to be a plumber? To attach a faucet to a pipe, you had to be able to melt solder and shape it with tools while using a kerosene-fueled blowtorch. Get it wrong and you melted the lead pipe. Putting in a faucet was half a day's work. When it froze, pipes split and had to be cut out and repaired, also at vast expense. The training to do all the jobs was expensive and took years.

Now go round the hardware store. In ours there are several kinds of push fit and screw fit plumbing. The pipe is plastic, you cut it with a simple little tool. I recently had to replace the water softener and the new one had different plumbing. It took me nearly half an hour to put in four bends and a few joints.

That's the race for the bottom. Basic plumbing skills now take a day to acquire and, by following the instructions, you can do a safe job. But plumbers are still employed. I'm not about to service my boiler, or install a bath. I have more sense than to try to put in an oil tank and all the safety equipment, following all the codes.

It's like that with software. It is not a race for the bottom, it is called progress. An SMTP server is now a basic piece of kit. The learning curve for spreadsheet design is, basically, over. Unlike the so-called creative arts, engineering does not recognise the idea that somebody should be rewarded forever for a one-off contribution. In a knowledge society, new knowledge has value but old knowledge is free.

Eventually, kicking and screaming, I expect we will get Open Source Law, and so-called lawyers will no longer be able to charge excessively for basic legal advice in simple cases. But specialist lawyers and the Supreme Court will still be needed, because there will still be hard cases. The same should really apply to all professions. And if you want a guaranteed source of income, make something essential that wears out. Grow food, make clothes or shoes.

Re:Value

[cgenman]

Can I just say that as a user the "survive on service" model makes me uncomfortable. We're disencentivizing making robust, easy-to-use software in exchange for one that requires some degree of brokenness to survive. I'd rather pay someone for their software than being stuck with their services because their software is somehow unintelligible.

     

Don't forget file format lock-in.

[khasim]

Don't forget file format lock-in and network effects.

If you're the only one who can make a 100% compatible word processor ... and everyone uses that file format ... then you can do just about whatever you want. As long as the damage you are causing to your customers is less than the cost of them migrating (and causing problems with THEIR suppliers and customers).

That's why there was such a big push for ODF. Once the file format is standardized, ANYONE can write a word processor and compete on quality and support instead of lock-in.

Effectively driving the cost of word processors down to zero.