Times article on open source eludes logic

This article in the New York Times (”Open Source As A Model For Business Is Elusive“) suffers from the same blinkered viewpoint and desire to create a story out of thin air as the recent WSJ article on Wikipedia (”Volunteers Log Off as Wikipedia Ages“). Doc Searls today hammered at the WSJ article, and now I’ll take my shot at the Times piece.

Ashlee Vance writes in the Times:

…there is an open-source alternative, and usually a pretty good one, to just about every major commercial software product. In the last decade, these open-source wares have put tremendous pricing pressure on their proprietary rivals. Governments and corporations have welcomed this competition.

Whether open-source firms are practical as long-term businesses, however, is a much murkier question.

then this:

“There’s only one company making real money out of open source, and that’s Red Hat,” said Simon Crosby, the chief technology officer at Citrix Systems, which acquired the open-source software maker XenSource for $500 million in 2007. “Everyone else is in trouble.”

and this:

Many of the top open-source developers are anything but volunteers tinkering in their spare time. Companies like I.B.M., Google, Oracle and Intel pay these developers top salaries to work on open-source projects and further the companies’ strategic objectives.

finally this:

The larger technology companies have tended to buy these one-trick ponies for strategic purposes. With its core server business declining, Sun hoped it could piggy-back on MySQL’s momentum with Internet companies. In SpringSource, VMware acquired a company that had cultivated deep interest with software developers and helped VMware diversify beyond its virtualization roots.

The story’s lede says that open-source business success is elusive. Yet over and over again in the text Vance states that large companies viewed open-source providers as strategic – strategic enough to pay hundreds of millions of dollars to own them.

If I were lucky enough to build a business that a company would pay several hundred million to buy from me, I would consider that successful.

What Vance may be saying is that building a long-term standalone business atop one open source product is difficult – hence, companies like MySQL, SpringSource and XenSource selling out. I would counter that building a long-term standalone business with one product of any kind is also difficult. Open source has little or nothing to do with it.

Furthermore, the value of open source platforms (apart from, of course, the value to end-users) is the economic value to the platform’s ecosystem of developers, integrators, etc. Part of the benefit of open source is that it breaks down barriers of scale, by allowing small developers to build big products using open source as a basis.

If Vance would like to calculate the profitability of corporate ventures dependent on open source products (such as those from IBM, Accenture and countless other companies), that’s a story I’d like to read.

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Tags: acquisitions, databases, information technology, open source

This entry was posted on Monday, November 30th, 2009 at 4:43 pm and is filed under information technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

timlew

The Manufacturing Delusion mentioned by dsearls is indeed very insightful.

A complementary meme is Google's "less than free" model, which I think in the long run will prove equally harmful to those who don't "get it", and open fresh opportunities to those who do get it and embrace it.

The example given in the link below is how Google Maps is about to disrupt the business of Garmin, TomTom etc. We may soon see a similar move with a free-to-use Google mobile phone, supported by targeted advertising and location-aware services. And there is Chrome OS which may prove to be thorn in the side of those OS vendors who remain firmly in the closed-source camp.

In the Innovator's Dilemma the author talks about how the majority of hard disk manufacturers, despite leading in development of new disk technologies, failed to properly align their business with the future needs of their customers and prospective customers, and consequently suffered or in many cases went out of business. I think you can draw a parallel and say that companies that make the mistake of ignoring open-source (i.e. the new tech) or of ignoring disruptive ways of doing business such as less-than-free (what the customers want) risk the same fate.

As John reiterates above, Vance points out the strategy of acquiring open source companies. It allows the established big boys to get a leg-up on new technology and have more influence over its future development. Of those companies doing the acquiring, the smart companies will then find the right way of bringing the product to the customer, rather than sitting on their laurels.

So acquisition of open source forms one part of solving the same problem the hard drive manufacturers had. The second part of the problem is staying on top of what your customers demand, and that's where companies need to understand what Google are doing with less-than-free.

Companies that try to sell in the public domain and continue to live in the world of closed-source software at $199 a pop may survive, but only so long as they don't have competitors that can leverage open source and can deliver the right value/performance to the customer. Often "good-enough & free" will trump "supposedly better & expensive", which is of course why the incumbents will use every dirty trick in the book, legal or not, to maintain any monopoly they may have. There will always be space for closed-source products, but I believe that it is going to be in increasingly difficult outside of highly vertical domains and the in-house systems that are mentioned in The Manufacturing Delusion.

For people who still don't understand what open source is, I sometimes make an analogy : open source is just a type of tool. You use the tool to get a job done, and that's what you charge the customer for. So MySQL is a flat-head screwdriver, Oracle RDBMS was a Philips-head screwdriver, but is now some kind of fancy ratcheting thing that sells for $49.99 that you don't often need but is sometimes really useful, and Oracle Corp is the builder who overcharges you for your new kitchen suite. There is always demand for new and better tools that make the job easier. When you understand that, and also understand the strategy for acquisitions, then it's easy to see that the idea that creation of open source technologies is a dead-end just doesn't hold water.

Time may show that open-source companies tend to have short lives as they are acquired, but since open source is not only viable, it is a natural consequence of an open market, we will certainly see replacements spring-up as they disappear.

The link : http://abovethecrowd.com/2009/10/29/google-rede...

dsearls

I didn't know where to start with that Times piece, so I'm glad you went to the trouble.

Imagine a headline that reads "Frame construction as a model for business is elusive." Even that makes more sense than calling open source a "business model." It isn't, and never was. It's a software development method. That it happens to be a useful and effective one does not make it a business model.

The amount of money and success "open source companies" earn (or don't) are red herrings. The European Union worrying that Oracle will sandbag MySQL is also silly. The development community is independent of Oracle, just as it was independent of the original MySQL company, and just as it was independent of Sun Microsystems. Even if Oracle does trash MySQL (which it won't), the code can be forked to circumvent the wreckage.

Meanwhile you're right that the value to the world of open source is beyond calculation, much as are oxygen and gravity. We couldn't begin to think about living without it. You can't say the same about anything made by Microsoft, Oracle or any other company selling proprietary software goods.

Eric S. Raymond's "The Manufacturing Delusion" should be required reading for any reporter preparing to write about open source as a "business model." Here it is: http://catb.org/~esr/writings/homesteading/magi...