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The Almighty Buck

Can Open Source Companies Stay That Way? 169

JoeGee writes: "According to this article on ZD Net, more and more companies born from open source projects are beginning to move towards closed source products as a source of revenue. Version 5 of GFS will be closed source, and even SuSE's director of sales Holger Dyroff has a quote that seems to disparage the service model of revenue. The one company that refuses to change its operations is, surprisingly, Red Hat. Red Hat CTO Michael Tiemann says 'We believe the Red Hat brand stands for open-source.'" Yes, this is a dupe. Bad Tim! *whack*
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Can Open Source Companies Stay That Way?

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  • They shouldn't sell something that can't be sold butsell expertise.
    The product actually doesn't matter but if it is free then we all are happier.
    • Cash Cows (Score:2, Interesting)

      by tubs ( 143128 )
      Lets use an example of why I think things are going wrong.

      Supplier A "gives" software away and sells support.

      When times are good customers pay for the support, well because they can afford it. When times are bad, people cut overheads, one overhead that could be ripe for major trimming is outside IT support. Now if a customer buys a new PC, or needs the software upgraded then they can do it themselves. Supplier A loses out on the support contract, because its argued they are not needed.

      Supplier B sells software and support

      Supplier B charges people for the software & for support. When times are good people will be convinced to pay for both, when they are bad they cut support. Now if someone buys a new PC, or needs the software upgraded they have to pay Supplier B not only for the software, but also for the cost of installing/updateing the software.
  • They make money
  • I thought they removed "Linux" from their name.

    I also thought that they are pushing a closed source SourceForge for companies.

    Correct me if I'm wrong.
  • by PigeonGB ( 515576 )
    My first experience with this model was when I was trying to get Corel Linux installed on my system.
    I was not about to pay over the phone for support, and I found a few websites that did offer free messageboards.
    If you think you're going to base your business off of service revenue, then you shouldn't make something and expect to sell/distribute exact copies of it.
    I can see someone personalizing on a case by case business, and it would make sense to charge for the support then. People would basically have to come to you, or to someone else that can code at least.
    It is too bad that so many companies are affected by this so much that they are going closed source and/or out of business.
    • Huh? You're saying that you d/led Corel Linux (for free), and then you got support elsewhere (for free). Then you go on to say it's "...too bad that so many companies are affected by this..."? Dude. You are personally part of the problem.

      So you're saying that you would've paid if Corel made a personal version for YOU? Well, unfortunately, if Corel made a version for PigeonGB, you'd probably end up paying many thousands of dollars. You see, in a business, they need what's called the economies of scale in order to be able to sell something cheap. It costs them a lot less to make a lot of the same thing than it does to make one that's different for every customer.
      • I did indeed buy Corel Linux. So in the first place, you assumed, but ignoring that part, do you think that my sole purpose is to support them just because they are open source?
        And no,I would not have paid for a personal versioon of Corel Linux.
        Economies of scale are nice and all, but with open source, I was suggesting that perhaps it does not work so nicely.
        If anyone can copy and run the program, then obviously you aren't going to sell as many copies as you could potentially if you didn't offer free (as in beer) copies.
        So no, I was not saying that I would pay for a personal version of Corel's software. I was saying that perhaps open source is not a perfect model for every type of software. Economies of scale are great, in terms of making something once and then cheaply distributing it, but then again, if I am not making any money off of any distribution, then what good does it do me if my sole purpose is to make money? People can easily get free support, as I did, especially if it is for something that is very popular.

        So yeah, it is too bad that open source companies are so affected by the fact that people like me won't pay more than they have to. Service and support revenues are more likely to come from services and support that only you can provide.
        To me, it makes sense to be able to customize software for individual businesses and other clientsand charge them for service, since they would most likely come to you.
        If everyone else can do so, and for free, you are charging too much.
        That is what I was saying.
      • Clearly if you are offering something for free, then you shouldn't be surprised if some of the people who use it are cash-starved (or even just cheap). This had better be factored into your business plan.

        If someone downloads software from you, they have cost you
        1) the price of a download, and
        2) the loss of the chance that they might have purchased it (but some of those will purchase it if they like it).

        If they get support from elsewhere, this isn't a cost to you. Your loss is that they didn't buy it from you.

        Now adding these together, the total cost if someone is cash-starved or cheap, is the price of a download. This cost needs to be a part of your business plan.

        The real question is, why should anyone purchase from you? That's the question that needs to be answered. There are 4-5 major distributions (of Linux), with slightly different flavors, which satisfy the answer "because it's easier". And there are numerous minor ones that may make enough to keep afloat, but probably won't be able to afford to become major. Several of these probably survive on being consultants. But that's Linux.

        Text editors?(As an example of minor applications): One person can write a decent text editor. This may be a personal ad: "This is an example of my skills", but it's unlikely to be a major financial prop of anyone. A few companies live in this niche already, and there are many free examples, so it's probably full. But if you write a good one, you can probably give it away as free (the costs are sunk) advertising.

        Larger applications? Either you are working as a part of some group, or you were hired. If you were hired, the company may not care whether or not the source code is given to others (or they may prefer it ... it might free them of maintenance costs [use the GPL here!]). You might like to have the right to reuse the code, so you could give them a cut rate if an Open Source license were used (they might release the code to you, with the proviso that if you reused it you would need to make the changes available back to them ... GPL would simplify the bookkeeping [with them as the original owner, so they could decide to release it, or a modified version of it, under any license that they choose]).

        Lots of special cases. Not many general ones. The real point is that Free Software isn't usually about making money, or even saving money. It's usually cost neutral, or a hobby activity. But in special circumstances, it can make money. Open Source is a bit friendlier to making money, but sometimes doesn't work as well.

        However, Free Software can help you *SAVE* money. Used as components, it can reduce your development expenses. This is where GPL shines. And if it becomes popular, then your maintenance costs can descend to nearly nothing (but don't count on this one!)

        So generally the only people who make money off Free Software are the consultants and the end users. But there are special case exceptions. The problem is, most software companies tend to think of themselves as being one of those "special exceptions", but they are rare.
  • by Black_by_Pubic_Deman ( 527432 ) on Wednesday November 21, 2001 @09:27AM (#2595356) Homepage
    Does moving towards Closed Source Products ensure every one will live happily ever after? Look at the number of Closed Source Product Companies that have shut shop. It is probably not the model, but the condition of the economy that is responsible for the poor performance.
  • by squaretorus ( 459130 ) on Wednesday November 21, 2001 @09:28AM (#2595359) Homepage Journal
    I am aware of a number of medium sized software developers producing specialist systems for specific industries, who are considering 'going open' and charging solely for deployment and support. I come into contact with these systems pretty regularly through my work - and usually call the company to ifnd out what their plans are as much through noseyness as need.

    They are considering it for a pretty simple reason - giving software away, and making it open so the client doesn't HAVE to buy your service agreement, gives the client great confidence in YOUR confidence in the quality of your service.

    Most users of such systems understand that the service component of the charge is the 'expensive' part anyway. By going open source a company can relaunch, give away the software and offer 'as you need it' support at rates likely to undercut the opposition.

    Open means customisable, which opens up another potential revenue stream to the producing company.

    It also lets the pain in the arse customers do some modifications themselves. One or two of these can account for 60-90% of ongoing support effort for some of these companies.

    You don't have to go 'open source' to follow this business model, but its a great shorthand, and a great differentiator. Anyone work in a firm thinking of following this route?
    • They are considering it for a pretty simple reason - giving software away, and making it open so the client doesn't HAVE to buy your service agreement, gives the client great confidence in YOUR confidence in the quality of your service.

      OK, so let's say it really IS that good, and they don't have to buy your support. Then what? Then you've just made a great product and given it away for free, with no hope of any kind of income.


      Most users of such systems understand that the service component of the charge is the 'expensive' part anyway. By going open source a company can relaunch, give away the software and offer 'as you need it' support at rates likely to undercut the opposition.


      OK, let's say you're company X that developers a piece of software. You give it away to companies in a particular industry. Those companies need support. They cna either get it from Company X, or a competitor Company Y. Company Y didn't spend a dime to develop it. They have $0 development costs, thus they can offer support at a much, much lower rate than the company that actually created the software.

      It doesn't sound like a very viable business method to me.
      • OK, so let's say it really IS that good, and they don't have to buy your support.


        Doesn't happen. We're talking about HUGE systems that are custom built for each customer and need constant modification adn extension, over decades. Open-sourcing the components from which they are built makes very little difference, as much more work and money goes into the building process, which is different for each customer.

    • What you're suggesting is a maintanace nightmare. I've been involved in projects where the customer gets the code. They hire some 3rd rate engineers to modify the source and then call us when something goes wrong. Do you know how long it takes for us to even find out that they modified our code? We can't have a clause that says once you touch code, we don't help you because we do charge large amounts.

      That being said, going open source for general purpose software is a great idea. Some of the software that we've made would be great for open source. It can be used across verticals and the equivalent open source project is either still in the infancy or is just bad. At another company I worked, there was a proposal to do just that. I hope they followed through.

      Me.
      • "We can't have a clause that says once you touch code, we don't help you because we do charge large amounts"

        OK. Companies want to do ONE THING. Make money. The more the better. If you let people dick up your code and your about the only people that can fix it you can charge them a hefty day rate to go in and tinker.

        These are mission critical systems, so the company is held to ransom. They have to pay. You 'give' them the software but charge them a shitload to fix it back up occassionally.

        Most of these companies would happily fold if the revenues enabled the, normally, three or four owners to retire next year - so they aren't overly concerned about keeping the client sweet for 5 years.

        This is a business model I believe we will see more of, but because it only effects a few hundred users in each case we'll never see this stuff on the news a la MS.
  • surprising? (Score:4, Insightful)

    by gowen ( 141411 ) <gwowen@gmail.com> on Wednesday November 21, 2001 @09:28AM (#2595362) Homepage Journal
    The one company that refuses to change its operations is, surprisingly, Red Hat.

    Why is that surprising? Red Hat have previously done the part-open/part-closed thing, and realised that it doesn't really help that much, and that well packaged all open source packages are just as marketable, cheaper to license and earn you good will in the community. Most of the other companies (SuSE excepted, as the YaST licensing was clearly designed to protect their market) are just ill-thought-out dotcom cash-ins [valinux.com] struggling to cope with a dose of economic reality.
    • Agreed. Most of them have not fully thought through how they are to make money. To most idiots its sounds simple "Make money selling other peoples work" - Wha'hey package it up and sell it at a profit. Now the idiots bit may be a bit harsh - many involved are very smart people. What I think is happened is that the businesses/companies are trying to force change and it ain't happening. Many are floating and gaining investment to grow to capitalise on this huge potential market. The problem is they are trying to grow to fast. Most of them didn't seem to be doing to badly till some people started shouting "look free money, only to do so we have to be this big!".

      If they paced themselves and grew with the market, instead of trying to grow themselves and drag the market with them - maybe they would not be facing the debts/problems they have accrued.

      Red Hat is surviving on it's size and momentum. But even they may lose that momentum. Linux will go massive when it is ready. Not when RH, SuSE, VA, etc decide it's ready.

      History is littered with companies that jumped the gun and fizzled out before the market is ready to yield.

      I could be wrong and talking crap.
      .
    • Red Hat have previously done the part-open/part-closed thing...

      What "part-open/part-closed thing" are you talking about?

      Ed

      • I believe Xconfigurator in RedHat 5.2 was closed and you were not allowed to distribute it at the time. Or at least that's what it told me when I installed it a few years back.
        • Re:surprising? (Score:2, Informative)

          by Ed Bailey ( 1912 )
          I believe Xconfigurator in RedHat 5.2 was closed and you were not allowed to distribute it at the time. Or at least that's what it told me when I installed it a few years back.
          I think you're talking about Metro-X, which was a commercial X implementation that we used to bundle with Red Hat Linux. Xconfigurator was part XFree86 code and part Red Hat code, and therefore bore dual copyrights. It also had this statement in the source (which *was* available):
          /* Permission is hereby granted, free of charge, to any person obtaining a */ /* copy of this software and associated documentation files (the \"Software\"),*/ /* to deal in the Software without restriction, including without limitation*/ /* the rights to use, copy, modify, merge, publish, distribute, sublicense,*/ /* and/or sell copies of the Software, and to permit persons to whom the*/ /* Software is furnished to do so, subject to the following conditions:*/ /* The above copyright notice and this permission notice shall be included in*/ /* all copies or substantial portions of the Software.*/
          Ed
      • Early versions of RedHat came with a number of optional non-free add-ons, including an accelerated X-server called Metro-X, and IIRC an i386 version of the CDE desktop.
    • That's the main reason I keep resisting buying another copy of SuSE. But I find it sufficient.
      .
  • Or is it an open-OS company? The revenue model is different for redhat. Imho, they dont rate any special recognition for not succumbing to the green monster, here.
  • Red Hat CTO Michael Tiemann says 'We believe the Red Hat brand stands for open-source.'" And VA Linux' SourceForge 3.0 (Slashdot is part of OSDN, owned by VA Linux) is part of this group, too.

    I think you mean owned by VA Software, a - gasp! - closed-source software company, it would appear.

  • Eh? (Score:3, Insightful)

    by brunes69 ( 86786 ) <slashdot@keirs[ ]d.org ['tea' in gap]> on Wednesday November 21, 2001 @09:29AM (#2595366) Homepage

    ...one company that refuses to change its operations is, surprisingly, Red Hat.

    How is this surprising? RedHat has always been one of the most staunch endorsers of Open Source/Free Software. Did anyone else watch the videos of the O'Reily OSS convention? The RedHat guy was amazing. And how about the comment posted yesterday (about RedHat willing to give Free Software to every school in the US) ? This doesn't surprise me at all, I don't see how it would surprise anyone.

  • "Where is our business model if everyone else can copy it?" asked Holger Dyroff, former CEO and now director of sales for Linux software seller SuSE. "The question is where we can make money now. Nobody cared about profitability two years ago."

    I really can't believe he said that! If nobody (including presuambly SuSE) cared about profitability two years ago how can these people be serious about running a business?

    I can only assume he was being somewhat facetious.

    • If nobody (including presuambly SuSE) cared about profitability two years ago how can these people be serious about running a business?

      Many of them aren't serious about running a business, in fact many of them aren't running any business any more!
  • without having to use a closed-source business model is to sell support and service contracts for the software. I work for a company that offers a free software product (it's closed source BTW). The customer has the option of downloading the software for free, or can purchase the same product and get live tech support (i.e. talk to me on the phone) for a year. I believe Red Hat is doing this already for Red Hat Linux. If Red Hat were to offer free support on every product that they gave away for free, they would not be in business for very long, and the only users of Red Hat Linux would be those who either work with the code or us anti-M$ /.ers who answer tech questions with "RTFM you moron!"
    • If your project is closed-source, then is isn't free software [gnu.org], but freeware [gnu.org].
      I'm not being pedantic for the sake of it, but these are the commonly accepted definitions on slashdot.
    • without having to use a closed-source business model is to sell support and service contracts for the software

      And then Slashdotters will moan and whine about how it isn't really free software, because the support isn't free. I know, I know, ESR and pals like to claim that this is the way to go, but in all honesty (1) as mentioned, people will whine about the cost of support (especially those people who don't actually use the software; (2) most companies don't want or need service contracts, especially for mature software; (3) service contracts only make sense for certain types of software.
  • Whenever a new technology or product (Cellular phones for instance) become available, it will increase its market share ín a rapid growing way, until the market is saturated. However, nobody seems to be able to plan ahead, so it always come as a surprise to the CEOs when they suddenly find themselves without a market. Virtually all cellphone manufacturers in Europe has been downsizing heavily within the last 4 months, simply because supply suddenly exceeded demand.

    The same thing is happening all over the Open Source Service front, so it should be expected that not all will be equally able to sustain a revenue, when supply exceeds demand. This will of course not be as juicy a story to tell, so instead Darwin will be arrested as soon as somebody tells the police where he is currently. That way we will no longer have to deal with the realistic world.

  • When a piece of code is GPL'ed it can NEVER be closed source again. This is why several companies are using a dual/triple license trick to allow them to close the source under the other license. This is for example how Mozilla (MPL) and the Qt (QPL) library is developed.

    But as long as the code is under the GPL it can always be forked.

    What i cannot comprehend is how external contributions to the GPL'ed source can be embraced by the other incompatible licenses in this scheme???
    • What i cannot comprehend is how external contributions to the GPL'ed source can be embraced by the other incompatible licenses in this scheme???

      They can't.If you make big modifications to, say, Qt, and want them to be part of the official Qt distribution, I'm sure Trolltech will ask you to give them the permission to include it in their proprietary version.

      Naturally you can refuse, in which case your modifications will not become part of the Qt distribution, effectively forking the code base. And you're perfectly within your rights to do so, but you will have an uphill battle trying to gain acceptance for the forked version, which you probably won't be allowed to call Qt (a restriction which GPL allows - simply put, it's a different product, and you may not market it as Trolltech's Qt using their trademark). And even for big open source projects it's often good to be based on a well-known toolkit a company has made famous by marketing rather than rather unknown MyFoobarToolkitFork 0.9beta with a very uncertain future.

    • Fah, that's ridiculous. The truly dangerous license is the BSD style licenses. There is no charging money for BSD code, and there is nothing to stop your competitors from grabbing your BSDed source, adding some proprietary extensions and selling your software. That's why Microsoft likes the BSD license and hates the GPL. Even more telling is the fact that the very products that you mention (Mozilla and QT) are both available under the GPL. The trick is maintaining yourself as sole copyright owner so that you can also release the software under a commercial license.

      If other developers are likely to contribute then the trick is to force these outside contributors to your source code base to sign over their copyrights to you before their code can be accepted. The funny thing is that it isn't the commercial software houses that started this trend. The FSF has been doing it for years so that they would be the clear copyright holder in case of copyright infringement (a very wise move). It used to be that you couldn't be a GNU maintainer unless you were willing to sign (with ink and pen in front of witnesses) your code over to the FSF.

      So QT, OpenOffice, Mozilla, MySQL and other simply do exactly the same thing, and then they can release the source under the GPL and any other license that they wish. This allows them to sell commercial licenses, and prevents their competitors from using their source code against them.

      A prime example is the MySQL/NuSphere debacle. When all is said and done MySQL is going to be able to sell proprietary licenses for use in commercial products, and NuSphere is going to be forced to release the source code on improvements they make. NuSphere's version will forever be GPL tainted, and will basically kill it for use in commercial products. If you are MySQL (the originators of the code) this is a good thing. If you happen to be NuSphere, however, it is a bad thing. This is why so many developers say that the BSD license is business friendly. What they really mean is that the BSD is friendly to companies that want to scoop up your hard work and use it to put you out of business.

    • You are mistaken. The triple licenses are just to get a wider audience.

      If you have some GPL software, you cannot revoke the rights you have granted others under GPL; that is true.

      But if you are the copyright holder, you can ABSOLUTELY stop issuing new versions under GPL.

      This is where it gets tricky you see.. if I start an OSS project, and people start submitting patches to me... does that mean they are now co-authors, or have they given me said patches to include in my software? I believe in most cases, I am still the sole copyright holder, I bet. I forget where, but this has happened before, where a company has taken many changes from people, improved their product, then went back to closed source (of course the OSS version is still available.. they can't revoke that). But they did, effectively, steal the work of others.
  • Suprising no one (Score:3, Insightful)

    by GypC ( 7592 ) on Wednesday November 21, 2001 @09:35AM (#2595384) Homepage Journal

    Why is it suprising that Red Hat should remain Free? They have always released all their source code and have cut paychecks for many an Open Source programmer. For them to remain steadfast in their policy is hardly suprising.

    Personally, I don't use Red Hat Linux as I find it rather byzantine, but I have always held them in the highest regard when it comes to their ethical stance on Free software.

  • Open Source was a mass delusion fueled by the internet bubble. These types of mass hysteria are very common during economic booms. History will look back on it as a form of collective geek madness. With the benefit of hindsight any objective person can see that open source makes about as much sense as farmers giving away food and trying to generate revenue by providing cookery lessons. The whole open source meme plays on the idea that geeks in their bedrooms want to believe they can out-code the big players and produce better software. The real flaw in the whole thing is that the strength big players is not (and does not need to be) in their coding, but in their ability to organize and focus enormous human and financial resources on creating and deploying software technology sustained over the long term.

    • Open Source was a mass delusion fueled by the internet bubble. These types of mass hysteria are very common during economic booms. History will look back on it as a form of collective geek madness. With the benefit of hindsight any objective person can see that open source makes about as much sense as farmers giving away food and trying to generate revenue by providing cookery lessons. The whole open source meme plays on the idea that geeks in their bedrooms want to believe they can out-code the big players and produce better software. The real flaw in the whole thing is that the strength big players is not (and does not need to be) in their coding, but in their ability to organize and focus enormous human and financial resources on creating and deploying software technology sustained over the long term.

      I have no comment on the above passage. Just felt it shouldn't have been marked troll, so I'm re-posting it.

      What is with this board and the incessant need to dismiss every opposing viewpoint as just an attempt to start an argument. What kind of ego do you have to have to believe that anyone who doesn't agree with you is just putting forth their own opinion in order to annoy YOU? I mean, grow up.
      • I'm with this guy, especially since he managed to avoid insults. I'll count to ten next time.
      • It was marked as troll because it dismissed a lot of very talented and experienced programmers as "geeks in their bedrooms," it made an inane analogy with farmers when we all know that software, unlike food, can be reproduced without cost and often requires maintenance, and it missed the whole point of Free software in general. If he had said, "Basing businesses around Open Source was a mass delusion," then he might have had a point and probably would not have gotten modded as a troll. But to most of us that have been using and contributing to Free software for years it has nothing to do with business, it is a community effort to build ourselves a computing environment that we control and can be happy with.

    • Whoever marked my post as "troll" -- it's not. I know nobody likes to hear the truth but that's the way it is. We have all got to wake up now the bubble is over. Just talk to any ordinary person in the street about the idea of running a business based on giving software away for nothing. They will think you are a total fruit-loop, as if you said you were going to make money by selling vacations on the Moon or by investing in edible cardboard toys (It's the next big thing!)
      • It probably got marked as troll because it's over-generalized without a lot of facts to back it up. The phrase "any objective person can see.." isn't proof of your statements.

        "They will think you are a total fruit-loop.." Why?
      • It is true that there is little future in making money "selling free software", but that is only part of the larger picture: in the long run, there just isn't much future in selling any software, when free alternatives exist.

        Software companies will switch from selling "software" to selling "services", not because services are going to become more profitable, but because software will become much less profitable. Companies that don't make the transition will eventually fade away. Microsoft is perfectly aware of this... what do you think the whole ".NET" thing is about?
    • The biggest problem with his statements is that he completely ignores why successful OSS projects are successful. If it was the bubble, then OSS would be dead. OSS was around long before and and will be around long after the "bubble". There are plenty of examples of OSS projects which are succeeding despite this "mass-delusion" -> Apache, Tomcat, Linux, MySQL, PostGRES...

      The fallacy being spread is that OSS projects cannot, in his words organize and focus enormous human and financial resources on creating and deploying software technology sustained over the long term has been proven false over the lifespan of Linux. To say that great finances are critical also ignores aforementioned success.

      A great product sells itself. Otherwise OSS really would be out the door.

      Here's where the real difference lies - the strength big players is not (and does not need to be) in their coding,. MS has proven this to be true. But the rest of his statement blurs why popular OSS projects are so - they are so because they have been able to produce high-quality products. Last I checked, coding was pretty key here, as is focus and efficient utilization of resources. Can they maintain it over the long term? Linux is 10 uears old, Apache is up there, BSD...

      ...a form of collective geek madness. My favorite, a dismissal of success under the ambiguous "Those silly geeks". On the contrary, history will look back on it as a maturation of software development. OSS projects which serve useful puposes have, since the beginning of the "movement", been successful. Why? Because of they ARE useful and widely available without increased and wasteful overhead expense on "support" and "maintenance" which go largely unused...
  • by under_score ( 65824 ) <{moc.gietreb} {ta} {todhsals-nikhsim}> on Wednesday November 21, 2001 @09:36AM (#2595392) Homepage
    Since the last time this article was posted, I have worked out my comments a little more completely and posted them to Oomind [oomind.com]. Basic summary: recession is bad for capitalist enterprises relying on OSS business models, but good for the community aspect of OSS.
  • by Anonymous Coward
    Why show your ignorance so clearly - you are almost flying it proud like a flag... RedHat has always been true to Free Software principles, unlike some others (hello Caldera).

    Please don't knock RedHat without good reasaon - they *are* one of the good guys out there.
  • The big problem is that in order to make a living out of open source, companies have had to sell services.

    This doesn't work to well in the (our) geek world as we all know what we are doing and in the rest of the personal computer market MS is still King.

    This leaves the Business sector, which as we all know is run by PHBs who beleave everything MS's markitdroids spoon feed them.

    If OS is going to make any head way we need a MUCH bigger marketing budget
  • by Ami Ganguli ( 921 ) on Wednesday November 21, 2001 @09:46AM (#2595427) Homepage

    In the end there will probably be a small handful of business models that are really successful. But things are still evolving to quickly to really know what will work. Especially given the current 'irrational negativity' (in contrast to the 'irrational exuberance' of recent memory), it's too early to tell what will work and what won't.

    RedHat is, in a way, in the same position as IBM. They've already established a strong reputation and consulting organization and don't need proprietary IP to compete. A small company with no track record can't successfully compete with RedHat.

    The same isn't true for a lot of smaller Open Source companies. Small companies can spend a lot of time and money developing an Open Source product, and then find a competitor selling against them using the same product, but with no investment in R&D. The client can't tell the difference, so in the end it comes down to straight marketing, with no points given for actually having developed the product.

    My company has faced this situation in the past and now we develop custom proprietary applications on top of an Open Source platform. We still believe in Open Source, but for now we need to keep some stuff to ourselves in order to compete effectively. I'm hopeful that over time we can swing back towards Free software - after all it does help to produce better software. Perhaps after we've had more time in the market and are a little more established. Or perhaps we'll open up certain pieces of the product while keeping more specialized functionality to ourselves. It's hard to say.

    It is clear that Open Source/Free Software is here to stay and will take a big chunk of the software market, but individual participants have to find a formula that works.

  • by Anonymous Coward
    They have a lot of smart guys, they took over Cygnus, they employ people like mr cox to work remotely. If you want the GNU compiler chain ported to your new processor, or even architecture (like the PS2), they can do it. You want a custom linux kernel, they can do it. The support companies that are folding are those that do "easy" support - installing linux, configuring networking, etc. just isn't that difficult.
  • I doubt anyone will bother to redo and close the kernel, which means there might be some more high quality programs (not that money==quality, but it helps) for alterniative OSs, and the applications may of course at some later point in time might be taken over by open source or free alternatives. Sounds a lot better to me than closed-source Windows with closed-source applications, which is the case today. Of course in a perfect world *bzzt* in a perfect world every OS and app you'd ever want would already be written.... *returns to real world* ... uh nevermind.

    Kjella
  • by MongooseCN ( 139203 ) on Wednesday November 21, 2001 @09:55AM (#2595462) Homepage
    It's the developers you are paying. Why are we paying for software? It doesn't cost anything to copy software, just 5cents or so for the cd and however much for the printer manuals and box, if you even buy that part. We should be paying for developers time instead, this is where open source fits in.

    Let's take an example. The Linux kernel is free, everyone can download it. So how do people make money off of it? Contracts. A company can hire out a person to write a kernel module for their new hardware. The developer gets paid by the hour to write the module and the module can be released open and free. Then later another company can hire someone else to make another module and add it to the kernel. All these contracts may be small, but they keep adding to one big project.

    Now this only works with Free Open Source software that can be incrementally improved. A large game for end consumers won't work with this model. What company is going to pay a large group of developers to make a giant game and then release it for free? Maybe as Open Source, but not free.

    So Open Source developers should get into contracting to work on open source projects that can help large companies. If a project is Open and Free, it can help everyone and save money for large companies as they don't have to pay for large software packages and then upgrades... and Open Source developers can still be paid.
    • We know S/W is not a tangible resource. Try telling beancounters. They build their careers around boxing up and selling a tangible resource.

      The fact that alot of development is done for free by people in their own time alters this. Its like trying to make money from a charity.

      Think of how you would sell GreenPeace - how do you sell the common knowledge of don't screw the plannet. People are willing devote time and effort to this for nothing. So can you boxup leaflets and books, and then expect to make huge amounts of money - NO. You can however develop products that help to implement that ideal.

      Same with Linux. You can't sell Linux to the masses it's free. You sell to businesses how you are going to save them money by using Linux/OSS. Every business that uses MS Windows (or other closed source systems) is a potencial customer for the 'service' of moving to OSS/Linux. Others will sell the 'service' of maintaining their OSS systems.

      OSS is not a tangible resource - lots of people can't handle that.
      .
  • by jdfox ( 74524 ) on Wednesday November 21, 2001 @10:03AM (#2595491)
    The point has been made many times here before, but bears repeating once again: Free Software and Open Source are two different things, regardless of what you might read on ZDnet.

    "Moving to a proprietary system also can spur ill will. Because of the freedoms afforded by the open-source movement, older versions of software may live on as competition. The Free Software Foundation, founded in 1984, continues to work to ensure open-source versions of programs live on as long as possible."

    Not true. The Free Software Foundation was established to promote and support Free Software. They have nothing whatever to do with Open Source, and are careful to say so.

    http://www.gnu.org/philosophy/philosophy.html
    http://www.gnu.org/philosophy/free-software-for- fr eedom.html

    The term "Open Source" is much abused, because it lacks sufficient precision. Everyone from authors that really want to encourage software freedom but do not always want to use the GPL, for entirely honest reasons (e.g. the BSD folks, Eric Raymond etc.), right down to parasites who care only about a quick buck (e.g. most of the shiny-suited salesmen who leaped briefly onto the Open Source bandwagon), call themselves part of the "Open Source movement". It's a conveniently huge umbrella under which even Microsoft might have fit, had they needed to. It was started by well-meaning people for the right reasons, but with a flawed charter, which may or may not be fixable at this point.

    It's not necessary to agree with everything the FSF and Stallman have ever said to see that they are right about several things. One of these is that a genuinely Free Software license can be an effective way of reducing your risks, if someone decides to close part or all of the source of software that you or your business depend on.

    Perhaps this is a necessary and inevitable shakeout, where we'll see a clarification of what the world wants from software freedom. It comes at a time when many different freedoms we take for granted are under attack, from many sides. In the case of software freedom, we will need to look hard at what we want, and what we're willing to do to defend it.
    • The term "Open Source" is much abused, because it lacks sufficient precision

      Every term is subject to that. As soon as someone is trying to make money from something, they will twist and bend terms until they become meaningless.

  • by NoNeeeed ( 157503 ) <slash@paMOSCOWulleader.co.uk minus city> on Wednesday November 21, 2001 @10:09AM (#2595516) Homepage
    ... I really don't care.

    The vast majority of open source software available has been produced by individuals or not for profit groups. Look at most of the major projects, the Linux Kernel, GNOME, KDE etc. These are not funded by companies, and if all of the companies trying to make money off of open source were to disapear tommorow, they would carry on.

    Sites like ZDNet are fundamentally biased towards thinking about the world in terms of companies and their success. This is how they have always worked and why they don't understand the os world.

    Yes, corperate help can speed up developement of a system but it isn't critical.

    The way I see it, there are three business models that can, and have worked, and two that won't.

    The Red Hat way - Selling totally open systems with support and (shock!) manuals etc. Adding something to a fundamentally free product.

    The IBM way - use free software as a base for your proprietory products. Why make your own UNIX when there is a free one. Mabey give developement back to the community.

    The QT way - Create a product that people have to pay for if they make money out of it, but is free if they don't

    The VALinux way - This is just another dot com and isn't really about open source, they just work off the open source community. The sourceforge model is broken in the same way as...

    The sistina way - Provide a product that is both open and closed source. This will fork. Unless the closed version is a long way ahead of the open version people will not pay serious money for it. GFS is not protected by the GPL in the same way as QT. I could package GFS (gpl version) with a closed source product and sell it, I can't use QT in closed source without paying.

    Of these, only the first three will work. Red Hat does not depend on a massive in house development effort to produce its product (unlike sistena). IBM and QT are both profitable companies. IBM is using Linux and Apache to reduce costs, and gives a little back in return, especially where specialist development is needed, but again it does not involve a major (relative) developement effort. Trolltech makes money, but gives its product away to people who do not make any money out of it, thus increasing its visibility. I hadn't heard of QT before KDE came about.

    VA Linux is just a web publisher like any other. Sistina is fighting a loosing battle against its own technology. Once something is GPL'd you can't unGPL it.

    Whatever ZDNet says. Open Source will continue for the same reasons that it got started in the first place, because people enjoy writing software and creating and sharing something, and mabey for the kudos. These are the same reasons that I want to start my own project (a developent env for Prolog), not for the money, but because I enjoy it, and it would be an interesting challange. OS has never been about the money. If it had been, GNU would not exist, nor Linux, nor any of the other major components of the OS panthion (*BSD etc).

    End sermon

    • Open Source - will survive. The companies may not.

      It was fine before the bandwagon arrived and will continue when it has left.

      Sure there will be changes - but change is inevitable.

      I don't get paid for OSS contributions (not in a pay check in my bank account sense) I may never. My payment is my pride in my work and my use and appreciation of others people's work who have similar ideals.

      Community is give and take. Anything else fails after a while.
      .
    • The Sistina way does work. Aladdin (the Ghostscript people) have been using it for years. The only difference is that they didn't behave in a sneaky way.



      Raph Levien [advogato.org], the current Ghostscript maintainer, has a variety of rants and rambles about this very topic in his diary.

      • With Sistina, you have that sneakiness involved. People don't like feeling like they've been had- and what Sistina pulled tends to make people feel like they've been had. This feeling tends to make people take the GPL version and transcend the closed version- if this happens, there's little reason for buying the closed one (Certification? Anyone can go through and audit the code and run bounds checkers over it, if they've got time and money- then sell the certified copy plus consulting services, etc.).

        In the case of Ghostscript, they were up-front about what they were about from the get-go and haven't made people feel like they were had. In the case of Sistina and GFS, we have the reverse and people are peeved about it.

        I don't think Sistina's going to last with the current course of actions.
    • Do you really think the publications like ZD don't "get it" though? I'm not so sure. When you watch a program like TechTV, you get the distinct impression that these guys really like Linux - precisely because it's more of a hard-core hobbyist's operating system.

      I don't really think most people dispute the fact that Linux development will continue, with or without Linux-related businesses. It certainly will.

      The problem is, without money, you have problems acheiving certain goals. Linux will forever be a tinkerer's/hobbyist's OS unless someone backs some of the development work with funding, and puts it out front. 99.9% of the population doesn't regularly check Freshmeat or Sourceforge when they want to research new software packages available to do a job. They call their sales rep. or go shopping at a retail store, to see what's "on the shelf".

      Failure of Linux companies means failure to catch the eyes and ears of all of these computer users. There are very good reasons people invest millions of dollars in things like advertising and marketing.
  • Do any small open source consultancies release their custom JSP/JDBC applications/cookbooks/templates that may be used to set up (franchise :) ) other small open source consultancies? [EJBs seem too complicated to start with]

    JSP/JDBC and open source seems a reasonable way to explore and gain experience, before I give up my day job.
  • I find the main problem with OS (Open Source) companies is that they tring to make money off of service for their product. While that is great when people have a lot of extra money but in a tight echonomy people will try to find less expensive means of support. While other companies like the one I work in. Although their is some OS development it main focus is on Suporting a companies infastructure.So basicly we give away our software because it helps our jobs but our revenu is created by actually supporting the companies computers ,Cisco, Linux, Solaris and NT systems and make them talk to each other and make sure that their network is secure, and they are getting maximum effiency out of their investment. OS development is only a small portion of our jobs but it exists and it works. but OS software works better as a form of advertising gimic (cringe) then as an actuall product.
  • by Whip-hero ( 308110 ) on Wednesday November 21, 2001 @10:15AM (#2595541) Homepage
    The point isn't whether Open Source companies can stay Open Source or not. The companies could all go bankrupt and it wouldn't stop Open Source. Before it had a catchy name, Open Source was just people writing programs that they wanted for their own purposes, and sharing them with other people. The loss of a few trendy business models won't change that.

    In fact, it might actually help Open Source in general by sweeping out all the cruft, just like the current slump is cleaning up the dot-com fad. The people who are left will be the ones that develop Open Source software because they just care about having the software, not because they want to capitalize on a freely available army of developers.

    Before, developers (or their companies) wouldn't openly release things that they felt really created a competitive edge. (Non-software companies didn't try to sell such systems either. They kept the advantage for themselves.) Now, these Open Source companies are trying to make a profit from creating software that, by definition, is their competitive edge. And they want to release all the source? Not likely. I don't want to sound like one of those people who yammer about how Open Source advocates shouldn't want everything for free, but it doesn't surprise me that these companies are dropping off and selling out. In the end, it doesn't really matter- the heart of Open Source exists outside of these companies.
  • Why can't these guys see that the nature of the software industry is changing?

    Let me spell it out:

    If you have a software product which is very widely used, there is no business model that will be highly profitable in the longer term.

    The nature of the IT industry is changing due to the Internet and the web. These changes may take a long time, perhaps 20, 30, 40 years. Unless draconian progress-halting laws are passed, the Internet is going to completely screw the 'old' software company business model.
    The invention of new processes during the industrial revolution lead to the death of many industries and professions. The "Open source development model" is a new process for developing software. It has been brought about by the fact that software can now be copied and distributed at virtually zero cost, and multiple individuals from multiple companies and other organised groups from around the world can work simultaneously on projects of mutual benefit. So, if you hope to make a long term business based on selling a widely used software product, forget it.
    • The improvement in comms has brought back communities, probably in a more strengthend way.

      Members of communities tend to help each other. If the help you provide is paid with help that you receive - It's difficult for a business to interfere.

      Many tradtional industires are reeling from what the InterNet is possibly bringing (Hmmm think Music Publishing, RIAA). Software like music is/can be done by people who do it out of love not money. Comms can take that love to the masses (and does not charge).

      Same with P0rn. Why pay when many give it away 'cause it gives them the horn?
      .
    • even if the product is very widely used.

      If several products are widely used, people will expect them come with a box, then there is a chance - packaging. Contract with hardware vendors to help them save money from propriatary software and to directly support the software after box sold.
      • If several products are widely used, people will expect them come with a box

        This is the old way of doing things. I doubt that in ten years time anyone will buy software 'in a box'.
        • I have to reply to this. There are distinct advantages to having software in a box, and the big one is that when your machine goes down, you can always reinstall from your original media, with your original serial numbers easily found (if needed). This is especially relevant for me, as I must now reinstall my W2K partition after it took a nosedive, and I'm still gathering up all the packages, serials, etc, two days later.

          This is made all the more difficult by the lack of a permanent medium for these programs, as many of them were downloaded (and one of them was $250 for the privilege of downloading and using it). Something for which I definitely wish I had a box.
  • Contrary to the premature rumors, the open source movement is going more and more popular. Now of course, there are companies that dream about getting big and strong and concur the world all for themselves using open source.Some of them move to closed source chasing that dream ... only to desapear and no one to hear about them again. That is right - when was the last time you heard of a prosperous company that started open and switched to closed?? If things are not going well, an open source company should think of scaling down the operations, change in the product and improving their relations with the comunity. It is that simple. In the world of open source, small is beautifull.

    Happy open-sourcing!
    Chears,
    da bear.
  • The one company that refuses to change its operations is, surprisingly, Red Hat.

    Red hat started making profit as soon at it became fashionable. And even in the first years they only lost amounts measured in the hundreds of thousands. Not millions, like VA or hundreds of millions like so many dot-bombs.

    It isn't surprising that red hat is sticking with it, since it's actually working out pretty well for them...
    • Good points made in regards to this comment.

      To me their CTO's statement was surprising because RedHat has always seemed to be viewed as being the Microsoft of the Linux world. That they would turn and embrace the community in spite of some of the community's resentments towards them (to me) demonstrates a remarkable (and sensible) dedication to principle. I am very happy these people are making money off of Linux.

      In retrospect you and other posters are correct, RedHat have no need to change their model to a more commercially-oriented approach because they have always been commercially-oriented. I hadn't throught about it that way, and had I done so I would have chosen different wording.

      As for the dupe, that's not Timothy's fault but mine for not being around on /. as much as I used to be.

      • That they would turn and embrace the community in spite of some of the community's resentments towards them (to me) demonstrates a remarkable (and sensible) dedication to principle.


        Well, we've developed a thick skin over the years... :-)


        But our core principles have not changed. Back when Matthew Szulik first came on board, I was present in a meeting about company values. We were all kind of nervous to see whether our new boss "got it". One of the values people came up with was "no matter how big we get, we never lose our soul". When that one was read, Matthew just looked up, smiled a little smile, and gave a nod in agreement. Don't worry -- the people in charge here get it...


        Of course, we've grown very rapidly. And we're finding that being a bigger company means you can't be as nimble as when the entire company could go out to lunch in two cars.


        So if we screw up, please let us know -- we want to do the right thing while still making a living...


        Ed

      • I am very happy these people are making money off of Linux.

        They're not. Red Hat is losing money on Linux, and has been for years. Check out their profile [yahoo.com]: "For the six months ended 8/31/01, revenues fell 1% to $46.7 million. Net loss totaled $82.9 million, up from $37.4 million." Their loss more than doubled from the previous six months, and their loss was 177% of their revenues. Revenues are declining, though only slightly. Funny way to make money if you ask me.

        Why is it that statements on /. about particular open source companies being profitable almost never seem to get corrected, even when many of the readers know better? Is the profitability falsehood one that has been designated as socially acceptable?

        Tim
        • I never said they are making a profit ... Are they making money? They must be -- they are nearing breakeven, and expect to reach profitability (I believe) in 2002. Compared to most of the companies born of the dotcom era, especially during a time of shrinking global economies, the fact that Redhat are able to follow their plan and meet their projected growth is impressive.

          I never said that VA Whatever-they-are-at-the-moment and most of the other companies that rely on Open Source are making profits.
          • I never said they are making a profit ... Are they making money?

            Um, er, what's the difference again? Making revenues is not particularly useful if they don't exceed your costs of doing business. There are definitely open source companies making revenues, but "making money" in its usual usage means that one is making more money than one is spending, and Red Hat is spending more than it is bringing in.

            (Yeah, I know that's an oversimplification, but I don't feel like going into the whole issue of goodwill and intangible losses right now. Not all the money Red Hat is losing is money it is spending, technically speaking. But by GAAP it is losing money. This may change soon, or it may not.)

            Tim
  • by defile ( 1059 ) on Wednesday November 21, 2001 @11:11AM (#2595799) Homepage Journal

    Ahh, nothing like the bastion of hardline journalism that is ZDNet...

    According to this article on ZD Net , more and more companies born from open source projects are beginning to move towards closed source products as a source of revenue. Version 5 of GFS will be closed source, and even SuSE's director of sales Holger Dyroff has a quote that seems to disparage the service model of revenue.

    And plenty of companies born from closed source software are beginning to move towards open source. What a world!

    Any business model that sells open source software alone is flawed. If open source companies can't manage to make money, that's their problem. Business isn't easy, people.

    Why doesn't ZDNet trumpet the demise of closed source? You can find hundreds of companies that are going out of business right now that sell nothing but proprietary software.

    Open source is doing better than ever. And the companies that claim to be "it" are only a small percentage of the business generated around open source in general.

  • And tonight, on Bill Gates's Creek....


    Sorry I just had to

  • Everyone likes to bash RedHat, but how many other tech companies do you see out there which are alive and doing as well as RedHat is? Thats right, almost none.

    They know their responsibilities, they know how to provide services and support, while still giving back to the community.

    Have you looked at how much RedHat has contributed back? Last time I checked, they host projects like cygwin, gdb, etc and have turned important apps like anaconda and even rpm (as much as people say it sucks, but it is the most popular package manager out there) back into the community.
  • Take a look at the list of publically traded software companies [yahoo.com], ordered by market cap. What do you see? Microsoft's market cap is almost equal to the market caps of all the other software companies combined. Oracle is way behind with over 1/10 of the software market. Most of the top of the list is B2B.

    The moral of the story is that consumer software (other than maybe games) does not make money. It doesn't matter if your product is open, closed, shareware, freeware, whatever, because copyright law is pretty much universally ignored for consumer software.

    At least explicitly making the source open gives you some good PR, and forces management to come up with a workable business model which doesn't presume consumers paying for software, which just isn't going to happen.

  • has a good advantage and slight edge based on our old freind called: "Brand Name Recognition". (Plus it does not hurt that they employee some of the doers rather than the thinkers....)

    I have to chuckle inside when I hear of a company going belly up because they can't make money from free software. It's like the California gold rush -- they think just because they made the trip to California -- they deserve riches and fame.....But in this business, riches and fame do not come from association -- they come from talent, the ability to do more with less, and some luck. I mean look at the cash Eazel went through ($11 Million Plus) just to try to get a file manager off the ground......Note to the masses: File Managers are best developed in the basement in the evening with a six pack of Dr. Pepper, an itch to scratch, and no overhead. How much VC did Linus have to work with when he got the whole ball rolling? -- I think I recall he did it because he wanted it....He did not see dollars and fast cars coming out of it....I think that the "hobbyist" business model is the best way to go here folks.
  • Any businessman or financial analyst will tell you that any corporation has only one objective: profit. The aquirement of financial wealth is the first and foremost responsiblilty of a company. Producing its product or delivering its service are just means of achieving profit: if they could turn a great profit without selling anything they would. What they provide to the consumer is secondary and only important insofar as it makes money. Sadly, this holds true for open source as well. As soon as a group of people who believe in the ideas and principles of open source come together, for effeciency reasons, they run the risk of becoming a company. Gradually the financial necessity of upkeeping a corporation becomes their primary motive. This takes much longer in such a rigidly principled market as open source, but eventually it will happen. That doesn't say anything about the future of open source though. As long as there are individuals who believe in it and work on it, not as members of a corporation, but because they think it is a good thing, corporations may depart from the movement as they please, and while devastating to open source, it will never be fatal.
  • Where is the great american spirit ? If I have a good idea, why should I make it using the open source model ? why not become rich ?...
  • *ouch!!!*

    What did I do?! Okay, okay, so I took a three hour lunchbreak when I should have been at work, and I met up with a female friend which my (paranoid) girlfirend probably wouldn't aprove of, but hey, I'm only human! ;-)

    Cheers,

    Tim C

    PS Yes, I know this is Offtopic...

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