The day open source became big business is the day that open-source development exploded. Yes, open source predates the moneyed interests hankering to use it to competitive advantage, but it really wasn't until IBM dropped $1 billion on Linux that companies began paying employees to write free software that the movement saw broad adoption.
That's when open source became more than an efficient way to develop software, and also became a great way to build a business.
However, adding open source to one's business is not magical pixie dust that guarantees its viability. As IBM's Bob Sutor explains:
The basic principles around revenue, profit, loss, taxes, payroll, overhead, accounting, sales, incorporation, health care, and human resources all apply. You can be a starving open source software entrepreneur as easily as a starving proprietary software entrepreneur. No one will excuse basic business failures and screw-ups just because you use open source. Make sure that you will produce a product that people want and in some way will pay for, no matter how indirectly.
Sutor's counsel applies to any company or individual that wants to build a business around open-source software, but arguably some of the industry's best projects are not the product of any one company, but rather of several. Linux, Mozilla, Apache Software Foundation, Eclipse, and other collaborative communities represent an interesting way to use open source to competitive advantage.
In many ways, open source has become a critical component of the software industry because the market has largely moved from vertical businesses (i.e., companies controlling all aspects of production, distribution, etc.) to horizontal markets (i.e., companies focusing on their core competencies and depending on others for complementary functions).
Linux: Peace, love, & squeezing Microsoft
But this business control system has a inherent risk. Should an organization monopolize a specific segment of a value chain system they can extract a higher percentage of its total proceeds. If the product, or service, in question is price elastic than those additional proceeds will come from other participants in the value chain system.
Case in point? Windows. By owning the operating system, Microsoft threw a wrench into the collective cogs of horizontally oriented software firms like Intel, IBM, and others.
The industry's response--Linux--is a classic example of the open-source approach to mitigating individual choke holds within an industry, as Prentice goes on to write:
What then does a CEO do when facing a squeeze on their profits because a direct, or downstream, supplier is dominating a segment of the value chain system? Besides negotiating a better deal - if they can - they've been left with little choice but to get directly into that segment of the value chain system themselves. But by doing so their organization is distracted from focusing on its own core competency.
The risk of such an undertaking can be mitigated if there is a collective response by similarly affected members of the value chain system. After all, it is usually a shared problem. But collective responses have always had an inherent, and often fatal, flaw. Who owns the resulting assets? Either organizations enter into complex joint venture agreements to sort this out or run the risk of shifting the distortion in the value chain system to another organization.
Again, Linux offers the perfect example. IBM, Intel, Red Hat, and others aren't investing in Linux because they're all chums at the country club together, but rather because they're looking for ways to reduce Microsoft's hold on their own businesses through its control of personal computer and server operating systems.
As an added benefit, it's a great way for companies to collaborate without running afoul of antitrust laws. It's collusion without the collusion.
Intriguingly, even Microsoft is getting into this game. Microsoft's partnership with open-source ad serving company OpenX indicates that Microsoft, too, is figuring out how to use open-source complements to loosen strangleholds competitors like Google may be hoping to throw in its way.
This is why open source is growing so much faster than the rest of the industry, as IDC finds. It's not because we love each other more. Quite the opposite. It's because proprietary vendors have figured out that open-sourcing key complements to their core businesses can be strategically decisive in hurting competitors while helping themselves.
For years, Oracle, Hewlett-Packard, and IBM have used Linux to lower the cost of their hardware and software-based solutions, while keeping profit margins fat and healthy. Google, ever the quick learner, is now doing the same with Android.
The mobile market will never be the same.
Take a peek inside the Android.
(Credit: Google)Just as Google and others are using open-source software to lower barriers to adoption of their proprietary cloud offerings, so, too, is Google using open source to reduce the cost of mobile computing in order to drive uptake of its proprietary search-related advertising business in mobile.
Google CFO Patrick Pichette said as much in Google's most recent earnings call:
If we move forward the adoption of these smartphones by having a lower cost infrastructure because it's open source...all the (mobile) searches...will happen so much faster.
Open source: it's all about peace, love...and capitalism.
However, Android is more than just a way to shave a few dollars off a phone's purchase price. Jim Zemlin, Linux Foundation's executive director, declared recently that Linux offers "greater flexibility, freedom from lock-in, and lack of licensing costs."
He's right, but I'd argue that the "lock-in" argument is a bit of a throwaway line and the cost advantages are of secondary importance. The real value for would-be Android developers is its flexibility, which in turn helps to corral a community of interested participants.
Google Android's open-source license also encourages broad experimentation with the platform by a range of device manufacturers. Some handsets will be flops, but others, like Verizon's forthcoming Motorola-developed Droid, look likely to succeed.
Google can play the odds because, unlike Apple, it hasn't tied its fate to any one device. Instead, it has intentionally spread Android's risk--and chances of success--through its open-source license.
It's genius. Sheer genius.
Microsoft CEO Steve Ballmer seems determined to revive Microsoft's stale desktop monopoly, as reported by The New York Times and, in mobile, is focused on toppling Apple's iPhone "momentum." But he probably should be more worried about Android as a long-term community play.
Mobile is the future, and that future is going to be heavily influenced by open source.
Linux has succeeded in servers precisely because a wide array of Microsoft competitors have converged on it as a way to club Microsoft. The same is happening in development tools (Eclipse), browsers (Firefox), Web servers (Apache), and more.
In Android, then, Microsoft isn't simply competing with Google. It's competing with the entire industry--or will be, soon enough.
Google, for its part, should continue to spearhead Android development, but must find ways to open Android further to outside involvement. Otherwise, it stands to lose out to open-source alternatives like Symbian if they do a better job at encouraging community uptake. Google really doesn't need to control the platform to succeed.
In fact, given that its revenue derives from proprietary services delivered on top of the Android platform, its best chance for success is to do whatever is necessary to further proliferate Android.
Android is powerful with Google behind it, but it would be much more so with Nokia, Palm, and others. As in the server war, such vendors may find it advantageous to abandon their "Unix" variants to combine behind Android.
That is the power of open source, and it's how Google has made such intelligent use of Android. It's not about freedom from lock-in; it's about freedom to demolish competitors and serve customers by shifting the rules of the game.
There was a time when vendors knew how to color inside the lines. A database vendor sold databases. An operating system vendor peddled operating systems. And application server vendors were in the business of selling application servers.
Customers knew what "application server" meant, which is what paved the way for low-cost, high-value open-source application servers like JBoss, Geronimo, and others to arise. The category was well understood. The only thing the customer had to decide was whether she wished to overspend on a brand-name application server or buy into an open-source upstart.
As the economy continues to pressure IT budgets, a new breed of application server is rising, one that doesn't color nicely within the lines of the traditional "app server" definition.
First there was SpringSource, which in April 2008 claimed it had developed the first "proper Java application server" to hit the market in more than 10 years. IBM, Oracle, and Red Hat (JBoss) must have found this surprising, given that "proper Java application servers" were what they presumed to be selling to their customers.
SpringSource, pressing the issue further, this week announced Spring Roo, an "interactive, lightweight, user-customizable tooling that enables rapid delivery of high-performance enterprise Java applications." At just 4MB, Spring Roo is tiny, but its promise is big: "working applications within 10 minutes of finishing the download" (video here).
Red Hat is taking notice of SpringSource's moves, but SpringSource founder Rod Johnson is dismissive of Red Hat's ability to compete:
Red Hat recently announced a defensive move (JBoss Open Choice strategy) motivated by trying to play catch-up with SpringSource. Clearly the momentum of SpringSource tc Server and dm Server has Red Hat worried, along with the continued advance of the Spring Framework as the de facto standard component model for enterprise Java.
The "JBoss Open Choice strategy" appears to be a repackaging, rather than new technology, which attempts to position JBoss as still relevant in a brave new world of changing requirements. On a positive note, it appears Red Hat has finally realized that many developers and customers have long since moved away from the full Java EE stack; that the traditional heavyweight application server has declined in importance; and that the Spring programming model is important to their customer base.
The paint is barely dry on JBoss' incursion into IBM's and Oracle's application server territory, and already it's under attack from SpringSource, which is positioning JBoss as old technology, despite barely being out of its teens. It's a sharp attack, but perhaps a sign of open-source competition to come.
Consider MindTouch. The entire idea of a Java application server got a shaking this week from MindTouch, which announced a new application packaging feature for its collaboration platform, as TechCrunch reports. This feature:
(A)llows developers to create a compressed file for import into other MindTouch instances, letting enterprise users install add-on applications easily. This addition represents MindTouch's ambitions to become an application platform where installing applications (is) as easy as adding Firefox add-ons.
This may not sound very groundbreaking, until you consider that MindTouch is essentially announcing that it has turned the wiki into an application platform. Until last year MindTouch was mostly known for its DekiWiki technology. This application-packaging technology basically allows customers to build on wiki collaboration, which is much more than just a MediaWiki-style wiki, as ReadWriteWeb notes.
Neither SpringSource nor MindTouch fit the old application server mold, but it's not clear customers should care. Enterprises just want to get work done.
Just as Google is shaking up e-mail with Wave and Wolfram Alpha is redefining a corner of search, so too are SpringSource and MindTouch redefining what application server means for the modern enterprise, while open-source companies like Acquia redefine Web content management, Marketcetera pushes the envelope on financial trading platforms, etc.
Open source is the new innovator, and not merely the commodifying force in the market.
Indeed, with traditional software markets perhaps reaching a critical saturation point, we may see much more "coloring outside the lines" in enterprise software from open-source projects and companies. Oracle's response has been to consolidate, but others seem to be responding with a different strategy: innovation.
Disclosure: I am an adviser to MindTouch. Red Hat is a business partner. Acquia is in some ways a competitor.
Follow me on Twitter @mjasay.
Open source's greatest strength may also be its Achilles' heel.
As a developer-driven phenomenon, much of the best open-source software ends up being written for other developers. For example, it's not surprising that Linux wins on the server (technical audience) but largely loses on the desktop (non-technical audience). Companies like Canonical and MindTouch can mitigate this by paying for usability design. But as an overall movement, it remains a weakness.
Apple has the opposite problem. It is religiously focused on usability, but struggles to open up to outside developers.
Even so, its attention to the user is something open source must emulate to reach the next level of adoption. Jason Snell of MacWorld writes:
Apple excels at creating products that the general public likes because the company is driven by design, not by engineering. Most tech products--heck, most products in general--aren't as good as they can be because they're put together by the people with the technical knowledge required to build them. And so the technical aspects of the product get pushed to the forefront.
The more complicated a product gets, the more technical acumen is required to put it together. Bad Web sites are built by people who know how to code HTML and JavaScript but don't understand how people use the Web. Bad software is written by people who are experts at knowing how a computer works and how to write code to make it do what they want, but no idea about how regular people behave and how those people expect to interact with that software.
Apple's the kind of company that makes decisions based on people, on users, and then challenges its engineers to find ways to fulfill those needs.
Why can't open source do this? Isn't there room in the open-source development process for the product manager, the focus group, and various other tools that software companies employ to determine what average users want and then to translate this into development plans?
The company (or project) that figures out how to do this will win.
Some projects already accomplish this to some extent. The strength of Mozilla, for example, is that it has figured out how to enable 40 percent of its development to be done by outside contributors, as BusinessWeek recently wrote. The downside is that these contributors are techies, but the upside is that they're techies who add language packs, accessibility features, and other "niche" areas that Mozilla might otherwise struggle to deliver.
This suggests a start: enable your open-source project to accept meaningful outside contributions that make the project reflective of a wider development community.
But the real goldmine is broadening the definition of "developer" to include lay users of your software. The day that I, as a nontechnical software user, can meaningfully participate in an open-source project is the day that open source will truly have won.
Until that day, don't be surprised to see Microsoft, Apple, and their ilk win most battles for the hearts and minds of common users. This is why Google comes across as naive in asking open-source developers to help it fight Microsoft on the "desktop." It's not a market developers are well-equipped to win because they're aren't reflective of the vast majority of end users.
Most people don't care how the software is written, and care even less for the supposed elegance of a given program's code. They just want the software to work in an easy-to-use manner, to look nice, and to fit their budget.
Open source does the last one better than most, but struggles at times with the first two. Fix that problem and open source will know no boundaries.
Follow me on Twitter @mjasay.
Since the unveiling its own browser, Google's continued support of Firefox has been somewhat puzzling. But to the world's dominant Web search provider, helping increase the amount of Web use ultimately means more Google searches.
Google has been a good partner to Mozilla over the years, pumping tens of millions of dollars into the open-source foundation that have helped make Firefox arguably the best browser in the world.
More recently with the launch of its open-source Chrome browser, however, Google became both partner and competitor to Mozilla. Given the potential to hurt Firefox adoption, it's interesting to note Google's calculus for introducing Chrome, as detailed in a recent O'Reilly Radar interview with Marissa Mayer, Google's vice president of search products and user experience:
We think that, overall, if you make the Web better, people use the Web more. And that ultimately benefits Google because we believe that search is a certain and rather fixed percentage of people's online activities each day. It's hovered right around 5 percent from the very beginning of the Internet...If that's true, one way we can grow search is by gaining market share from other competitors. The other way we can gain share is by just growing the market overall, where we don't necessarily gain share but we gain on overall volume.
So we have a number of things that we do that try and make the Web more pleasant and easy to use...As we looked at the browser market, people have gotten really good at rendering HTML. But there hasn't been a lot of innovation. And there's been almost no attention on JavaScript at all. And so we thought we could build a browser that is just a lot faster for the Web, and it's much more optimized for JavaScript.
As Mayer further details, Google doesn't expect to be the source of all browser innovation. It wants to continue working with Firefox, for example, helping prod the market forward.
As Mozilla CEO John Lilly has said, increased competition in the browser market can spark innovation. Competition isn't comfortable, but because it pushes vendors to do their best work and "often results in innovation of one sort or another," it's ultimately good for customers and competitors.
This is why we should be cheering Google's entry into the browser market--even if we ultimately want Firefox to win. Perhaps especially if we want Firefox to win.
Follow me on Twitter @mjasay
OStatic reports that the latest build of Google's Chrome browser outpaces Firefox 3 beta 4, with up to 30 percent faster performance than its Chrome predecessor, but this report overlooks a speedier Firefox alternative (Firefox 3 beta 5 is zippier), but it also misses arguably the biggest advantage Firefox has over every other browser:
A massive, growing, deeply involved add-on community, one that is only going to get stronger with the release of Jetpack.
Google has talked about getting Firefox-like extensions for Chrome but it, like Microsoft's Internet Explore and Apple's Safari, woefully underdeliver on community.
Before you cry 'Foul!', recalling that I dubbed the value of community "overhyped" in software, let me quickly suggest Firefox as an exception to the general rule, and a significant one, at that. John Lilly, Mozilla's CEO, reminded me on Twitter that 40 percent of Mozilla's development comes from outside contributors.
This makes sense, as Mozilla's Firefox fits all the parameters I outlined to hit the open core, open complement, open community box on my "openness grid."
So, fast as Firefox is, forget speed for a minute. Or two, because you really do have time, especially when the benefits of the Firefox add-on development community dramatically outpace whatever JavaScript improvements Google, Apple, or Microsoft may manufacture into their browsers.
Jetpack, as CNET reports, makes building and maintaining add-ons much easier for developers. InformationWeek notes that Firefox already sports more than 7,000 add-ons/extensions. Imagine what happens once the bar to creating and maintaining those add-ons/extensions gets better with Jetpack....
Mozilla is also proposing new rules for commit access to the core Firefox code, which could further open up the development process and encourage even more community involvement. Firefox, in other words, is going from strength to strength while its proprietary peers (which does not include open-source Google Chrome) struggle to be all things for all people.
In a product like the browser, which has so many disparate uses and users, this is an exercise in futility. Horizontal technologies like browsers and operating systems are best developed by communities, not individual organizations. They can be shepherded by a single organization - be it a for-profit corporation or a non-profit - but unless they break through the walls of their own office complex, they will struggle.
Dave Neary has suggested different ways to calculate the size of an open-source project's community. By any measure, Mozilla's Firefox community is large and growing.
This, and not JavaScript enhancements (of which Firefox will continue to do plenty), is what sets Firefox apart, and ensures that it's the browser to beat. Even though its 22-percent market share, growing 5 percent each year, still trails IE's dwindling 68-percent market share, declining 5 percent each year, Firefox has community, and that community is the decisive factor in the browser battle.
Follow me on Twitter @mjasay.
SAN FRANCISCO--Tom Foremski of Silicon Valley Watcher suggests that "you aren't are missing anything if you couldn't make it" to Web 2.0 Expo. That may be a bit strong, but one thing seemed to be almost entirely missing from the show: money.
Yes, there were plenty of sponsors spending money on the conference. There just wasn't much emphasis in the conference program itself on actually making Web 2.0 profitable for more than just Google, despite an entire track dedicated to Web 2.0 business models.
The one session, other than mine, that focused on the topic was somewhat apologetic about even having to raise the issue: "Why Sales Shouldn't Be a Dirty Word in Web 2.0."
Sales? A dirty word? How do these companies expect to exist long enough to be acquired? And while the good old days saw Web 2.0 companies bought based on their page views alone, the reality is that not many Web companies are going to be able to acquire money pits forever. Only so many companies can afford to acquire a YouTube and have it bleed mountains of cash.
Ironically, the open-source world, which has been criticized in the past for not making its advocates enough money, is now firmly focused on minting money, and it's doing a pretty impressive job of it. Red Hat, the biggest open-source company, notched more than $659 million in revenue in its last fiscal year, but Red Hat is no longer alone in making money with open source.
My own company, Alfresco, announced 103 percent year-over-year revenue growth (on a very significant base). Open-source ad server company OpenX delivered 400 percent growth in its ad-serving business. Pentaho and others have also announced significant growth, even as the economy contracts.
Web 2.0 has a lot to learn from open source. There are plenty of principles common to both (e.g., users add value, focus on adoption before focusing on sales), but there's one principle that Web 2.0 companies need to adopt immediately: users are nice, but customers are critical.
Disclosure: I am an Alfresco employee.
Follow me on Twitter @mjasay.
Jeffrey Hammond, principal analyst at Forrester, just Twittered something that is about to hit the traditional software world like a ton of bricks:
Just got off the phone with a client who's been mandated to use [open-source software] because licensing costs are killing them.
Call it the beginning of the end, if you like, but it's coming. The last few decades of software have been an aberration, built upon the historical accident that is digitization. Or, rather, not the accident of digitization, but rather that for a relatively brief period of time, we've made believe that digital goods can be treated like physical property. Companies like IBM, Microsoft, Oracle, and SAP have made billions in the process.
Guess what? Party's over. Ultimately, every software business will transition to a maintenance business, where software is charged on a subscription basis and looks suspiciously like services revenue, because buyers now realize that software products that can be developed and distributed cheaply should also be sold cheaply.
In fact, the transition to maintenance revenue is already well under way. Oracle, a paragon of the traditional software industry, already makes most of its revenue through maintenance. Its peers are much the same.
The next phase in the transition comes as IT buyers start to question the value of the maintenance contracts they sign with software vendors. Oh, wait. That phase has already begun, as reflected in the recent uproar over Oracle's and SAP's attempts to raise maintenance pricing without actually delivering much value for the base maintenance cost or the price uplift.
Next phase? We're already there, too. It's called open source, and it forces software vendors to provide ongoing value to justify CIOs spending money with them. Red Hat has led this shift, but it's a movement that is accelerating as open source permeates all areas of the software stack, from applications like Openbravo (ERP) and MindTouch (collaboration) to core infrastructure like Lucid Imagination (search) and MySQL (database).
In the past few weeks I've had a range of Fortune 500 companies choose Alfresco to replace Documentum, Oracle (Stellent), IBM FileNet, Vignette, and more. In those same weeks I've heard from peers at other open-source companies that they've been actively replacing HP, IBM, Tibco, Oracle, etc. in customer deployments, too.
In fact, the only enterprise software vendor that has remained somewhat impervious from open-source encroachment is Microsoft, as it has been lowering prices and improving ease-of-use in its technology for some time. But Microsoft, too, will have to face the open-source music, as Microsoft CEO Steve Ballmer has noted recently.
As enterprises get squeezed by the recession, they're going to squeeze their vendors for cost savings. At some point, those vendors' cost structures and business models won't support the squeeze, and the business will go to open-source vendors.
It's already under way.
Disclosure: I am an adviser to Lucid Imagination, Openbravo, and MindTouch, and an employee of Alfresco.
You can follow me on Twitter at mjasay.
CFO Magazine is running a great story about the cost savings available from open-source software. This is a topic that you'll hear open-source vendors crow about, but it's somewhat rare to actually get a CFO on the record about her benefits from open source, so it's notable.
Open source is gaining at proprietary software's expense.
(Credit: Gartner)Recent Gartner research suggests that over 27 percent of enterprises will deploy open-source software in 2009. (Note: the remaining 63 percent will, too, but Gartner must have asked the CIO, and the CIO is the last to know.) That's up from 25 percent in 2008, while the share of proprietary software deployed will actually go down.
That is perhaps the scariest data point for proprietary vendors who have to grapple with former safe havens like InterContinental Hotel Group, which CFO Magazine notes is adopting Red Hat, Alfresco, SugarCRM, and MySQL, among other open-source products, for its mission-critical systems going forward.
Against this backdrop CFO Magazine calls out the benefits of open source in a tight economy:
One of the initial raps against [open source] was that, while the idea of free and continuously modified software had a certain appeal, it also inspired a certain terror; what business would hitch its technological star to software that was pulled off the Web and unsupported by a major vendor? Who knew what lurked in the code, or how easily that code might be cracked into?
Today, the recession and its attendant impact on IT budgets have prompted companies to live with a certain level of anxiety. And, as well, years of experience by those on the cutting edge have shown that many applications within the [open-source] world may now be ready for prime time. Vendors do in fact play a role in supporting [open source], and while their fees have been rising, overall cost of ownership is still substantially lower; often that vendor support feels more like a security blanket than a shakedown.
This isn't a Payless Shoe Store commercial, either ("You could pay more, but why?"), promoting goods of generally less quality. Open source has hit its stride, and often the open-source competition is actually better for enterprise requirements than the proprietary alternative. For example, if an enterprise is running Web applications, it would be daft to not at least consider using the leading Web database: MySQL.
Better software, lower price. What's not to love?
If you're a CFO, there's much to love in open source. If you compete with open source, well, perhaps you won't be so enamored. Sorry about that. Competition has returned to software.
Disclosure: I am an Alfresco employee, and an adviser to SugarCRM.
Over the Christmas break, I've watched one of the basic powers of open source in action. Two employees from my Alfresco team did something that is largely impossible in the proprietary world:
They wrote integrations to third-party open-source software, the Apache Hadoop and Drupal projects. No contracts changed hands. No NDAs. Just code.
Open source, of course, is a great way to get one's code in the hands of would-be customers, and then sell them support or other add-on services or software. But it's also a fantastic way to collaborate with would-be partners. Not a single lawyer need get involved until the code is working, and then only to divvy up responsibilities and revenue, if you so choose.
Try the above integrations between two proprietary companies. First you get contacts from both companies (probably the executives, depending on the size of the company, because who has authority to make that kind of a decision?) to start talking about the integration. Then, before any real work happens, the lawyers need to get involved. (While at Novell, I had one of the most distressing experiences in my life trying to negotiate a partnership with Siebel. It's not an experience I'd wish on my worst enemy, much less a partner.) Further work will then need to be done to define the integration, marketing teams will need to get involved to define the go-to-market strategies and whatnot. And so on, until eventually code actually gets written, a year or so later.
With open source, you just need one guy and a week or two of downtime over Christmas. With proprietary software, you need a small army. Which do you think is the more efficient model?
