The Open Road

In the cloud, no one cares about your software license. That is one of the most liberating--and frustrating--things about cloud computing.

Depending on your perspective, it either opens up computing or closes it off. Customers don't seem to care one way or another, happily shoveling data into cloud services like Google, Facebook, and others without (yet) wondering what will happen when they want to leave.

Cloud computing may just be the Hotel California of technology.

Google Trader

(Credit: Google)

I say this because even for companies, like Google, that articulate open-data policies, the cloud is still largely a one-way road into Web services, with closed data networks making it difficult to impossible to move data into competing services. Ever tried getting your Facebook data into, say, MySpace? Good luck with that. Social networks aren't very social with one other, as recently noted on the Autonomo.us mailing list.

For the freedom-inclined among us, this is cause for concern. For the capitalists, it's just like Software 1.0 all over again, with fat profits waiting to be had.

The great irony, of course, is that it's all built with open source.

In this cloud computing/Web 2.0 world, infrastructure needs to be cheap, flexible, and plentiful. Open source delivers all three.

Hence, we've seen companies like MySpace tripping all over themselves to open up parts of their platforms in order to make themselves more appealing to developers. As ReadWriteWeb wrote of Facebook back in 2007, however, such developer outreach has not opened up these Web platforms in the sense of providing useful off-ramps to services like Twitter, Digg, Facebook, etc. It has simply created more on-ramps.

Cue the nefarious Microsoft theme song.

Rather than wringing our hands over this, I think there's an opportunity to create amazing amounts of good (and wealth) in this open/closed Web. Frankly, the longer we're in this, the less it's going to matter whether the code is open or closed because, as Tim O'Reilly has been saying for years, data is the heart of the Web, and even open data isn't going to hurt a successful vendor's network effects.

Take Google Trader, an interesting new SMS application that helps people buy and sell goods through text messaging. As The Economist notes, however, one of Google Trader's most interesting applications is in helping to foster free markets in emerging economies:

Lastly there is Google Trader, a text-based system that matches buyers and sellers of agricultural produce and commodities. Sellers send a message to say where they are and what they have to offer, which will be available to potential buyers within 30km for seven days. Mr Makawa says his father used the service to look for a buyer for some pigs, which he sold to pay school fees. These services cost 110 shillings ($0.05) a time, the same as a standard text message, except for Google Trader, which costs double that. In their first five weeks the services received a total of more than 1m queries.

I'm not familiar with the economics of SMS, but I'm guessing that Google gets a cut of the messages its application generates. The more useful Google Trader becomes, the more SMS it generates, the more commissions Google collects.

For the entrepreneurs using Google's service, they could possibly care less whether Google Trader is open source, but Google might. Open the source (and the API to the service), and let a thousand add-on development projects bloom. The more useful and feature-rich the Trader application, the more SMS, the more...you get the picture.

Take me to Google, Earthling.

The key is to create an open Web platform, one into which a diverse array of mobile software services can tie. This is one reason Google is such an advocate for open source. Android and other projects bring more people to the Web, a Web that Google monetizes through proprietary services like AdWords.

The community is critical to building upon the platform, but the money is in control of the platform and provisioning of services therefrom.

Just ask Amazon.com. According to ZDNet, Amazon's Elastic Compute Cloud (EC2) service makes roughly $220 million per year. That's a lot of cash, and is a function of EC2 sitting at the heart of a growing developer community, one that builds upon Amazon's open APIs to the service.

Some companies like Cloudera and Red Hat will make piles of cash providing the infrastructure for this cloud-computing gold rush. But the biggest money of all will be those that can build platforms in the cloud, platforms that depend upon open source but which aren't open in the traditional open-source license sense of the word.

That traditional licensing world is dead. Open-source licensing has become an on-ramp to closed data services, hardly what its creators envisaged. In fact, proprietary cloud vendors are almost certainly going to become the biggest cheerleaders for open source, because it means more developers creating more on-ramps to the cloud.

Even if such providers create effective exits, it's unlikely that consumers and businesses will actively use them...

...just like in the Software 1.0 world.

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Matthew Szulik, Red Hat's former CEO and current chairman, has been in semi-retirement for the past two years, but you'd never know it from listening to his interview with the BBC's Peter Day. Szulik, ever the revolutionary, talks up open source's opportunity to disrupt conventional software and promote social reform.

As he does so, however, he inadvertently describes Red Hat's winning open-source business model as directly parallel to the Web 2.0 business models deployed by Google and others. While this isn't surprising (I've written about it before), it was the first time I've heard Red Hat state it so baldly:

Think about [open source] like mining. There's all of these natural resources buried under the ground.

But unless you have a large aggregator to pull it out of the ground; to take the gold or the coal or the copper and turn it into something usable, then it's really not useful for mankind.

[Day interjects, "But Linux was usable before, wasn't it?"]

It was usable by the 14 people that are sitting in Cambridge or Oxford right now. It was really not a mainstream technical activity.

Red Hat develops some of the open-source software it distributes. It is the primary contributor to the Linux kernel, writing 12.3 percent of the Linux kernel, and spends, by Szulik's estimation, "over $100 million per year to advance Linux and open source [development]."

But Red Hat, like Google, Facebook, and other "Software 2.0" companies that heavily employ open-source software, gets more than it gives to open source. It is a net beneficiary.

Sure, as Szulik goes on to explain to Day, Red Hat "puts all of that [$100 million worth of] intellectual property into the public domain," which differs from Google and others that write a lot of proprietary software that is never shared with external developers, but the core model of building upon open-source software and wrapping it with proprietary services is very much the same model employed by every significant Web company today.

I'm also willing to bet that Google contributes more than $100 million worth of intellectual property as open-source software every year, making it an even bigger open-source company than Red Hat, at least in terms of lines of code contributed.

I used to complain that the Web companies pick and choose where to contribute back, but it all seems to work out in the end. Yahoo works on Hadoop while Red Hat releases KVM while Google releases Gears while...you get the picture. Different companies releasing and "free-riding" on different open-source code, with the entire industry growing and benefiting in the process.

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These days, it's virtually impossible to avoid open-source software. If you're a Web company, don't even bother trying.

That's the message I got from a conversation Friday with Raju Vegesna, evangelist at Zoho, a leading competitor to Google Docs. According to Vegesna, the company--formerly known as AdventNet, now called Zoho Corp.--has been around for 13 years, and has always used free, but not necessarily open-source, software as part of its strategy. The company has released software under open-source licenses before, including the somewhat controversial vTiger project.

With 1.8 million users of Zoho.com, growing at roughly 100,000 new users per month, and profitability expected in 2009, Zoho's use of open-source software offers a glimpse into the development strategies of the next generation of software companies.

As Vegesna explains it, "In 2003 we were trying to determine whether to go open source or SaaS. We opted for both." Expect to see a lot more "both" software strategies going forward: open-source software inside with a cloud delivery strategy, and open APIs to give external developers access to that cloud.

Q. Tell me about how and where you use open source at Zoho.
Vegesna: We are completely open-source at the core of Zoho, from the operating system (CentOS) to the database (MySQL) to the application server (Tomcat) to Hadoop for scaling our systems.

Do you modify any of these projects and, if so, do you contribute back those modifications?
Vegesna: Yes, at times we modify open-source software to meet our needs, but often, like with the operating system, we don't modify the source code. We simply strip it down to the essential components that we need, thereby improving performance and security. But for other areas, we may modify a project like MySQL to improve scalability.

As for contributing back, it depends. If our changes help us but likely won't help the community, we won't contribute them back. But if it's code that would help the general community, like a security improvement, we contribute that back, unless it's something proprietary to our business. Whether the community accepts and incorporates it, however, is up to it.

Could Zoho.com exist if it were built with proprietary software?
Vegesna: Technically, we could do the same thing with proprietary software but the cost would be prohibitive. Imagine Google trying to run 600,000 servers on Windows. Could it do so technically? Probably. But it's doubtful that it could give so many different services away for free if built on pricey, proprietary software.

Without open source I can't imagine SaaS [software as a service] taking off. The economics simply wouldn't work.

Open source gives us flexibility so that we can add our own layers of business logic. For example, we use OpenOffice for document conversion. There are some conversions that OpenOffice doesn't support, however. Because it's open source, we can split the code to allow our proprietary software pick up the slack where OpenOffice can't handle transformations.

Most of our applications are built from the ground up by Zoho. Ninety-five percent of our employees are engineers. We use open source strategically but we need to be able to understand our code intimately, so writing it ourselves is important.

We use the best of open-source software, contribute back strategically, and write our own software where it makes sense.

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Just when I get consumed by the "destruction" in Schumpeter's "creative destruction," I stumble across something like this note from a new indie band on Dave Kusek's "Future of Music" blog:

TOTAL MADE THIS MONTH USING TWITTER = $19,000 TOTAL MADE FROM 30,000 RECORD SALES = ABSOLUTELY NOTHING.

In part, this is a testament to the power of Twitter, but it's primarily an example of how new technology can upgrade old business models, as Kusek points out.

These new tools, such as Twitter, will help the entire music business scale much, much better. Very popular musicians such as Radiohead will still make a lot of money. But relatively unknown artists, by promoting their work and selling stuff directly to the fans, using free or inexpensive online tools, will be able to make a better living than they do right now. The future might not be very bright for the big record companies, but it is indeed bright for the artists.

It's not about a wholesale replacement of the old world with the new. It's about making the old world more efficient through the Web.

Yes, some businesses will absolutely get bulldozed by the power of the Web. But not most. At least, not yet.

For example, Jason Hiner is likely right to suggest that Microsoft's enterprise dominance is unlikely to wilt in the face of Google in the near term, though I continue to believe Google has the upper hand in the long run.

This is particularly true when you track the executive departures from Microsoft to more agile competitors like eBay (Yes, even eBay is more agile than Microsoft), Google, Facebook, etc. Steve Ballmer was quick to call the death of offline media, but has been slow to move Microsoft to an online existence.

Regardless, there's still plenty of time for software companies and record labels to adapt to the power and potential of the Web. But the transition must start now.

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Some have described Google as an advertising company. This might have been accurate at one time, but given the sheer breadth of Google's ambition and product mix, it's far too limiting a description.

Google is a search company. It's a cloud company. It's a subscription services company. And, as is becoming increasingly obvious, Google is the world's largest open-source company.

Tim O'Reilly has been telling us this for years, but it wasn't until I read this brilliant Keir Thomas article that I appreciated the clarity of O'Reilly's vision.

As Thomas writes, Google is the antithesis of Microsoft. Where Microsoft is closed, Google is open. Where Microsoft is limiting, Google is expansive. Where Microsoft is desktop, Google is the Web.

Microsoft has a problem, and it's this: Its entire business model is built around discrete computers running discrete applications....

The key thing about online applications [like Google] is that they are platform agnostic....Open source doesn't require licensing fees, and is like a double-jointed Russian gymnast: It's flexible. Really flexible. This puts it in a far better position to provide a platform for the new platform agnostic online world.

Chrome (technically Google Chromium) is open source because it makes no sense for Google to lock-down software to one hardware platform or architecture. The platform no longer matters in the Google universe, and this perhaps is the biggest difference between the Microsoft and Google philosophies. Microsoft needs you to keep you using Windows and an x86 platform.

Google [doesn't] care what computer or platform you use, and is actively encouraging you to be eclectic in your choice. Microsoft's approach is all about restriction. Google's approach is all about freedom.

In short, Google can afford to give away everything that makes Microsoft valuable. Everything. How can Microsoft hope to compete, except by trying to tether the online experience to its legacy desktop?

This is a good strategy...for now. It takes a lot of time for industries to change, and it's very possible that not all enterprise applications will successfully migrate to the cloud, as Dan Woods posits.

As such, enterprises will stick with Microsoft and on-premise deployment of software for many years to come.

But that phase in our industry's history will end. Already, as Chris Nuttall notes in the Financial Times, "the inevitable primacy of the browser and web applications is becoming clear."

Google, creator of some of the best of such Web applications, is the quintessential open-source company. It can afford to open all of its code, even if today it does not, because Google isn't selling code, and it can derive significant benefit from extensions to its online services through open-source development. Open platforms, as venture capitalist Fred Wilson suggests, are the future.

Google, in short, is what open source wants to be when it grows up. It illustrates what a true services company looks like: not support and other old-world services, but instead Web services. Most open-source companies only strive toward this goal. Google has fulfilled it.

The writing is on the wall, and that writing says that Microsoft and its model is dead. Google has killed it. Unless we're careful, however, Microsoft won't be the only casualty. Anyone hoping to monetize software directly is at risk.

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Of the formative figures in open source, Richard Stallman, Linus Torvalds, and Eric Raymond loom large. Arguably, however, few have had as much of a disruptive force as Tim O'Reilly, who has helped to create the open-source market and has spent the last six years reshaping it with his seminal "Open Source Paradigm Shift" and other articles.

In an engaging and informative recent TWiT podcast, O'Reilly revisits the theme. It doesn't break new ground (for O'Reilly), but does highlight, and render somewhat meaningless, the fissures currently running through the open-source community.

Host Randal Schwartz kicks off the podcast with a question about Twitter: Is Tim concerned that "Twitter is anything but open?"

I like to think I have a more nuanced view of open than a lot of people. Some purists will say that [I'm] a traitor....From the very beginning of my advocacy about open source, I've really just been interested in having interesting things happen in the world.

The reason I like open source and worked on this idea of renaming it from "free software" to "open source" was because I don't think it's a religious issue. It's really about how do we actually encourage and spark innovation. Because for me a more interesting world is one where there's more innovation and more freedom to innovate....

The idea is that people can build on it. You give it away because you want other people to do things with it that you can't do or don't want to do.

Open source, in other words, is not an end in itself. It is a means to an end, and that end is collaborative innovation.

While reputation is the first goal of many open-source developers, it's really a means, with the end for many being money ("There's huge currency in reputation. And that's how most open-source developers have 'monetized' giving away things for free.") But it's not really the ultimate end for, as O'Reilly rightly points out, "Money is a signifier of a more fundamental exchange."

Today, O'Reilly suggests, the real value in open source has little to do with source code; instead, it's the result of that code. Value has moved to data, with "network-effect driven databases - user-generated databases - [serving as] the heart of Web 2.0."

And yet, as O'Reilly points out, the open-source world continues to fixate on the wrong battles:

The whole context of free and open-source software is not about Linux taking over the world and replacing Windows. That might even happen, just as the PC replaced the mainframe. And it probably will happen. But it doesn't change the dynamic....

The heart of how we need to understand free and open-source software is in the context of Web 2.0. We can have as much open-source software as we want but we've now created this new layer where these databases that grow through user contributions are the real source of lock-in.

Eventually, these guys probably will make their software open source because it won't matter. The value lies in having the data. The real question is, will there be a future open-source movement that's really an open-data movement.

The market, in short, is no longer for software, open source or proprietary. Tomorrow's market is all about data. It's therefore not surprising that O'Reilly isn't too bothered by people who consume open source without contributing back. That's a short-term phenomenon:

Free riding doesn't bother me because we do get value from it.

That's not to say that there aren't real issues with the power that is accruing to Google, Facebook, et al., but open source is science, not religion. It's pragmatic. If you close things off, eventually you lose. This is why one of my slogans is 'Create more value than you capture.' As long as people are doing that, I don't care whether they're trying to capture some value.

It's a good point, and a great reminder that many persist in fixating on all the wrong issues in open source. The licensing wars should be a thing of the past. The question is how to drive participation while building businesses that improve as participation increases. Sometimes this will result from open-source licensing, but sometimes it won't.

So long as we focus on the correct end, rather than treating open source as an end in itself, we should be OK.

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Open source has proved to be phenomenally successful, and continues to grow. As open source grows beyond its roots in software infrastructure like operating systems and Web servers, however, it is finding that the types of community it attracts is increasingly corporate.

Even in the geeky application server layer, Marc Fleury notes that JBoss' "community meant users, partners, consultants," not the freedom-loving developers we often associate with open source. This is because our simplistic conception of community has likely always been wrong, as Michael Dehaan suggests.

Open source has long been more about users than developers for the simple fact that a far greater number of people know how to use software than develop it. Hence, though Richard Stallman and early proponents of open source have issued a clarion call for the developer's right to view and modify source code, the silent majority of the open-source community really only cares about the right to use and extend binary code.

So, you see Openbravo's Paolo Juvara suggesting to its open-source enterprise resource planning community that it might be advisable to extend the Openbravo system, rather than customize it. (Read: modify core source code.) Or you read Jake Goldman rightly arguing that open-source software can lead to closed platforms (e.g., if APIs are not well-documented), while proprietary platforms like Mac OS X or Salesforce.com can actually be much more open platforms, despite keeping source code closed.

In an ideal world, you'd have open source and open platforms, but not every open-source project lives up to that ideal. It's therefore not surprising that open source is growing in two different but aligned directions.

The first direction is commercial open source, which generally trades off the promise of 100 percent source-code access for a hybrid open/proprietary approach, as The 451 Group captures in a recent blog post. This is spawned by a need to frontload development with a paid community at a level of the software stack that doesn't attract a broad development community. (How many people do you know have the aptitude and interest to develop an open-source customer relationship management system? Exactly.)

The second direction is proprietary software that emulates the best of open source by keeping APIs, data, etc. open. This comprises Web 2.0 and other technologies that are open, but not necessarily in a way that would pass muster with the Open Source Initiative.

Both approaches involve openness. Both make trade-offs, and this isn't necessarily a bad thing. Jake Goldman, echoing Tim O'Reilly's suggestion that open-source licensing matters very little in the grand scheme of things, declares "it's all about platform openness and adoption, not base code openness." He's absolutely correct.

Open-source projects need to focus on more than their license. We need to improve documentation and access to APIs that make source code more usable or, even better, somewhat meaningless. Cloud computing already obviates much of the value of source-code access, a trend that I believe we'll continue to see as users demand the transparency of open source without having to muck in the code.

Such a trend is a useful "next-generation open source" because it focuses on users, not developers, with data, not code, the primary currency. So, while I'm glad to see the GIMP project discussing usability enhancements, I'd much rather see such projects finding ways to include average users in the process of development.

This has long been a weakness of OpenOffice.org, for example. I doubt most of OpenOffice.org developers do a lot of presentations, spreadsheets, and such. But the target user--someone like me--is mostly locked out of the development process by unfamiliarity with the project and no clear idea as to how to help.

Meanwhile, proprietary software like Lose It! and other social software does a far better job of including users in the "development" process by making development all about data, not source code.

In sum, proprietary software has much to learn from open source, and is increasingly applying open-source lessons of transparency and modifiability. But open source also has a lot to learn from the proprietary software world, which increasingly involves lay users in a way that open source has not.

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I was listening to MGMT's "Kids" today on iTunes, and by the end of the song I found that I had shelled out roughly $6 for a few more songs by Arcade Fire, Sonic Youth, Band of Horses, and MGMT.

All of those songs are available for $0.00 on LimeWire, which I have installed on my computer, but which I haven't used in at least a year. I haven't needed to. Everything I want to buy is a click away and, better yet, as happened Monday, Apple keeps helping me find more things to buy with its brilliant Genius service.

It used to be that I'd download music without paying. I didn't want to steal the songs--I simply didn't want to have to go to a CD store to buy the songs that I knew I could be listening to right now. Making customers wait unnecessarily doesn't pay, as The Guardian recently pointed out.

Dave Kusek points to a number of reasons consumers happily pay for otherwise free products: authenticity and immediacy are two.

Software, music, movies, and other digital goods each require new business models, models that assume free transfer of bits and charge for other services that are not easily replicated.

For instance, in open-source software, Red Hat's business model depends upon certification of a closed, Red Hat Enterprise Linux binary, but doubly so on its Red Hat Network that delivers patches and other updates to the software.

Somewhat similarly, Google's depends upon value-added services (search, news, etc.) that aren't related to the underlying open-source software at all.

Free (as in liberty) software has become secondary, in other words, to the generally non-free (as in liberty) services that run on top of it. Tim O'Reilly was right: we truly are in the land of Open Sources 2.0 or, if you will, the post-open source world.

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Even as open source seeks new models for funding its explosive adoption, open-source business executives can take heart: the newspaper and, indeed, the Web 2.0 world, are undergoing the same soul-searching.

It is therefore instructive to hear what Google CEO Eric Schmidt has to say on the matter, since Google is one of the few Web companies that has learned how to make serious coin on the free Web. TechFlash has excerpted his comments Tuesday to the Newspaper Association of America, some of which are highly pertinent to anyone trying to make money in freely distributed goods:

I think you're going to end up with all three [advertising, micropayments and online subscriptions]. An analogy I would offer is television. There's free television, over-the-air television, there's cable television and there's pay television. And they have smaller markets as you go from free to more highly paid. And that structure looks to us like roughly the structure of all of these businesses....

[Y]ou should assume that your information -- that there's a category of information you all produce that you'll want to distribute free -- freely -- there's a category that you'll want to have a per-click basis, and then there's some that you'll want subscription for.

The reality is that in this new model, the vast majority of people will only deal with the free model. So you'll be forced, whether we like it or not, to have a significant advertising component, as well as a micropayment and an additional payment system.

Hmm....This sounds eerily similar to the business-model somersaults that the open-source world is also going through, and which the Web 2.0 world must soon explore in earnest.

Free adoption is the hallmark of the Web, whether expressed in an open-source download or an online service. But real businesses need to find ways to charge for value beyond that initial taste of "free," or they will discover that there is no such thing as a free bankruptcy. (Lawyers tend to charge for that sort of thing.)

Schmidt's counsel is wise: find different ways to charge different types of users. Marten Mickos, former CEO of MySQL, suggested that a good open-source model segments users into those willing to trade money to save time, and those willing to trade time to save money. One pays in cash, the other in code. It's a nice approximation of the principle Schmidt outlines.

We're still in the early days of the Web. It's nice to see that even the big vendors like Google are still experimenting with the right business models to monetize the Web's tremendous growth.

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