BusinessWeek is asking an important question of open-source companies: despite the rapid growth of some open-source businesses (e.g., Red Hat, Novell Suse, Alfresco, SugarCRM, and others), it's still very much an open question as to whether open source can deliver outsized returns for investors.
"A pure service business is not particularly defensible," says [Red Hat CEO Jim] Whitehurst. "Some open-source companies have not truly figured that out." If the open-source movement, now in its second decade, is to realize its promise for vendors and investors, more of its purveyors will need to get the message soon.
Savio Rodrigues of IBM has been beating this drum for some time, suggesting that pure open-source business models have a built-in glass ceiling. While I think this is a bit overstated, I 100 percent concur that any business must figure out a "proprietary" differentiator that tells a customer, "This is why you buy from me rather than my competitor, and rather than taking it from me for free."
Support, as Jim Whitehurst suggests, is not a compelling enough argument for most would-be buyers.
This is why I've argued for a phased approach to open source. It's inefficient to try to "reap" every prospective customer in the early stages of a business: making the code open source lets a company sow a wide field of prospective buyers.
But it's also inefficient to rely on faith and goodwill to reap customers later in a company's growth and revenue trajectory. There must be a compelling reason to buy. This is where many in the open-source world lose their way. But what should that reason be? That is the nettlesome question.… Read more