Sun CEO Jonathan Schwartz has put forward a compelling argument as to how Sun will monetize open-source software.
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In a nutshell, Schwartz argues that chief information officers decide to pay for for value, and value is more than just software. Schwartz seems to be suggesting that open source makes a great complement to a larger systems business, and/or that for mission-critical tasks, CIOs will pay to ensure that a company stands behind the code.
This is all true, but it also is potentially irrelevant, as several well-placed sources within IBM and Sun have confirmed to me that IBM is on the verge of acquiring Sun. IBM has been among the savviest of companies, when it comes to open source and its monetization; it's unlikely that Sun has much to teach Big Blue about making money with open-source software.
Even so, perhaps Sun's influence could help IBM use open source to drive adoption, not merely to create low-cost complements for its various business. Schwartz describes the Sun approach:
Integration, innovation and, as a result of building atop open source and commodity components, we are the low cost supplier. (Our competitors), on the other hand, will be forced into all kinds of contorted partnerships and complex reselling arrangements.
They may ship the boxes, but they won't control the platform software--or profit streams...Numerically, most developers and technology users have more time than money. Most readers of this blog are happy to run unsupported software, and we are very happy to supply it.
For a far smaller population, the price of downtime radically exceeds the price of a license or support--for some, the cost of downtime is measured in millions (of dollars) per minute.
If you're tracking packages or fleets of aircraft, (or) running an emergency response network or a trading floor, you almost always have more money than time. And that's our business model: we offer utterly exceptional service, support, and enterprise technologies to those that have more money than time. It's a good business.
But it's not the only way to run an open-source business. IBM contributes heavily to open-source projects and groups, such as the Apache Software Foundation, Eclipse Foundation, Linux, and other projects, almost always with the intent to either create a low-cost on-ramp to its more expensive (and proprietary) products, such as Apache Geronimo as a lead-in for IBM WebSphere.
IBM also contributes to open-source projects that promise to undermine the profit margins of its competitors. The company has long been a big investor in Linux, in part to help provide a common operating system for its various hardware lines, but also as a way to lobotomize several key competitors, including Microsoft...and Sun.
Nearly 10 years later, IBM's decision to seed Linux has succeeded on all fronts: Linux powers much of IBM's hardware, and Sun's share price has fallen precipitously since 2000. Even at the 100 percent premium of $6.5 billion IBM is rumored to be willing to pay for Sun, it's still a fraction of the $200 billion IBM would have paid for Sun in 2000.
I'd call that strategy a success.
IBM would pick up a slew of assets in buying Sun: Java, Solaris, OpenStorage, and more. But one thing it probably doesn't need much of is Sun's business plan for open source. IBM already has one, and it seems to have worked very well over the years, sometimes to Sun's detriment.
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