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Something hit me the other day. Perhaps it was two years of education at the hands of Larry Lessig finally sinking in. Or perhaps it was my reading of Gene Simmons' commentary on those pesky kids who steal his music. Whatever the impetus, it finally all came together.

Twentieth century software business models focus on scarcity because they're founded upon 20th century conceptions of property (actually, their origin is a few centuries' older than that, but never mind).

Scarcity is the absolute wrong way to build a software business in the 21st century, with the rise of digitization. It is pointless and fruitless to insist that the digital world act like the physical or analog world, and build business models that conform to this false view. To thrive in the new software world, we need to embrace its changes rather than fight them.

Inspired by Glyn Moody, I wrote a few weeks ago that "in a digital world, the money is in analog." But the principle is actually much deeper than this.

To get at the principle, it's useful to look at the successful business models of a few 21st century pioneers, including Google and Red Hat:

I just heard from an unimpeachable source close to the company that Zimbra's revenue last year was ~$6 million. (Though the more interesting number is the significant increase they've had this year (on track to hit $20 million), which points to a strong future.) That makes the $350 million acquisition by Yahoo outstandingly profitable for Satish and crew. That's a ~60X valuation (on 12 months trailing revenues).

Was Yahoo foolish? Yahoo isn't a foolish company. I think it means that Yahoo believes Yahoo plus Zimbra is worth more than $350 million, and I think it's right. Citrix spent $500 million on a company that had $1 million in 12 months trailing revenues. Foolish? Not when you consider the future.

This is a fascinating read from Baseline. I heard a bit about Hadoop and other Doug Cutting Lucene projects during a session at the O'Reilly Executive Radar session of OSCON last month. Hadoop is "an open-source project that aims to replicate Google's techniques for storing and processing large amounts of data distributed across hundreds or thousands of commodity PCs."

Sounds juicy, doesn't it? Especially in Yahoo's hands.

Tim O'Reilly gets this move exactly right: Yahoo is using open source in the Web 2.0 world in the same way that HP and other traditional software companies have used it in the packaged software world:

As a club to undermine competitors while blessing customers and developers.

O'Reilly writes:

The Internet turns open-source licensing on its head. Copyleft is neither copyright nor copyleft anymore in the Web world. It's just copy, because distribution of a service over the Internet doesn't count as distribution in the archaic licensing language that plagues most open-source licenses.

It's a problem that the Free Software Foundation chose to ignore, and then beat on Tim O'Reilly to atone for its own failing. Tim, for his part, thinks that the open-source world is missing the boat, which is chugging along unmindful of antiquated things like software licenses when the real value is in data-centric applications whose value lies in network effects (architecture of participation).

I get this point, and he's probably right in the long run. My question for now, however, is: if the value in Web 2.0 is data, why can't Web 2.0 get over its own software fetish?

I will predict that virtually every open-source company (including Red Hat) will eventually be acquired by a big proprietary software company.

Thus spake Tim O'Reilly in the comments to one of his other posts. Tim believes that open source, at least as defined by open-source licensing, has a short shelf life that will be consumed by Web 2.0 (i.e., Web companies hijacking open-source software to deliver proprietary Web services) or by traditional proprietary software vendors.

In other words, why don't I just give up, sell out, and go home? I guess I would if I thought that Tim were right. He's not, not in this instance.

Eben Moglen (left) tells it like it is.

(Credit: James Duncan Davidson)

Once upon a time, the term "open source" was coined to save the free-software world from itself--or, rather, from the free-software zealots, as you can read on the Open Source Initiative's Web site.

Today, I can't help but feel that the pendulum has swung in the opposite direction, where we're so self-satisfied with the money we're making off open source that we have neglected the essential freedoms that make open-source profit possible.

The wake-up call about the necessary freedoms came from Eben Moglen at last week's O'Reilly Open Source Conference. Some, including software consultant Stephen Walli, don't like the way Eben said it. I wasn't in the room to hear Eben. At any rate, I'm not one for handwringing and am just glad it was said.

Why?

I've been attending the O'Reilly Open Source Conference for years and have watched an interesting thing happen. A rising number of attendees have come with Mac OS X-based laptops. In fact, throughout the tech world, you see a dramatic increase in the number of people toting Macs. Why?

The Mac, after all, is a closed platform, just as Windows is. In fact, arguably, Apple is a more proprietary company than Microsoft has ever thought of being, controlling hardware and software alike. Just look at how Apple has managed its iPhone product: developers were initially shunned, and then they were allowed to crawl onto the device through the browser (and not a community-based browser like Firefox, but rather through its own Safari).

As a die-hard Mac addict and open-source advocate myself, I was thinking this morning about why the two increasingly converge, despite all the ironies and conflicting approaches. Here's my best guess.