With open-source software businesses, you have two options. Actually, three, but the third belongs to Red Hat, and it applies to roughly no one else.
The first option is to sell support for open-source software. This option is generally advocated by those who have never grown a business beyond $10 million. It's a terrible model unless your only aspiration in life is to run a services company.
Hence, the support model might be good for Accenture or systems integrator, if they want to take on the burden of support, but it's a poor model for Red Hat, MindTouch, Microsoft, or other software company.
The second option is to contribute heavily to open source but not build your revenue model around monetizing that software directly. This is what the New York Times points to in its Sunday expose of allegedly fizzling open-source business models.
Open source can drive adoption like little else. It's not, however, necessarily a great driver of revenue. For that, you need to be selling something beyond the source code, and that "something" is often going to be proprietary, be it hardware, software, or a service.
Proprietary search revenue funds a lot of open-source development at Google.
That's the way successful companies are run: they take ownership of what they ship. They are influenced by but not controlled by the mystical whims of The Community.
Even Red Hat, which piggybacks on a lot of Linux kernel development, increasingly includes more home-grown software in its distribution and takes great pains to certify its Red Hat Enterprise Linux will work in the most demanding environments before putting its brand on the label.
Some, including me, have wrongly concluded that Red Hat's business model would apply to other product markets beyond the operating system. It doesn't. It only applies where the moving parts in the product are complex, multitudinous, and frequently changing.
For everything else, there's Option 1 (if you want a business that doesn't scale well or possibly at all) or Option 2 (which is really no different from the old proprietary model except that it effectively uses open-source complements to lower engineering costs and possibly sales/marketing costs).
Even Option 2 won't work if you under-invest in marketing and development, as Symbian is learning to its hurt. It turns out that there is no free lunch, even in the land of free software. It always takes work. And money. Lots of both, actually.
When an open-source project is working optimally, can proprietary-software companies hope to compete?
Eat my dust, proprietary sloths
Greg Kroah-Hartman, a prominent Linux kernel developer and Novell fellow, suggests that the answer is no. Speaking to the How Software Is Built blog, Kroah-Hartman makes the case that the pace of Linux development leaves competition in the dust:
[The Linux kernel development team adds] 11,000 lines, remove[s] 5,500 lines, and modif[ies] 2,200 lines [of code] every single day.
People ask whether we can keep that up, and I have to tell you that every single year, I say there's no way we can go any faster than this. And then we do. We keep growing, and I don't see that slowing down at all anywhere.
I mean, the giant server guys love us, the embedded guys love us, and there are entire processor families that only run Linux, so they rely on us. The fact that we're out there everywhere in the world these days is actually pretty scary, from an engineering standpoint. And even at that rate of change, we maintain a stable kernel.
It's something that no one company can keep up with. It would actually be impossible at this point to create an operating system to compete against us. You can't sustain that rate of change on your own.
Microsoft might beg to differ, as would Apple, but the reality is that neither is updated as often or as extensively as Linux is, which supports a far broader hardware portfolio than any other operating system in existence.
Linux is pretty incredible. But it's not alone. Mozilla Firefox, Eclipse, and other projects produce best-in-class software at an almost frightening pace.
Can anyone compete with an open-source project at the top of its game?
The answer might well be no, as the top open-source projects are collaborative efforts between multiple companies that pool resources and expertise to drive development. And while it might seem reasonable that a single corporation could best open source's seeming "development by committee" approach, the reality is that well-managed open-source projects have none of the inertia that one might expect from a communal approach.
Quite the opposite.
Having said that, very few open-source projects actually meet the criteria that enable Linux's success. Most appeal to a too-narrow and too-small population of developers (i.e., single-company projects) to glean the benefits and scale of Linux-like development.
As such, the proprietary-software companies probably won't have to worry about competing with indomitable open-source competitors. Not most of the time, anyway.
For those that do, however, better stock up on the pumpkin pie. It may be the only thing to be grateful for this Thanksgiving season.
Greg Kroah-Hartman interview discovered via @glynmoody's ComputerWorld blog.
It's increasingly difficult to separate "open-source vendors" from "proprietary vendors," but Demandware, a proprietary software-as-a-service (SaaS) vendor, is attempting to do so in an effort to stem the rising tide of Magento, an open-source e-commerce project. Demandware's criticism of Magento largely falls flat, however, because it uses outdated descriptions of open source.
Demandware walks through a litany of complaints about open source--requires too many developers! forces you to upgrade your software all by yourself! forking and fragmentation!--but none hit the mark. Why? Because each is only somewhat accurate of the state of open source 10 years ago. As a critique of open source today, and specifically of Magento, Demandware's criticisms fall short.
There is a big difference between community open source and commercial open source, not to mention a diverse array of quality even within the "community" or "commercial" open-source areas. Some of Demandware's critiques might be true of certain community-led open-source projects, but they seem wildly off-base for any of the more popular projects, including Magento.
Unfortunately for Demandware, it turns out that open-source vendors care just as much about quality, stability, performance, etc. as proprietary vendors do. The difference is that open-source vendors shift the risk of deployment onto themselves rather than foisting it onto customers.
Equally unfortunate for Demandware, most of the leading open-source projects are increasingly under vendor guidance and control, as Gartner finds. This means that Demandware's complaints are relevant only to a dwindling population of open-source projects.
What's particularly ironic (and a bit galling) is that Demandware, after spending so much time criticizing open source, then goes on to describe its own software as...open source:
Much of our software stack--operating system, application servers, etc.--is open source. But we build a commercial SaaS platform on top of it and do all the heavy lifting for our customers.
How interesting. This sounds much like the model that Varien, the company behind Magento, uses. In fact, it describes the commercial open-source business model: give away a free and open-source version of the software but then charge customers for additional packaging, support, etc.
Fortunately, prospective customers of Demandware don't need to take the company's word for it on Magento. As open source, they can download it for free to see if it works for them. The same cannot be said for Demandware. If you're interested in evaluating Demandware, it appears that you've got just one choice: contact the company and let it start the sales machine:
Demandware sales model: Heavy on people
Apparently Magento is good enough to sell itself. But you won't hear that from the Demandware sales representative.
Follow me on Twitter @mjasay.
MySQL 5.4 has just been announced, evaporating the open-source database's previous four cores per instance limitation. Now, as Betanews reports, MySQL can handle up to "16-processor ("16-way") support for x86 servers with multiple cores per processor."
In other words, MySQL, long the leader in Web-focused database applications, just became a serious contender in the enterprise. It's unlikely MySQL's new owner, Oracle, is going to welcome this news.
While Redmonk analyst Stephen O'Grady suggests that MySQL nicely complements Oracle in many ways, he's also right to note that "the Oracle sales force is going to dislike MySQL even more than the Sun sales force did, as it is a low margin product competing--at least in some sense--with a high margin staple."
Oracle has much to gain--and lose--from MySQL. It's an exceptionally well-managed company, so my bet is that Oracle will find ways to make MySQL work for it, not against it. I don't think we'll see MySQL used as an onramp for proprietary Oracle databases, similar to how IBM uses open-source projects like Geronimo to fuel WebSphere sales.
Rather, I believe Oracle will firmly position (and technologically ensure) MySQL as a Web database. Oracle owns InnoDB, after all, the primary storage engine for MySQL. The scalability upgrade I mention above? It depends upon InnoDB. Oracle, in other words, already has the means to constrain the markets to which MySQL is targeted. Expect it to do so.
Follow me on Twitter @mjasay.
In the midst of an engaging Times UK article on the rise of open source, Michael Tiemann, president of the Open Source Initiative and a Red Hat executive, declares that proprietary software has outstayed its welcome:
A few days ago, I was visiting several banks in Canary Wharf and the city. On television the entire day was one apology after another from banks whose fundamental business was trust and reputation.
We are now living in a moment where claims of reputation are not sufficient to ensure delivery. We are using source code instead of reputation as a means to grade who is doing what.
The honeymoon period for proprietary software is over. It remains a struggle for many executives to even begin to justify their investment in IT...Ten years ago, I believed that there were reasonable exceptions for when to use proprietary software. I have since come to believe that proprietary software has no advantage, even for the most specific applications.
It used to be believed (by myself and others) that open source couldn't tackle niche applications, as there wouldn't be a financial incentive or sufficient expertise in a given field to mount an open-source approach. But that thinking was wrong. We just didn't know it yet.
It's very likely that open-source vendors will increasingly intermingle proprietary code with open-source code in order to improve their top and bottom lines, but I agree with Tiemann: the era of top-to-bottom proprietary lock-in is over. Even Microsoft CEO Steve Ballmer says so.
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Ubuntu @ Microsoft
(Credit: Matt Asay)If you were to try to think of the two most diametrically opposed software companies in the industry, Red Hat and Microsoft come to mind. One is the open-source leader, while the other has tenaciously held to its proprietary software background.
Red Hat believes that real customer choice comes from an open ecosystem of software. Microsoft believes something similar, but prefers customers buy into its own software ecosystem (Windows, SQL Server, SharePoint, etc.) and stay there.
And yet, something has brought the two companies together in a manner which suggests to me that both are converging in the way they view technology:
The iPhone.
Bringing PHP into the Microsoft fold
(Credit: Matt Asay)Walk Red Hat's Raleigh, N.C., campus and you'll see Apple's iPhone in the hands of an increasing number of Red Hat employees. Cross the country to Microsoft's Redmond, Wash., campus and you'll see the same thing. I've been to both campuses in the past few months and was surprised by the number of iPhones being used.
There is, of course, a very good reason for this, and it should send a ray of hope to those who believe that open source and proprietary software are destined to live out binary, partisan lives:
Both Red Hat and Microsoft employees ultimately are consumers and care more about what works than dogmatically clinging to The One True Way to use or sell software.
It wasn't always thus. Ironically, Microsoft and Red Hat have shared a common problem, though they have appeared diametrically opposed at a superficial level. The proprietary/open-source divide has sharply split the two companies, but even as Microsoft's cold war against open source is thawing so, too, has pragmatism crept in at Red Hat.
For Red Hat, the big shift came with its JBoss acquisition,
Microsoft's internal open-source education
(Credit: Matt Asay)The further up the stack from the operating system Red Hat goes, the more it's going to have to work with non-open source components, just as its Linux server business has always depended upon supporting the industry's leading proprietary applications and databases.
Microsoft has the reverse problem. While it has occasionally forgotten that it's a platform company, Microsoft is a platform company and should welcome all sorts of software on that platform. That means both open and proprietary, as well as mixes of the two. The more Microsoft remembers the need to strengthen its platform, the more it will necessarily embrace open source.
Microsoft grapples with Linux.
(Credit: Matt Asay)See the pictures in this posting? They were taken while at Microsoft, not Red Hat. Microsoft knows it needs to figure out how to embrace open source.
This convergence is perhaps most easily viewed by the iPhone usage on both campuses, which suggests a pragmatism and affinity for "what works" that will increasingly see both companies abandon old dogmas and embrace customer realities.
This isn't to suggest that either Microsoft or Red Hat is going to drop their differences overnight and become indistinguishable in their strategies. But both are growing out of their binary perspectives on the world, and that's a very good thing for their customers and partners. In fact, I suspect that customers will ultimately drive out the bile and bitterness that has unnecessarily separated software that customers want to run together.
It's software, not religion. It matters, but not that much.
Follow me on Twitter at mjasay.
Reading through a Jane's Strategic Advisory Services report entitled "Open Source Software in Defense Markets" (PDF), I was struck by this passage:
A key trend in the current software and IT environment is the convergence of open source and commercial software approaches. While significant differences do and will continue to exist, both open source and commercial providers are increasingly taking hybrid approaches to providing software and software support.
Some open source providers, such as Red Hat for example, have sought to monetize open source in ways that are not always compatible with long-held open source movement principles and have also created support teams that are in many ways not dissimilar to the commercial software model.
Commercial providers have taken various approaches to "opening up" their software and are either adopting open source solutions or increasingly allowing users to examine and monitor code and provide feedback about this code to support teams directly through established forums.
In other words, we are all hybrid vendors now.
Granted, Microsoft sponsored the research, and may have had an ax to grind in informing some of the research, though Jane's is a reputable defense-focused consulting firm and wouldn't stray far from its findings to appease Microsoft. Regardless, what Jane's writes is true, or largely true: open source and proprietary software are converging.
Open source needs some hook - however mild - to encourage prospects to pay, thereby earning a reasonable return and justifying further open-source development. Proprietary companies, for their parts, are looking to open source as a new distribution channel for their products, plus want to tap into the development benefits open source can afford.
Back in 2003 I thought I was clever when interviewing at Red Hat because my resume declared that I had helped to devise a "mixed-source model" for a former employer. The person interviewing me looked at me blankly and said, "Mixed source? Why?" It was a classic moment, but I failed with what should have been a classic response: "Because, like Red Hat, I think the right business model balances customer freedom with the ability to generate solid returns for shareholders."
Red Hat rightly gets credit for its open-source ethos, but as former Red Hat executive Marc Fleury has long suggested, Red Hat essentially offers a proprietary binary distribution of Linux in Red Hat Enterprise Linux. This doesn't make it evil. It makes it smart. Customers can get around paying for RHEL, if they wish, but when presented with the value and comparative freedom of RHEL, most choose to pay.
We are leaving the land of open source versus proprietary religious dogma. Open source is a better distribution and development model than traditional proprietary software, or can be. But there are benefits to proprietary software, too. Used in conjunction with the customer's best interests in mind but not forgetting the vendor's interest, a hybrid model makes a lot of sense.
In the interest of finding an alternative to the Microsoft overlord, we may be rushing headlong into a new, even more proprietary overlord. Its name?
Apple.
According to a recent poll that The Register ran with its readers, 55 percent crown Apple as the King of Closed, while only 21 percent awarded that dubious distinction to Microsoft. Twenty-four percent think they're equally bad.
While I'm a big Apple fan, and like using it as the foundation for a wide range of open-source software that I happily run on my Mac, I can sympathize with the sentiments of The Register's developer audience:
The most frequently cited reason for regarding Apple as closed was the end-to-end proprietary nature of its offerings, which tie hardware to software to services and in a way that is thought to restrict choice and interoperability. Whether it's OS X being wedded to the Mac, the iPod being dependent on the iTunes service, or iPhone software distribution being controlled via the Apple Store, there is a strong perception that openness is not always the biggest priority for Apple.
For developers in particular, this end-to-end proprietary approach appears to be a big turn-off, which is interesting given that one of the most frequently cited strengths of the Mac, for example, is the Unix foundation that underpins OS X, which is generally considered to be an indicator of openness and compliance with standards....In terms of specifics, references were made to lack of transparency with regard to proprietary API specifications, and being secretive about known faults, vulnerabilities, and so on - behaviour that Microsoft simply could not get away with nowadays without drawing fire from its customers or the regulator.
So, even as Microsoft seeks to find ways to open up, Apple is content to close off, figuring that its consumer crowd simply wants something that works, regardless of the consequences to ultimate computing freedom. This is, in fact, precisely how Microsoft started down its now well-worn path to closing off customer choice: tie products together to make them work well together, and often to the exclusion of third-party alternatives.
Will Apple become the next Microsoft? Time will tell. But its recent action toward open-source Songbird, which poses a threat (albeit a weak one) to iTunes, is no credit to an organization that bills itself as the cool alternative to stodgy Microsoft. Cool? Maybe. Alternative? Well, that would mean that it would have to be different.
Open source rules in a bad economy, but perhaps not always for the reasons suggested.
Forget source code for a minute, and put development aside. One of the biggest assets that open source provides is a low-cost distribution model. In a bad economy, you want your software to find budgets still filled with cash, rather than spending money to chase money, and nine times out of 10 coming up empty.
Proprietary-but-free (as in cost) is one way to mimic the open-source model, but it's not nearly as effective, if for no other reason than it still requires prospective customers to come to your Web site to find the good. Open source, however, has several well-known repositories: Sourceforge, Google Code, Code Haus, etc. If I'm a company that is looking for low-cost software, I'm going to sourgeforge.net before I look at sap.com.
So, a question: why aren't proprietary software companies doing more of this, whether by creating new open-source projects that mesh with their proprietary products, or by acquiring open-source companies or investing in existing open-source projects? IBM has done it with Gluecode ("Websphere Light"), but it's the anomaly. Why not use open-source projects - commercial or otherwise - as on-ramps to "premium" proprietary products? This is a well-worn path for IBM, but why don't others use it?
Many open-source companies use commercial extensions to actually drive revenue, so it's not as if the business model is foreign to the would-be buyers of the Pentahos of the world. It's a way of seeding the market, however they may choose to reap.
The cost can be zero: you don't have to acquire an open-source company to participate. You just need to either create your own open-source project or invest in an existing one, most likely with an Apache-style license that would enable you to build the open-source components into your proprietary product.
Now, more than ever, cheap distribution is critical. Open source provides that distribution.
I was fortunate to be asked by my friend, Jon Williams, to speak at Wednesday's New York CTO Club, a gathering of dozens of CTOs from a range of interesting (and some quite large) enterprises. The topic today was "Open Source as a Renewable Resource," with the focus on how enterprises can contribute cash or code (or other contributions) back to open-source communities.
However, much of the discussion turned on how open-source companies should be making money, rather than how enterprises should be contributing code. The interesting thing was that while the CTOs looked to open source as an inexpensive means of discovering and evaluating software, all seemed to believe that adding proprietary services or software was the right way to monetize it.
I was surprised, to say the least. I talk with a lot of enterprises in the course of my business, and open source is always a primary reason for why they purchase my company's product, even if they don't intend to view or modify source code. The question I never asked, however, because my company doesn't offer proprietary software, is how the buyers would react to proprietary ("commercial") components.
From what I heard today, it's a non-issue. Every CTO that spoke up (and it was a very open forum) said that they are happy to pay for proprietary extensions to open-source software, and criticized pure-play open-source vendors for not providing an obvious, compelling reason to pay: proprietary bits. (One actually said that we have built a great financial model...for SIs, not for ourselves.)
Trying to shift the burden of proof back onto themselves, I asked why they don't contribute to the open-source projects from which they derive so much value. Many indicated that it's too hard to contribute back to open-source projects due to internal legal issues and the high bar to knowing how to contribute. They suggested that they would instead prefer to pay the open-source companies to do that work for them.
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