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Thursday, May 26, 2005

The Open Source - Where’s The Business Model?

Several occassions in the recent past, we had covered in this blog the serious issues with open source - some of these are titled Open Source costly & litigatious,Backlash against opensource, Open Source - A Reality Check. Forbes has an interesting coverage on Open Source centered on Larry Mcvoy's views on opensource. Excerpts with heavy edits :

Larry McVoy, a close ally in the past to Linus Torvalds, creator of the open source Linux operating system, also an industry veteran has developed operating system software at Sun Microsystems, Silicon Graphics, Google believes that the open source business model, which is all the rage these days cannot generate enough money to support the development of truly innovative software programs.Some key concerns of Mcvoy:
- Building new software requires lots of trial and error, which means investing lots of money. Software companies won't make those investments unless they can earn a return by selling programs rather than giving them away.

- It is simply not possible for an innovative software company to sustain itself using an open source business model. Mcvoy says bitkeeper believes if the product is open sourced ,we would be out of business in six months .To build a financially sound company needs well-trained staff, who need to be paid well. If everything is free, how can I make enough money to keep building that product for you and supporting you?"

- The services model doesn't generate enough revenue to support the creation of the next generation of innovative products. Red Hat has been around for a long time-for a decade now. There is no one significant innovative product that has come out of Red Hat.A few open source companies are successfully generating revenue and even (possibly) profits. But none of them generates enough money to do anything really innovative.

- Open source as a business model,in isolation,is pretty much unsustainable.You have to have a business model that will let you recoup those costs. These arguments are exceedingly unpopular. Everyone wants everything to be free. No one can show how to build a software-development house and fund it off open source revenue. It can not be done !

- The open source guys can scrape together enough resources to reverse engineer stuff. That's easy. It's way cheaper to reverse engineer something than to create something new. But if the world goes to 100% open source, innovation goes to zero.

- Open source software is like handing you a doctor's bag and the architectural plans for a hospital and saying, "if you have a heart attack, here are all the tools you need- and it's free," McVoy says. "I'd rather pay someone to take care of me."

- Open source phenomenon may appear to be sustainable but actually is being propped
up by hardware makers who view open source code as a loss leader - something that will entice customers to buy their boxes. Most of the money funding open source development, maybe 80% to 90%, is coming from companies that are not open source companies themselves.
What happens when these sponsors go away and there is not enough money floating around? Where is innovation going to come from?

- Linux would suffer if hardware makers stopped their sugar-daddy support for its development-putting their own programmers to work on Linux. "If hardware companies stopped funding development, I think it would dramatically damage the pace at which Linux is being developed. It would be pretty darn close to a nuclear bomb going off," says McVoy.

- McVoy says he believes the software industry will reach some kind of balance between open source and traditional software companies. Open source companies will make commodity knockoffs and eke out tiny profits, while traditional "closed source" companies will develop innovative products and earn fatter profits. Certainly thoughts that call for serious reflection and analysis.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"