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Thursday, June 16, 2005

Open Source SmackDown!!

(Via Forbes) Marc Fleury claims JBoss shipped more copies last year than IBM did. IBM apparently has grown tired of it and acquired JBoss's main rival, Gluecode, which also distributes a set of open source Web server programs. Gluecode used to make money by selling some "closed source" programs that ran on top of its free open source stuff. IBM intends to release the source code for all of Gluecode's programs and distribute them for free. IBM also will slash prices on service and support, charging less than half of what Gluecode used to charge. The pitch to customers is this: You get the software for free and service and support at a bargain rate. And it all comes from IBM."Where does this all end? When the whole deck of cards, the whole software industry, falls apart? I find it arrogant on their part that they think they can control what they've unleashed," says Fleury, JBoss' chairman and chief executive. This is what open source software is all about: creating knockoffs and giving them away, destroying the value of whatever the other guy is selling. What's new is that now open-source companies are turning on each other.

It's not just JBoss getting attacked by Gluecode. Red Hat,the leading Linux distributor, is besieged by knockoffs of its "enterprise" Linux: the one customers are supposed to pay for. It's starting to look like one of those Quentin Tarantino movies where a bunch of guys end up all pointing guns at each other. Indeed, IBM's assault on JBoss raises big questions about whether stand-alone open source software companies can ever make enough money to sustain themselves. Because their code can be freely copied, these companies can't charge for their programs. Instead, they hope some users will pay for service and support. Problem is, most people just take the free stuff and run. Only 3% to 5% of JBoss customers buy support contracts.No wonder no one is making any real money at this. JBoss operates at a loss, as does MySQL, the open source database company. Novell, the No. 2 Linux distributor, is losing money. After a decade of losses, Red Hat earned $45 million last year on sales of slightly less than $200 million, but 40% of its profit came from interest income rather than operations. The opensource business model is not intended to produce powerful, wealthy, massively profitable software companies. As & when these open source software providers burn through their venture funding and go out of business, customers will need to either hire teams of expensive techies to maintain that orphaned code or pay someone to rip out the old stuff and replace it with something new. Either way, all that free software is suddenly going to look awfully expensive.

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