Who benefits?
I've often thought that Open Source in the hands of big companies is a cudgel used to beat the life out of smaller ones - apparently, Mark Fleury just woke up to this fact after IBM purchased the main competitor to JBoss (GlueCode) and made the entire thing free. The IBM pitch?
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, a name you can trust.
Meanwhile, Fleury seems to be utterly stunned by this turn of events:
He claims IBM is trying to put his privately held company out of business. He is furious, but also stunned: He says Gluecode could hurt sales of IBM's WebSphere as much as it hurts JBoss, yet IBM doesn't seem to care.
Well duh. Let's have a look at IBM's cash on hand as compared to Fleury's outfit - seems IBM has a much bigger pile. Which company is going to drop dead first, IBM, or JBoss? The beauty of this for IBM? Since they released the software as OSS, they get to play the good guy (20 years ago we would have called this a predatory practice). The gap toothed crowd over on Slashdot hasn't really figured out who benefits from OSS yet - here's a hint - it's not the small guy. What I really love is the hue and cry aimed at Microsoft for things like bundling IE and Media Player (horrors! they all say) - meanwhile, IBM does the same thing in a less visible sector of the market, and it's all good. Here's the kicker on it:
But if Microsoft, for all its billions, is doomed by the open source movement, as many open source proponents believe, then what chance does Fleury's 130-person startup stand against IBM, a company that had $96.5 billion in revenue for 2004, aims to use software as a loss leader and can absorb losses for years?
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.
Look at those stats in the last paragraph again. You wonder why I keep saying that I've seen no viable business model behind open sourcing Cincom Smalltalk? That paragraph explains why that's the case. In order to "make it up" in services and maintenance, you have to have a huge customer base. It's actually the same problem you get into when you try and sell inexpensive developer licenses for a product like ours - in order to fund things, you have to sell (or in the case of free software, ship) gazillions of copies a year - every single year. Or, limit the size of your staff to a very small number. For free stuff, you have to hope like heck that no one else decides to be a free rider on your software - meaning, repackaging it and offering cheaper support than you can afford to offer (like, say, is happening to Red Hat right now). The real kick in the pants:
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 (nasdaq: NOVL - news - people ), 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.
There's a reason IBM supports Linux and other free software projects - it's a way for them to take a free ride on product development and vacuum up the available services revenue. There's a phrase that covers this:
Comments
Who benefits?
[Steve Wart] June 17, 2005 11:08:27.818
Mostly customers benefit. Developers benefit too, because it gives them the freedom to move from project to project.
It's ironic that most defenders of OSS are often lumped in as socialist natterers against big business. The tone of the article is pretty harsh and I would say inaccurate. For example, OSS products are generally not "knock-offs" of closed-source products.
But lower costs and uniform standards benefit everyone, except for those with a vested interest in a status quo; the same way Chinese shoe manufacturers are hurting a few wealthy factory/sweatshop owners in Italy for the benefit of EVERYONE WHO WEARS SHOES.
JBoss still has a good name and as you mentioned, it's still free for people who don't want to pay for support -- BTW, I can't believe you quoted an MSM article: where are the links to the original quote? Did they interview him? Are you sure you trust closed-source news? :o)
Frankly, I would rather take my chance with OSS than depend on the fickle behaviour of vendors who want to squeeze us for revenue every time they decide to release an upgrade, whether we need it or not.
Freedom or extortion? Tough choice. Actually it's an easy choice. Real big businesses will go for extortion every time. It's in their nature (insert joke about frog and scorpion here)
Steve...
[ James Robertson] June 17, 2005 11:50:35.041
Comment by James Robertson
You miss the entire point. In a war between IBM and JBoss, where both are giving away software - who do you think wins? Developers pay nothing in the short run, while IBM drives JBoss out of the market. After which, developers lose. When MS does this, people like you throw fits. When it happens with OSS, it's "all good"
Take the blinders off :)
Who benefits?
[ ] June 17, 2005 12:57:57.891
Comment by
Where is the part where the developers lose?
Re: Who benefits?
[ James Robertson] June 17, 2005 13:28:02.982
Comment by James Robertson
Developers lose when products are driven from the market by what amounts to predatory pricing. Here's the key question to ask yourself - why is it ok for a large company to use OSS as a weapon this way, but not ok for MS to ship Media Player and IE for free? It's all the same thing.
Who benefits?
[ ] June 17, 2005 15:34:17.350
Comment by
The point is that it's not the same. The prototypical "predatory pricing" situation comes from the old railway days (and was lots of fun to play in Railroad Tycoon :-). Two companies serve a town. The one with more money cuts prices until the one with less money gives up and closes. Then the prices go way, way up. The important factors are the financial reserves, the high barrier to entry for competitors (the cost of opening up again), and the ability to raise the price afterwards. But using open source in this way, the price going up isn't really an option. Once the software is out there, it's out there. IBM is free to "vacuum up the services revenue", except that as you point out, it's easy for them to be undercut by someone else. And it's entirely true that they will be undercutting their own Websphere sales while they're at it. And even if JBOSS is "driven out of the market", it continues to exist and be available. Support might become free, and voluntary, or it might become very expensive. Or both. And it's easy for it to come back in one form or another easily. So while open source certainly can be used as a loss leader to beat competitors, once you've let the genie out of the bottle it's considerably different from traditional "predatory" situations.
Re: Who benefits?
[ James Robertson] June 17, 2005 16:40:31.620
Comment by James Robertson
Sigh
This assumes that availability of sources means that support of said sources is easy.
[Kevin Smith] June 17, 2005 19:58:12.485
I agree with James. I don't see how OSS benefits companies attempting to make a buck from their software. If I can get the software for free and support myself, where/how does the company profit? Its good for me, the customer, that I can avoid for-fee support services but its not good for the company who needs to pay for development staff, support staff, etc. If the company is small enough to only have one or a few product lines (like Gluecode or JBoss) where does the income come from? Companies can't give their products away and expect to derive much income from those products. I think one viable way forward is to apply id software's model. Open sourcing older versions of your products while keeping current versions proprietary walks the line between building and supporting a community around products and making a profit.
Re: Who benefits?
[ ] June 18, 2005 0:05:36.937
Comment by
Sigh. If 95% of the users support themselves, it doesn't seem that difficult.
Re: Who benefits?
[ James Robertson] June 18, 2005 1:19:22.101
Comment by James Robertson
The "95% of users support themselves" kind of circles right back around to the revenue problem, doesn't it?