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: