Is There a Profitable Open Source Model?

Microsoft has opened Pandora’s Box by standing up in public (at New York University in the person of MS Vice President Craig Mundie*) and declaring that it’s not possible to offer Open Source software without it having to be offered free, under the terms of the GPL (General Public License**). Microsoft’s Mundie (and Jim Alchin, in an earlier interview in mid-February) both expressed concern that the open source movement could suppress innovation by destroying rights to intellectual property.

To be sure, the Open Source movement offers both advantages and disadvantages to developers and software users.

*Open Source Advantages*	*Open Source Disadvantages*
· Supports a world-wide community of developers	· No single point of control
· Self-organizing; adapts to the goals of the group, not to any one constituent community	· Potential fragmentation; no single standard
· Software evolves based on input from many sources	· Lack of direction may lead to lack of progress
· Best work rewarded with world-wide reputation	· Resources can’t be scheduled or held to account
· Bugs can be found and fixed more quickly	· No direct economic return for effort
· Access to expertise outside your organization	· Developers may withhold best work for the commercial (profit-making) sector

First, let me assure you that I have a great deal of interest in intellectual property rights. Anyone who writes wants to be paid for the intellectual property they produce. Much of my writing is for or about software companies, so I need them to be successful in protecting their intellectual property rights, too.

Perhaps the right question to ask here is who is being threatened, how, and by whom?

Software companies have a long history of defending their intellectual property rights – from user piracy and from unlawful incorporation into others’ products as well as from changes to the source code which break the owners’ terms and conditions of usage. Microsoft is surely not alone in this regard.

For instance, Sun has had an ongoing discussion with the industry about how Java can be an “open standard” if Sun controls the content of the source code. Sun does this through the Sun Community Source License***. Sun offers access to the Java source code, but attempts to retain control. Sun claims this is to prevent forking (fragmentation) and to insure changes occur at the fast pace necessary.

In fact, Sun’s demand for this level of control has invited much less standardization, with HP rolling its own version of Java and Microsoft first trying to create a Microsoft-specific Java and then moving on to a Java replacement (complete with a Java migration strategy).

This puts Sun in a difficult position if they want to argue against Microsoft’s anti-Open Source point of view. On the other hand, Sun has placed StarOffice into the Open Source domain and expects, over time, to hand its control over to an Open Source community of interest that forms around it. (We thought this might mean Sun was downgrading StarOffice’s importance.) This project is managed for Sun by Collabnet at www.collabnet.org.

The Open Source community has begun to reply to Microsoft’s comments, generally negatively.

1. A number of Open Source gurus note that GPL is only one of the Open Source licensing possibilities. Most others are more flexible in terms of protecting software developers’ Intellectual Property. A comprehensive list of open source licenses with links to further information about them is at http://www.opensource.org/licenses/index.html.

2. The failure of Linux companies with bad business models doesn’t mean that Open Source is at fault, but rather that you can’t run a profitable business around a poorly conceived business model.

Many of the Linux businesses that failed expected unwisely that they could command a premium price for the incremental value of the way they packaged up their Linux distribution or that a small piece of component software could be seeded into the market and create a profitable market for sales of consulting, support, or more complex (and licensed-for-a-fee) software.

Some of these failed or failing companies didn’t understand who the primary buyers in the Linux market would be and simply built the wrong products. Others misjudged how long it takes a new market to develop and grow.

3. Microsoft seems to discount the success and influence of IBM in the Linux market, pursuing a model that Microsoft might find difficult to follow. Or maybe that’s exactly the point. IBM sells proprietary operating systems for each of its hardware platforms – NT on Intel servers, OS/400 for the i-Series (AS/400), AIX for the p-Series (RS/6000) and MVS and VM for the z-series (mainframes).

IBM now offers Linux support (but doesn’t have its own Linux distribution) for each of these platforms. It offers Linux versions of all of its middleware (infrastructure) software for all of these platforms. These products are built to the open source standard of Linux but the Linux implementation of middleware software is, of course, sold at a tidy profit and its source code is generally protected (although access is made available via API’s for interfacing additional software).

But if many users and organizations standardize on Linux, this process might change. There is no advantage to the creator of new functionality (except fame and glory) in putting a new function into Linux. (Linus Torvalds points out that the desire to create artful work may, in fact, be a sufficient reward.)

Under such circumstances, commercial developers might choose to keep functionality in separate products, applications or middleware, where they can continue to collect license fees for their intellectual property.

This assumes, of course, that no clever Linux developer chooses to replicate such functions in future versions of the Linux operating system, obsolescing the separate products just as Microsoft has routinely incorporated function into Windows, from time to time, which previously resided in separate products.

Of course, this could be an advantage for Microsoft. They could continue to improve the OS while on the Linux side the business incentive to put more and more into the OS (retained or increasing market share and upgrade revenue) might be lacking.

Or the whole house of cards could be about to fall, ready for reassembly in a different architecture around web services, where functions are offered separately, combined into an endless array of applications, each for a particular purpose, and operating systems may be a much less interesting issue. About that, of course, Microsoft has plenty to say, and we’ll be covering that in a future article on Hailstorm, Microsoft’s version of Web Services, as well as in a white paper comparing multiple Web Services offerings.

Amy Wohl has written recently about Linux, Linux Comes of Age, for the MiddlewareSpectra Report. A copy of the article may be found at our site, with the permission of Charles Brett, Spectrum's publisher, by clicking this link: www.wohl.com/middleware5-01.htm.

**General Public License is a term which refers to the main license used to assure free access to Open Source software and the terms and conditions of its use and distribution. It makes it clear that such software is freely available to anyone, including its source code and that changes to the software must also be made available, although such changes are not in any way warranted.

It does not say that software such as applications, which run on top of Open Source software, but are separate from them, must also be Open Source or that they cannot be sold at a fee (or their source code distributed on different terms, e.g., only to an ISV’s partners or only for review but not for revision).

***Sun Community Source License - You can view an extensive discussion of Sun’s idea of a license which is at once somewhat open (that’s like being somewhat pregnant, I think) and yet still retain control of the pace and content of change at http://www.sun.com/981208/scsl/principles.html.