For those of us in the open source community, you were probably under a rock this week if you missed the New York Times story “Open Source as a Model for Business Is Elusive“. It was sent to me by a number of people, including one woman who I’ve seen rarely since high school – 25 years ago.
This has been analyzed to death (see the 451 Group’s blog for a nice roundup of commentary) so I’m not going to focus on the article too much. I did find amusing the comment “There’s only one company making real money out of open source, and that’s Red Hat” since Red Hat seems to be the only large company that focuses on truly open source solutions. Surprise, surprise, the fauxpen source players are apparently “in trouble”.
I know I look at the world differently than many (if not most) people, but I’ve never seen “open source” as a business model. The term is way too big and vague – like saying “manufacturing” is a business model. Sure, it can play a role in both the development, support and marketing of software, but its not a business in and of itself.
The biggest mistake is to try and treat open source software the same way as commercial software. The rules are different, and a lot of the griping is due to the fact that the way one runs a software company is different if the software is open source. I’m often asked “how do you sell free software” and the answer is always “you don’t”.
But it is hard to get both customers and investors to think differently.
One issue is applying old metrics to new markets. The Times article seems to think that open source companies are floundering. On the other hand, here at OpenNMS we had a record year and hired two new people. I’m sure if I brought that up as a counterpoint we’d be dismissed as being too small, but these days the costs of starting, maintaining and marketing a software company are so much smaller than they used to be. The model of the future is lots of small, profitable software companies versus an Oracle or a Citrix.
I read yesterday that the new album by Susan Boyle sold a record amount in the first week of release. While that’s a laudable achievement, at the bottom of the article they point out that most young people buy single tracks and not entire albums, and Ms. Boyle’s audience is a much older demographic. In five years using album sales as a comparative measure of success will go away, in much the same way that the overall size of a software company as the measure of success will change.
I love looking at how the entertainment industry is dealing with the prevalence of broadband network access to their traditional business models. In some cases they decide to sue their customers – trying to keep the status quo.
In other cases, artists are taking the distribution of their works into their own hands, like Radiohead. While the overall total sales of a particular album may go down, the amount of money the artists receive goes up. Others, like Phish, focus on touring and even encourage their fans to bootleg their music.
Expect to see more musicians focusing on singles vs. albums, since they will become more popular and they open the door to sales of other things such as ringtones (note – as someone who loves high concept long play albums like “The Lamb Lies Down on Broadway” I’m not saying this is a good thing).
It’s all about efficiencies. Cut out the marketing and production machine required to produce a piece of music and it is possible to make the cost to the consumer go down while the profit for the producer goes up.
Change bothers people, but it also provides an opportunity for creativity. On the show Glee the story line involves three to four musical numbers per episode. The producers then offer those tracks on iTunes which provides a totally new revenue stream. With people skipping the ads during shows, some are imbedding the product placement right into the story (with 30 Rock being the most obvious about it).
I am certain we will continue to see articles that cast open source in a bad light because it doesn’t conform the way software has traditionally been handled in the past. I’ll ignore them and keep looking for opportunities to shake things up.
I’m betting I’ll find them.