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Why Making Money from Free Software Matters (The H)Why Making Money from Free Software Matters (The H)Posted Apr 26, 2010 22:01 UTC (Mon) by drag (subscriber, #31333)In reply to: Why Making Money from Free Software Matters (The H) by davidw Parent article: Why Making Money from Free Software Matters (The H)
Anything to do with scarcity in terms of copies of any sort of digital media can only come through government-enforced fiat.
It's a unsustainable model... the federal and institutional forces behind maintaining the illusion that copyrighted digital media is somehow logical or even remotely makes sense can only sustain the current popular business models so long.. eventually (one way or another) the market will fight back and bring about prices that reflect the true cost of distributing digital copies (very close to 0).
I don't expect that to happen in our lifetimes, of course. It may take a century or more to reverse current accepted thought in the role of governments to protect irrational markets.
But with software there is still a ton of scarcity.
Talent, knowledge, support, decent documentation, software customizations and so on and so forth. This is how companies like (well there is only one big one so far) like Redhat can sustain making money with software that they give away for free. To put a different perspective on it.. it's not important that software makes money, all that matters is that programmers get proper compensation for their time.
Traditionally only businesses are willing to pay these sorts of costs, however. Which can help explain how 'FLOSS' has penetrated so far into business markets, but have penetrated so poorly into more populist ones. The per-issue cost of business to pay for bug fixes, support, or customization is going to be rather low versus the value of those various items. A performance optimization or a bug fix can save companies thousands of dollars in costs in terms of employee time, material, and downtime.
For individual users, however, this is not so true. Paying a programmer to fix a bug in Gimp or in some other program on a Linux system is just too high... It can cost hundreds of dollars worth of development time to fix a small issue in open source software versus paying 50 dollars for proprietary software.
So the challenge is for open source folks is: In order to create a sustainable model to were people can devote enough time to become experts in the field of open source software development is to figure out a way for the costs of developing software to be distributed over a large number of users in a similar fashion to proprietary software without having to invoke government enforcement as proprietary software does.
Bounties seem a obvious solution, but so far has failed to pan out. When bounties were tried for the Gimp folks and a couple other projects I've heard of they have failed. Maybe it's due to unfamiliarity for the users or the developers being unable to cope with dealing with money when their organization is built around pure semi-charitable voluntary model.
There has to be a market driven solution out there somewhere. But until the open market throws off the shackles of government-driven artificial scarcity I don't think we are going to see it. Open source alone would probably be able to defeat the Microsofts and the Oracles (to the point were they determine that FLOSS is actually sustainable for themselves, not until destruction...) of the world... but it cannot defeat the Microsofts and Oracles of the world working in any reasonable time frame (say a decade or two) with Governments colluding internationally to protect their markets through a bizarre web of laws surrounding copyrights and patents.
Oh well.
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Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 1:09 UTC (Tue) by dskoll (subscriber, #1630) [Link] This is how companies like (well there is only one big one so far) like Redhat can sustain making money with software that they give away for free. Red Hat is about the only example I can think of making serious money. There may be a handful of second-tier players like Sugar CRM, but the sad fact is you will not make much money selling free software. ...figure out a way for the costs of developing software to be distributed over a large number of users in a similar fashion to proprietary software without having to invoke government enforcement as proprietary software does. In my opinion, it's impossible. I run a software company whose product runs on Linux. We even ship with source code. However, it's not open-source. When I had the idea for my commercial product, I posted about it on the mailing list for the (GPL'd) core product. I was asking for donations to develop the product and release it under the GPL. No-one was willing to pay for the development time. I went ahead and wrote it anyway, and so far we've sold many millions of dollars worth of traditional proprietary software, created employment, and built a company. This would not have happened had a few people on the mailing list been less cheap. My heart tells me that Free Software is best. I wrote and continue maintain several GPL'd products and a bunch of Artistic-licensed Perl modules, and I love doing that. But the reality is that there's no sustainable business model around free software unless you are there at the right time as Red Hat was. Proprietary software development is simply orders of magnitude more profitable.
Not the only one Posted Apr 27, 2010 6:23 UTC (Tue) by man_ls (subscriber, #15091) [Link] Alfresco is another high profile free software company -- I read somewhere that they had bets with Red Hat about who toppled $1B/yr first.I don't know on your business area, but a lot of business software would not be hurt if it was free software (although they might have to change their business model radically). Like SAP or Oracle DB (if they had better support). It's quite true that people are quite cheap when valuing software, especially free software; even though they will then pay outrageous rates to consulting companies to write poor software to do the same thing, only worse. It's sad.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 7:16 UTC (Tue) by niner (subscriber, #26151) [Link]
The company I work for makes quite decent money developing free software. How? By using it! We write the software and patches because we need it. And we release it as free software not only to give back to the community, but to also lower our own development costs. And I'm sure, there are many companies that do just the same.
So maybe people just don't go far enough looking for the sustainable model. Just taking the standard model of the software development business and replacing "proprietary" with "free" may not work. But free software allows for quite different methods. Most of all software as a business enabler instead of core business. Collaborating on the software and competing in the primary business.
We for example help developing a CMS, publish Perl modules and test and patch the Linux distribution we use because that helps us creating and hosting websites for our customers. Competing hardware companies contribute to the Linux kernel, because they want it to support their hardware.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 9:43 UTC (Tue) by davidw (subscriber, #947) [Link]
It sounds as if you save some money by using free software, but how do you actually make it? What do people pay you for? Services - and you are able to deliver them cheaper because of free software? Or something else?
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 10:33 UTC (Tue) by niner (subscriber, #26151) [Link]
Cheaper and better. We can afford to pay for development because we have no license cost and much more, because our processes run extremely efficient due to software doing exactly what we need. We scratch every itch and without itches, you can concentrate much better on making profit.
Why Making Money from Free Software Matters (The H) Posted Apr 29, 2010 0:15 UTC (Thu) by Trelane (subscriber, #56877) [Link]
I like that "itches" line at the end. I shall need to remember it in the future!
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 11:26 UTC (Tue) by dskoll (subscriber, #1630) [Link] The company I work for makes quite decent money developing free software. How? By using it! We do that too. It would be foolhardy not to. However, I still contend that it's far easier to make a lot more money with proprietary software than with free software. The reason is that with free software, about the only sources of revenue are consulting, customization, support, and maintenance. All of those are labour-intensive and relatively low-margin activities. In my case, I probably would have accepted a year's salary (let's say $100K) to write and GPL my commercial product. But by taking it proprietary, we've made 50x that amount in sales, because each additional sale, once the software is written, is essentially free. It's this huge leverage of effort that makes the proprietary business model so attractive. And given human nature and economics, I don't see that ever happening with free software.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 11:35 UTC (Tue) by davidw (subscriber, #947) [Link]
Exactly. For people thinking "Oh, I don't really need all that money, I just want a decent living...", you can scale the numbers the other way, too:
If N people need something, you can sell it as a proprietary solution fairly cheaply, because you can divide the costs up N ways. If on the other hand, the product is to be open source, you probably won't be able to recoup your costs, as the developer, from more than one of the potential clients (assuming you're not making some really difficult to use/set up consultingware system), so you'll have to ask that one guy to foot the bill for the development of the whole thing. Ouch! That's a lot of money: he'd do better off to go to the proprietary vendor who is selling for less because he hopes to recoup the costs from N-1 other customers.
Sure, that's all simplified, and it is blatantly obvious that open source software has an important role to play, and is not just some blip on the radar screen, but my point stands that it's way simpler (although neither *simple* nor *easy*) to do something proprietary if you want to create some new software and get paid for it.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 11:42 UTC (Tue) by tzafrir (subscriber, #11501) [Link]
Get paid for once? Sure. Continue to get paid for? Hmm....
If you want to make users keep buying new versions, you compete not only with all others in the market (proprietary and free alike) but also with previous versions of your software, that might be "good enough". So is it sustainable?
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 11:54 UTC (Tue) by dskoll (subscriber, #1630) [Link] So is it sustainable? Darn right it is. People are much more willing to pay for support and upgrades of proprietary software than free software. Also, with proprietary software, the software author is the only one who can provide updates and upgrades; he/she doesn't have to compete with others who could equally support or upgrade the software.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 12:36 UTC (Tue) by Zack (guest, #37335) [Link]
>>So is it sustainable?
>Darn right it is.
I'm not so sure about that. It seems that mainstream popular software reaches a point where there is really nothing substantial left to add. From that point onward it needs to be sold on the merits of insubstantial changes, market lock-in and other consumer-unfriendly practices.
So, yes, it is "sustainable" for a single person as he can join early, cash out at the right time, and retire or alternatively hop from company to company. But from a long-term perspective, popular proprietary software is a downwards spiral for (the smaller) IT related businesses in general as well as the consumer; generating profit by not actually producing anything anymore at the expense of innovation and by scorching the earth for potential competitors.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 16:01 UTC (Tue) by bronson (subscriber, #4806) [Link]
Oh really? Let's ask Microsoft about your "downwards spiral"...
http://www.informationweek.com/news/hardware/desktop/show...
The fact is, proprietary software has sustained a huge number of companies large and small for decades, and shows little sign of faltering (yes, there are signs on the horizon that service-based or appstore-based sales will take over, but the numbers don't show that yet).
Proprietary software is a proven, long-term, sustainable business model and doesn't require the shenanigans that you describe to maintain. Just because some companies have treated their customers badly doesn't mean that you can claim that it's all fiction.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 20:01 UTC (Tue) by Zack (guest, #37335) [Link]
>Oh really? Let's ask Microsoft about your "downwards spiral"...
I'm not sure whether you are missing my point or whether I am missing yours.
Microsoft's sales might be soaring, but that has very little bearing on what I wrote. Microsoft is not as much of a software house as it is a marketing and lobbying company. Whether the latter activities are more commercially successful than the former is not that relevant to the question of whether it is detrimental to the larger system.
On the other hand, they do have products that can serve to illustrate my point.
There is very little to functionally add to present day word processors
>Proprietary software is a proven, long-term, sustainable business model and doesn't require the shenanigans that you describe to maintain.
So, actually, some of the most prominent examples of long-term sustainable business models apply exactly the sort of shenanigans I described to maintain.
Proprietary software is not only detrimental because it doesn't allow sharing with the proverbial neighbour, it also is detrimental because it is damaging to the entire industry in the long term.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 12:47 UTC (Tue) by paulj (subscriber, #341) [Link]
Interesting poll to ask of those at your next free software geek meet-up (virtual or real):
"How much money have you personally given to software organisations in the last x years? How much of that to proprietary software vendors? How much to free software vendors and organisations?"
Amongst people I know I get the anecdotal feeling people spend *way* more on things like Apple OS-X and even Windows than they ever spend on RedHat/Novell/Canonical support contracts, or LWN, FSF, etc.. donations. It'd be really interesting if LWN and /. would conduct such a poll.
Why Making Money from Free Software Matters (The H) Posted Apr 27, 2010 14:32 UTC (Tue) by dskoll (subscriber, #1630) [Link] Here's my data point: I have spent about $1500 on free software. All of that was via voluntary donations to free software projects; I have never purchased a support contract. I've donated a few hundred bucks to the FSF, and we've had a corporate LWN subscription for a few years. I have spent about $50 on proprietary software; that was back in 1981 when I purchased the EDTASM assembler for my Coco. Since then, I've spent nothing on proprietary software other than the very-hard-to-avoid (Coco ROM BASIC, BIOSes in my PCs, Nintendo games for my kids, etc.) You may find this surprising given my other postings, but it's perfectly rational. It makes perfect economic sense for me not to pay for software, just as it makes perfect economic sense for me to run a company that sells proprietary software. It makes no economic sense for me to donate money to free software projects. That was done out of a sense of moral or ethical duty, just as giving to any other charity would be. I suspect I'm an outlier in your poll. :)
I doubt it'll take this long... Posted Apr 27, 2010 6:22 UTC (Tue) by khim (subscriber, #9252) [Link] I don't expect that to happen in our lifetimes, of course. It may take a century or more to reverse current accepted thought in the role of governments to protect irrational markets. Well, it depends on many factors. Right now the status quo can not be changed because US play pivotal role on world market. US is losing this role. If some big enough and influential enough country will defy the the US demands for long enough and abhor the copyright for long enough the industry can do a flop like it did with chemical industry (British and French firms controlled 90% of world market in 1862 but only about 2-3% in 1873). It's easier to move the software development around then chemical factories. But with software there is still a ton of scarcity. You can say this again. The best way to explain the point I've ever seen: It is rather ironic that a group of economists, who are also college professors and earn a substantial living teaching old ideas because their transmission is neither simple nor cheap, would argue otherwise in their scientific work.It's from this book - read and weep. Open source alone would probably be able to defeat the Microsofts and the Oracles (to the point were they determine that FLOSS is actually sustainable for themselves, not until destruction...) of the world... but it cannot defeat the Microsofts and Oracles of the world working in any reasonable time frame (say a decade or two) with Governments colluding internationally to protect their markets through a bizarre web of laws surrounding copyrights and patents. Yup. But it's only till governments are playing the same games. When governments will finally see that they are helping the US and killing the local firms by enforcing copyright of Microsoft and Oracle... the flop can happen quite fast as I've pointed out above...
I doubt it'll take this long... Posted Apr 27, 2010 16:06 UTC (Tue) by bronson (subscriber, #4806) [Link]
> When governments will finally see that they are helping the US and killing the local firms by enforcing copyright of Microsoft and Oracle
Um... are you suggesting that countries should somehow invalidate all copyrights held by Microsoft and Oracle?
I doubt it'll take this long... Posted Apr 27, 2010 20:32 UTC (Tue) by dmaxwell (guest, #14010) [Link]
There is a broad spectrum between "slavishly adopt nasty secret anti-consumer treaties strong armed by the US behind closed doors" and "invalidate US copyrights just because". Suppose a few large markets among other things decided they don't need to please the US on this as much as they have in past and try some true copyright reform. Say they have a system where copyright only lasts 25 years and can be renewed once if it is still profitable for the copyright holder. Under that system, those two old ladies wouldn't be able to terrorize people for singing "Happy Birthday" around a campfire. There are many such possibilities where many US copyrights would (eventually) no longer be valid in those jurisdictions. And if the US continues as it has been, this could start happening sooner than you think.
I doubt it'll take this long... Posted Apr 27, 2010 21:04 UTC (Tue) by drag (subscriber, #31333) [Link]
Going after or blaming the 'US' for all of this is a mistake.
The people who are after passing things like the ACTA are absolutely a global community and they use the USA government as a vehicle because it's currently the most influential and is the most friendly for them for various reasons, not to mention that many of them are in the USA (of course).
But it can just as easily be the EU folks being their vehicle AND it certainly would NEVER get done without the full cooperation of the governments in Europe.
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