Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 9:39 UTC (Tue) by Hanno (guest, #41730)
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)

Says Sony: "Linux has achieved world domination everywhere except on desktop systems."

OSS is part of infrastructure these days. Go in a shop and try to find e.g. a TV, blu ray player, DSL router or cell phone that doesn't run Linux. A substantial amount of products does today.

So yeah, there is a surprisingly big bunch of companies making money of OSS today. These companies pay developers to write and maintain their OSS. They compete with each other, yet they collaborate as well (as an example, see the recent LWN article about MeeGo that describes how Android, Palm and Meego work together on the Kernel).

Linux is not the underdog anymore, it's the hidden champion. Things aren't so bad as many think.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 11:31 UTC (Tue) by dskoll (subscriber, #1630) [Link] (13 responses)

OSS is part of infrastructure these days. Go in a shop and try to find e.g. a TV, blu ray player, DSL router or cell phone that doesn't run Linux. A substantial amount of products does today.

There's a big difference between making money using OSS (especially embedded in products whose main point isn't really the software), and in writing and selling a software product as OSS.

Any company that doesn't use OSS where possible is throwing money down the drain. But I don't believe that most proprietary software companies would benefit financially from open-sourcing their products. On the contrary, I think they'd lose huge amounts of revenue.

It makes clear economic sense to use free stuff; it's much less clear that it makes economic sense to offer free stuff.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 11:46 UTC (Tue) by Hanno (guest, #41730) [Link] (12 responses)

To use free stuff, you must adapt it your needs. Oh, hello GPL.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 11:50 UTC (Tue) by davidw (guest, #947) [Link] (3 responses)

There are tons of cases where no adaptation is necessary, and where it makes economic sense to "free ride".

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 11:55 UTC (Tue) by Hanno (guest, #41730) [Link] (2 responses)

And where is this a problem?

My original point was, companies are making money selling products using Linux, but to maintain the software that is integral part of their products, they have to hire developers. And there you have one very healthy business model for open source. Yes, people do get paid for doing OSS. Quite a lot of people, actually.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 12:02 UTC (Tue) by davidw (guest, #947) [Link] (1 responses)

No one is arguing that no one makes any money at all from open source.

However, Linux is also something of an exception in that it's one of the most important and visible projects out there. Also, Linux is a good case in point: the initial development work that was sunk into it was mostly, as far as I know, done 'for free' (i.e. subsidized by Finland, Linus' parents, etc...), and only later because it became so huge did Linus get something back. How many free software projects does that happen with? There are no guarantees that merely sticking a proprietary license on something will make you loads of money: most of those projects fail too. However, it is a good guarantee that if your product is popular and people are buying it, you will make some money from it. In other words, the feedback loop between popularity and the developer getting money is pretty tight, whereas with open source, it's kind of open, and most of the benefits are probably going to people saving money, with little ability to funnel that money back into development of the product.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 15:34 UTC (Tue) by vonbrand (subscriber, #4458) [Link]

I beg to differ. Both with closed and open source the vast majority of the work done is in-house, for local use only. That you don't see on the balance sheet of the visible players. Some of that "escapes" (and might get included), other parts are specifically contributed to upstream. The advantage of open source is that it is normally much easier to contribute.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 11:52 UTC (Tue) by dskoll (subscriber, #1630) [Link] (7 responses)

But how does that promote the idea that you can make money from free software?

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 11:57 UTC (Tue) by Hanno (guest, #41730) [Link] (6 responses)

But how does that promote the idea that you can make money from free software?

We seem to be misunderstanding each other. OSS developers are being paid for their work, so they are making money. What is your point?

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 14:24 UTC (Tue) by dskoll (subscriber, #1630) [Link] (5 responses)

What is your point?

My point is that it is anywhere from 50X to over 10,000X as profitable to write and sell proprietary software than to attempt to profit from producing free software. (Note that I'm restricting this discussion to organizations that produce software as the final end product. I'm not considering the case of embedded software where the end product is not purely software.)

And unless people's psychology changes or the laws of economics are overturned, I can't see this changing.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 17:05 UTC (Tue) by chromatic (guest, #26207) [Link] (4 responses)

Are you accounting for all of the proprietary software that fails to generate profit?

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 17:36 UTC (Tue) by dskoll (subscriber, #1630) [Link] (3 responses)

If proprietary software fails to make a profit, you go out of business. Free software is almost guaranteed to be unprofitable. (Note that I'm specifically concentrating on companies whose end-product is software. I realize that most software is for in-house use only and is a cost, not a revenue source. I'm also not considering consulting and development revenues, because those are labour-intensive and low-margin.)

I just don't see how free software can leverage the enormous magnification of effort that proprietary software does. Lots of people have tried to come up with creative, profitable business models built around free software, but few have succeeded, and certainly they've never had anywhere near the financial success of proprietary software vendors.

Free software is enormously successful in infrastructure, because everyone needs it and it doesn't really hurt anyone to release the code for free. It's less successful at the application level (if Sun hadn't purchased StarOffice, I doubt we'd see and open-source OpenOffice). And it's completely unsuccessful where large development costs combine with a short product lifecycle and no possibility of support revenue (video games, for example.)

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 20:16 UTC (Tue) by tzafrir (subscriber, #11501) [Link] (1 responses)

So how could a large software company like Sun ever fail if the software business is so profitable?

As for OpenOffice:

1. And if there was no OpenOffice, many more efforts would have gone into "GNOME Office" and KOffice
2. Office Suits are "basic infrastructure"? So how come StarDivision (and later on: Sun) were selling licences of them? In fact, MSOffice it was a major source of income for Microsoft at the time.

Also:
"Short product lifecycle" for proprietary video games are mainly because they are proprietary.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 22:04 UTC (Tue) by dskoll (subscriber, #1630) [Link]

Sun was not a software company; it was a hardware and software company. Any company can suffer from management or other problems; while proprietary software can be hugely profitable, it doesn't mean it must be. However, free software is never hugely profitable, certainly not at the levels proprietary software has reached.

Office suites are not basic infrastructure... that was my point. I've never used KOffice, and I don't know if "GNOME Office" even exists. I get the impression, though, that OpenOffice is by far the biggest and most capable free office suite.

And video games have a short life cycle because of the nature of the product. Video game fads come and go; some video games last about as long as movies. It has nothing to do with the fact that they're proprietary.

A couple of points

Posted Apr 28, 2010 6:22 UTC (Wed) by man_ls (guest, #15091) [Link]

I'm also not considering consulting and development revenues, because those are labour-intensive and low-margin.

Consulting is definitely labour-intensive, but not low-margin -- you can ask Oracle or SAP, or even Red Hat. Their hourly bills are easily above 300% what a fully-loaded senior consultor makes. Good consulting (straight from the software publisher) is very well paid.

Also, not all games have a short product lifecycle; online games like WoW or Second Life last for decades, and it is for them where free software makes more sense. But here your argument still stands (for other games free software has not succeeded).

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 13:52 UTC (Tue) by SEJeff (guest, #51588) [Link] (2 responses)

Sorry, Android works with no one but google and their hardware vendors on the kernel... Thats why there is so much animosity towards their project from upstream kernel.org. They don't play nicely with others.

Why Making Money from Free Software Matters (The H)

Posted Apr 27, 2010 14:16 UTC (Tue) by mjg59 (subscriber, #23239) [Link] (1 responses)

I think that's somewhat unfair now. Google's just resubmitted their suspend blocker code, and this time I think we're in pretty good agreement about it.

Why Making Money from Free Software Matters (The H)

Posted Apr 29, 2010 0:19 UTC (Thu) by Trelane (subscriber, #56877) [Link]

Glad to hear things are progressing! Yay GOOG! :)