Skok said there are a few basic business models for open-source software. One is the dual-license model, where companies offer their ware for free under the GNU GPL (General Public License) and then charge a fee to customers who want a commercial license. Another model is the support model, where companies provide the software for free but charge for support. A third model is to offer a basic version of the software for free and then charge for an upgrade.
Red Hats Stevens said the open-source model "works for us because the complexity of the technology is really high" and there is a need for support. He said the more complex the software, the better the chance for a company to build a business on open source.
"But even harder than making money on open source is making money on proprietary software that competes with open source," Stevens said.
Skok pointed to IBM as a major company that has harnessed open source to great benefit. "Theyve managed to capitalize on Linux. Their major competitor on hardware used to be Sun [Microsystems Inc.], but since Linux, IBM has been able to thrive and sell a bunch of services and hardware."
Stevens agreed. "Its a fantastic move by IBM," he said. "Its only good to donate IP if youre going to become the benefactor. So they have emerged as the most aggressive proprietary vendor with Linux."
Sun is a different story, Skok said. "I think Suns in trouble. They have a very serious problem of a business model that can change, but when it does change itll be hard for their shareholders. Its Intel economics. Sun has to become an Intel seller; they not only have to lose the Solaris and Sun hardware edge, but they have to compete with Dell [Inc.]."
Commenting on Suns move to open up Solaris, Stevens said, "Sun said it released some 1,600 of its patents, but you have to read the fine print."
Moreover, "the challenge Sun is going to have is they lost their top two markets: financial services and telecommunications," Stevens said. He said already 20 percent of the financial services sector is running Linux. Stevens then spoke of recent meetings he had with financial services companies who said they used to have a combined $2 billion budget for Sun products, but this year that budget is only $500,000. "So they can bring in Dell, IBM and [Hewlett-Packard Co.], all on Linux."
Stevens lauded Suns moves to come back with its recent foray, "but its not causing a reverse," he said. "Instead of really joining the community like IBM has, Sun is trying to create its own developer community."
Meanwhile, Skok said he is keeping an eye on SugarCRM Inc., an open-source CRM (customer relationship management) software provider. "Im watching them very closely to see if theres a similar community to help spread the word about open-source CRM.
Skok founded SilverStream Software Inc., one of the early application server vendors. "So I have invested in a paid-for app server and then I moved to invest in one that they give away for nothing," he said, referring to JBoss.