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Five years ago, if you had asked most people if open-source was a good basis for a business, they would have laughed at you. How things change.
Today, major open-source projects, like Mozillas Firefox and Thunderbird and the Debian Linux distribution with the Debian Core Consortium, are being transformed into businesses.
Whats happening here?
First, there has always been a strong tendency for some to look at open-source and see the business possibilities.
The late Caldera Systems (subsequently The SCO Group Inc.) and Red Hat Inc. lead the way for the commercialization of Linux.
Other people saw the possibilities of open source beyond the operating system.
David Axmark, Allan Larsson and Michael “Monty” Widenius saw profitability in the open-source database management systems and founded MySQL.
Later, Marc Fleury in the United States thought that open-source Java-based middleware could make a viable business.
Today, his JBoss is a leading J2EE (Java 2 Enterprise Edition) provider.
There are, as theyve proven, many ways to profit from open source.
Analysts, however, now see more open-source groups than ever before, realizing that there might be gold to be found in their code.
“Were seeing a grand experiment under way now. Many open-source project teams are trying different approaches to monetizing their projects,” observed Dan Kusnetzky, IDCs VP for system software research.
This development isnt just about turning a corporate profit, though. Some open-source projects need to turn commercial to keep going.
“Its a bit of a mix,” said Gordon Haff, senior analyst for research house Illuminata Inc., “but certainly many of the major projects are very dependent on developers who are paid to work full-time on them, which in turn implies that some commercial entity is either profiting or hoping to profit.”
As Kusnetzky pointed out, “Even open-source projects need funding to pay for systems, network connectivity, and other things.”
Laura DiDio, senior analyst at The Yankee Group research firms application infrastructure & software platforms, agrees.
“The fact is Red Hat, Novell, IBM, Oracle, HP, Apache, JBoss, Debian, Mandriva, Turbo Linux et al. have to make money somehow. Common sense dictates that without a visible revenue stream or revenue generating business plan, these businesses will not be able to keep their doors open or the lights on, or secure financing (in some cases).”
So it is that DiDio believes that “the Linux distribution vendors and OEM hardware vendors are clearly commercializing Linux offerings and adopting licensing models that—although they are not nearly as expensive as commercial offerings— are trying to impose more structure and specific conditions on the models. [The same is true] for the larger and more popular open-source applications.”
Next Page: Embracing a more traditional structure.
Embracing a More Traditional
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Stacey Quandt, chief analyst for Quandt Analytics, thinks that open-source projects today often have little choice but to embrace a more traditional commercial structure.
“Today most open-source-related companies, whether they seek venture capital or not, need to define their market and objectives in the context of technical maturity, commercial support and partnerships with system vendors and independent software vendors, licensing, and the vibrancy of their respective open-source communities,” said Quandt.
In particular, Quandt sees “several companies” following this trend.
For example, she points to the “companies focusing on the certified LAMP [Linux, Apache, MySQL and Perl/PHP/Python] stack [such as], SpikeSource and SourceLabs. Then there are the companies focused on business intelligence, such as Greenplum and JasperSoft.“
Quandt wonders, though, whether this commercialization of open source may be a short-term trend.
“Most of these companies may be seeking a buyout, such as Gluecode, which was acquired by IBM.
There may well be buyers for these next-generation open-source businesses.
“It is only a matter of time before IBM focuses on a delivering a certified LAMP stack. Also HP is likely to augment its open-source reference architecture with more value-added software and services,” said Quandt.
That said, its certainly not all about having the right exit strategy.
“Its clear that some of these [businesses] will work. Examples [of ones that work] are JBoss and MySQL. Their approaches do appear to be working for them. Its also clear that approach will not work for everyone,” said IDCs Kusnetzky.
Haff sees the same thing.
“There are few enough examples of companies that are purely Professional Open Source prospering. Red Hat is much more the exception than the rule.”
Next Page: Evolving expectations.
Evolving Expectations
Another factor driving this trend is that as open source is more accepted by the enterprise, the enterprise expects it to reflect more of its concerns.
“The passionate arguments over the merits of open-source versus commercial offerings like Microsoft Windows or Office are relegated to the developers community and internal political factions with corporate IT departments,” said DiDio.
“In the overwhelming majority of cases, they do not resonate with the higher level CEO, CIOs and COOs who do not care about technology types other than to pose the questions: How much will this cost us; will it keep us competitive; what are the advantages/disadvantages, etc.”
“And the higher-level executives are the ones who sign the purchasing orders. They tend to demand accountability—in terms of enterprise level technical service and support, documentation, product warranties and indemnification and the relative financial health and long-term viability—of all of their vendors.”
Another motive behind open-source projects going commercial is the need for sufficient support to make it attractive to users.
For example, Quandt sees this as being the case with the DCC (Debian Core Consortium).
“A trend to watch is the progress of the DCC to gain support from system vendors and ISVs. The primary reason that most enterprise customers choose Red Hat or SuSE is because of the support from system vendors and ISVs.”
“Most CTOs and CIOs want service and support through their system vendor and not a Linux distribution provider,” said Quandt.
If the DCC, Mozilla and other such groups are successful in this, Quandt thinks it may change the entire software world.
“As open-source companies continue to create pricing pressure on proprietary software solutions, it will be interesting to see how Microsoft responds subsequent to the release of Longhorn. By 2010 Microsoft will support its applications on Linux and develop an open-source strategy,” Quandt said.
Be that as it may, open-source companies face the possibility of rejection from their supporters.
Red Hat, for example, lost support some of its open-source developer support when it first folded its Red Hat Linux line in 2003.
It wasnt until Red Hat opened its community-based Fedora Core that it regained some, but not all of the communitys good will.
Its not just, as eWEEKs own David Coursey has it, that the Mozilla and DCC moves are “taking with it a bit of the romance of software by the people, for the people.”
Its that theres a real gulf between those who develop free software for idealistic reasons and those who do it for business ones.
As Haff observed, “This not-so-creeping commercialization is clearly not viewed positively by some.”
In a recent paper, Haff wrote, “there is perhaps no clearer division these days than that between the developers who hack together Open Source projects on their own time for fun and the increasingly prevalent counter-current of professional Open Source in which IT vendors large and small fund Open Source development for hard-headed business reasons.”
“Thus, when JBoss Founder and CEO Marc Fleury sniffled a bit dismissively about amateur Open Source projects—contra those supported by corporate-funded development teams—some of the natives turned more than a bit hostile. Marc may not have been the most diplomatic, but that doesnt change the reality of disparate objectives and goals for Open Source,” wrote Haff.
DiDio sees the same problem, but puts it another way.
“Remember that 35 years ago, the area we now know as Silicon Valley was a collection of modest houses surrounded by orange groves. So for open-source purists, this may be a disturbing trend.”
“It reminds me of that old aphorism: We have met the enemy, and it is us. Or in this case, Open source has met the enemy and it is commercial success.” said DiDio.