Why No Billion-Dollar Open Source Companies?

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If you attended on of my presentation where someone asked me about Open Source you probably know what I think, in summary I think Open Source is a good way to help people to learn technologies and share knowledge, a good social and academic tool, but not something to make money, it brings more negative impact in the market them any other think. If you are trying to make money saying your product is Open Source, you are dead.

Navigation Through the Internet this Sunday night I found this article “Why No Billion-Dollar Open Source Companies?”, a nice interview with Red Hat’s CEO Jim Whitehurs published by Computer World UK, take a look and see, it is interesting.


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9 replies
  1. cjrh
    cjrh says:

    With respect, I think you:
    a) didn’t understand the article to which you refer;
    b) confuse open-source software with free-as-in-beer software;
    c) completely forget the history of why we even have open-source in the first place.

    The linked article clearly points out that a significant benefit of open-source is that more money remains available to the company or country to be spent on things other than software This is a positive, not a negative.

    Then, the primary purpose of open-source is to ensure that when source code is openly donated, the recipients of that code must ensure that when they give that code over to others, all the rights they enjoyed with it must be maintained. Here I refer specifically to the GPL. That open-source code is often zero-cost is besides the point. The GPL is intended to preserve rights.

    Lastly, free software exists because the root nature of software is a monopoly industry, and it will always be this way, because systems must integrate with each other for the purposes of communication, and that gives a much greater preference for using the same software on both ends. In general, there is zero motivation for big companies to spend any effort on interop with competitors’ tech, unless they are so far behind that they need that interaction just to survive.

    In sum, open-source (GPL) exists to make sure donated code remains examinable for all, and free software exists because that is the only way to compete in a monopolistic market.

    Reply
  2. fabio vitale
    fabio vitale says:

    I disagree completely with your assessment about OpenSource!

    There are plenty of Big companies making real money from OpenSource.

    During the first meeting with a new customer the first thing I try to do is: replace as much as I can all software that is not OpenSource.

    OpenSource or, better, software you do not have to pay, is the way to go.

    Regards

    Reply
  3. Esteban Pacheco
    Esteban Pacheco says:

    @Fabio Vitale,

    Care to give an example of these big companies reporting more than a billion profit?

    @crjh,
    I think you also deviated from the original idea of the post. I dont think Andreano is debating the license or the principle behind open source software, nor the existence of the very repeated line “monopolistic market”. I think the topic was around the level of profit that can be obtained with ONLY open source software based companies. For sure you can make millions and be successful to a level that most of us will be happy, but to the level of billionaires? probably not, but again, there are already very few companies on that level so I dont think it matters much.

    Reply
  4. Andreano Lanusse
    Andreano Lanusse says:

    Hello guys, thanks for you comments.

    I don’t confuse Open Source and free, but the market yes, but in some way they are connected.

    I have to disagree in some points, especially when we are talking about integration, we have enough technologies which allow integration.

    I prefer to talk about the facts about what I see in the market, instead the Open Source history. I always ask for the Open Source defender if there software is Open Source, if is in source forge, etc… 100% don’t upload in source forge.

    Red Hat try to make money in service, selling support, training and consulting, they don’t make money in software and it drop their margin and make difficulty to raise revenue.

    Simple question, are you guys development open source software? did you host the source code in SourceForge?

    Reply
  5. Mason Wheeler
    Mason Wheeler says:

    You mention Red Hat selling support. Part of the problem is that that business model is fatally flawed.

    Think about it. If you’re giving away software for free and charging for support and services, the only way to make a profit is to make software that requires enough support and services to recoup the development cost. In other words, software that’s hard to use and figure out without outside assistance.

    Or in other other words, software that sucks. And if your software sucks like that, people are going to prefer to use the competition. And if it doesn’t, then your opportunities for making money are sharply curtailed. It’s a lose-lose situation.

    Reply
  6. Jonas Maebe
    Jonas Maebe says:

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    Red Hat develops little software itself. They are primarily an integrator. Companies pay Red Hat to continue performing this integration work, because they depend on the result to run their business (in addition to receiving regular support, like from any commercial software publisher). The companies could also do this work themselves, but that would cost them more time and money.

    In other words, it’s a completely different business model than shrink-wrapped software and it’s based on different incentives.

    The business model you describe sounds more like what SAP does (sell hard-to-use and hard-to-customise software so that you cannot but also purchase expensive support contracts), except that in addition they also charge a hefty purchasing price and moreover lock you in completely.

    Reply

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