I was talking with a friend today and he suggested that proprietary vendors have a "right" to their business models, just as open source vendors have to theirs. When I questioned him on whether anyone has a "right" to a certain way of making money, he backed down, but it's telling that he even made that mistake in the first place.

The Microsoft patent FUD isn't about intellectual property. It's about Microsoft's desire to continue making money the way it always has.

Oddly enough, every industry has its share of disruption, and every industry changes over time. There's no reason to believe that the proprietary software model is something to be venerated and held inviolate. Guess which industry this snippet comes from?

"I had done quite a few deals where I spent maybe five hours total working on the deal. I never saw the house. My client found it online and, you know, I would make $12,000 for four hours of work. And I thought this cannot keep going on like this. Someone, I felt like I was going to get caught! You know, someone’s going to see that this is happening and I think a lot of them hold that truth inside of them right now. They’ve got the clients that are finding [the products] on their own. They make $20,000 and did 10 hours of work," she says.

Any takers for Real Estate?

For realtors, the six percent commission is sacrosanct. It's remained in place, even as the price of homes has quadrupled over the past 25 years.

Despite the Internet putting power in the hands of buyers, such that they don't need an agent to do as much (or any) of the legwork. (I bought my last house without an agent - not sure what I was missing out on, besides the Cadillac to ferry me around.) Despite the price of the service going up while the effort involved goes down.

Despite lots of things that mitigate against the price tag a real estate agent puts on their work.

Open source actually fits this real estate example to a "T." As Larry Augustin once said in an OSBC keynote, and which he is covering in more detail at OSBC in two weeks (May 22-23, San Francisco), the open source P&L works because it cuts out much of the sales/marketing fat rife within a traditional software business model. If I remember right, Salesforce.com spends $10 for sales and marketing, for every $1 it spends on R&D.

That's a shocking number, if even remotely true, and begs for a different value proposition. Let customers find and deploy software on their own terms, and pay for value (service, support) if desired. Cut out the real estate agent, in other words, or at least the disproportionate fee for their services.

It's tough, change. But I learned in Antitrust 101 in law school that it's not the government's role, or the law's job, to preserve inefficiencies just because they benefit the incumbents. It's not surprising that the incumbents dig in their heels to prevent change, but there's no reason we should feel sorry for them.

After all, they can come work for us. We're hiring.

Posted by Matt Asay on May 14, 2007 01:50 PM