Just when you think Tim is an optimist, he reminds you that he's somewhat of a realist. His post came in response to a quote from Nat Torkington, talking through the implications of Adobe, Microsoft, and Sun beating down the doors to open source competing technologies first:
"Microsoft is in a new era. The Bill Gates cutthroat 'we win by killing' days are passing," says Nat Torkington, co-chair of the O'Reilly Open Source Convention. "Microsoft exists by making users happy. And sometimes -- just sometimes -- you make Microsoft users happy by giving them a technology that wasn't invented at Microsoft."Tim disputes that any free love is being passed around, and I think he's right, though perhaps for different reasons. Tim doesn't really go into this, but much of the use of open source today is offensive, not defensive. Some companies toss around open source as a defensive way to staunch their bleeding (not naming names...), while others do it as a proactive way to undercut competitors.
So, all this open sourcery has a highly capitalist bent to it. In other words, Nat, it may well be about 'we win by killing.' That's certainly not the mindset of many of us in the industry, but it's there.
Tim implies (at least, I think I see an implication in his comments) that we've reached the second phase of open source: the Google phase, if you will. This is where free riders build proprietary gardens on open source soil, selectively give back, and make a mint in the process.
I would give more credence to this thought if there were much to substantiate it. There simply is not that much free software to free ride upon. Even the "M" in the LAMP stack (MySQL, that is) has lately moved to capture more of the value that is being derived from enterprise-class use of its database. The days of taking without giving back, I hope, are limited.
What we need are next-generation open source licenses built for SaaS. I have no problem with Google making billions of dollars. I have problems with Google making that money without giving commensurate code or cash contributions back. (No, it doesn't - it's highly selective and, yes, increasingly generous, but open source isn't about generosity - it's about obligation, quid pro quo).
Tim writes:
Pure open source software businesses are orders of magnitude less profitable than their closed source brethren even as they close in on them in terms of the number of customers.This is true, so far as it goes, but it actually begs a different conclusion than the one that Tim seems to arrive at. For me, it suggests that the days of outsized profits based on proprietary, write-once-print-a-billion-dollars models are gone, or nearing a deserved demise, just as they have in virtually every single other industry this planet has ever known. Software had a brief spell as an anomaly. Now it's growing up, and the answer isn't more proprietary lock-in. It's better value for the customer's dollar.
Tim later writes:
Outsized profits come from lock-in of one kind or another. Yes, there are companies that have no lock-in that gain outsized profits merely by means of scale, but they are few and far between. So the question I've been asking from the beginning of my thinking and advocacy about open source is this one: Where are the new sources of lock-in, once we've taken away the old ones based on proprietary APIs, binary software, and control over distribution channels?I appreciate and acknowledge Tim's semi-conclusion to this one ("Data is the Intel inside"), but I think it's only one answer to the question.
I actually think it's possible to build a high-margin business on giving software away without proprietary bits that provide the "real value." In fact, Alfresco, my company, is doing just that. We have traditional software margins without traditional software price gouging. We just run our business very differently from an Oracle, Microsoft, etc.
What is Nordstrom's proprietary lock-in? Service. Frankie Johnnie & Luigi, Too!'s? Packaging. (Best pizza on earth, btw.) BMW's? Brand and assembly. Etc. IP may matter in each of these industries (trademark for Nordstrom, patents for BMW, etc.), but these aren't the primary bases for their success. Service is.
I think we fall into an unfortunate trap if we think the best way to compete is through exclusion. History doesn't teach us that. It teaches us the exact opposite. Every successful industry outside of software has built its outsized profits on service, not proprietary lock-in. The tech world may be fond of thinking it's different, but it's really not.
Not for long, anyway.
Posted by Matt Asay on May 11, 2007 02:01 PM
