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Is Open Source Software a Race To Zero? 729

gozunda writes "My company is an open source software vendor/developer. We maintain a popular open source project and keep ourselves afloat by producing commercial products derived from or extending the value of the core project. Over time we've seen our business model eroding as other open source projects produce free versions of the same extensions and utilities that are our bread and butter. Something that was worth $5K last year is suddenly worth $0 because the free version is just as good as the paid. This same cycle is obviously having an impact on pure-play commercial software vendors. Is open source ultimately a race to zero? In ten years will there be any cost associated with commodity (non-custom) software? If not, will there still be a 'software industry' as it exists today, or will software simply be a by-product of the operation of other industries? Is that a good thing or a bad thing? As a professional developer, do I need to fear this or feed it?"
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Is Open Source Software a Race To Zero?

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  • by KingSkippus ( 799657 ) * on Sunday November 23, 2008 @11:42AM (#25864673) Homepage Journal

    Is open source ultimately a race to zero?

    Yes, and there's nothing new with that.

    Just because your software is open source doesn't mean that you get to sit on your duff and collect money off your paid extensions in perpituity. Just like any other software company, if you want to keep food on your metaphorical table, you've got to continue to innovate and improve. Otherwise, just like any other software company, your competitors (in this case, open source develoeprs) will eat your metaphorical lunch.

    For what it's worth, though, nothing would be different if your software were closed source, except that your user base would probably be smaller and, depending on how necessary your software is, open source competitors would be even more eager to push you out.

    • by Anonymous Coward on Sunday November 23, 2008 @12:04PM (#25864825)

      And since the base is open, the investment in time required to make a competitive product is just the extension itself. Usually something a motivated user can and will do.

      And no, it's not a bad thing. But it does mean a changing business model. I really don't think there will be much in the way of pure play software businesses in the future. I also think the "support" model is a mirage.

      Software will be what it has always been for me and many others... a necessary component of a larger system or product that does have a barrier to entry (for me, that's embedded systems).

      • by loufoque ( 1400831 ) on Sunday November 23, 2008 @12:40PM (#25865101)

        If the cost of making the extension yourself is far lower than that of buying the extension, then obviously it's the price of the extension that is much too high.

        And that's what the problem with that kind of things is in practice, extensions are priced much more than their real value to amortize the cost of the main product.
        The solution is simple: just price the extensions correctly. If that means your extensions become super cheap, then why not make extensions that are actually valuable?

      • by mikeb ( 6025 ) on Sunday November 23, 2008 @08:44PM (#25868689) Homepage

        I don't think that support is a mirage at all. Many customers will pay for support - I've been in numerous meetings where I say something like "You can have RedHat for xxx per year or Fedora free" and it's the last bit that scares them.

        We could have a philosophical debate about how long customers will pay for support on software with a low price tag but my bet is it will be at least until we no longer have to care about it.

        If the software is worth having - i.e. has a nonzero benefit to the customer - then it has a negotiable support price. How much would they lose if it stopped working? Between that figure and zero is what they will pay per year to not have it stop. The more it's worth to them the more they will happily pay as an insurance policy let alone to guarantee access to updates.

        Until you have been in those meetings negotiating the prices it's hard to get a grasp on how much that means to many customers and how delighted they are to be able to pay someone.

        Remember, if the system goes down and they are summoned to talk to higher management who ask "how much were we paying in support for this stuff" - and their answer is "we didn't pay for support" then that's their job on the line. Senior management will not be impressed by that reply.

        So for many customers if nothing else it's ensuring that they keep their jobs and it's not coming out of their pockets. There is a budget for support and it has to be spent with someone.

      • Re: (Score:3, Interesting)

        by ReedYoung ( 1282222 )

        And no, it's not a bad thing. But it does mean a changing business model.

        I would add that it's a change in the direction of textbook laissez-faire capitalism, meaning towards practical realization of the academic abstractions behind theories of free markets as efficient distributors of wealth. The OP has observed that the Open Source model requires suppliers to continue producing, not to write a program once -- then, as the eloquent first post put it, sit on the duff collecting royalties for nothing.

        Adam Smith's idealized competition is pretty well summarized as an open source

    • by hedwards ( 940851 ) on Sunday November 23, 2008 @12:08PM (#25864863)

      Keeping food on a metaphorical table always causes me trouble. I can't even recall the number of times I've had to mop the floor.

    • by eddy_crim ( 216272 ) on Sunday November 23, 2008 @12:11PM (#25864883) Homepage

      Imagine if there was no open source. You would still have competitors and they would still be undercutting you. Remember the cost of reproducing software on CD or download is effectively negligible. So perhaps your competitors would sell for a dollar or whatever. The problem is the same. Keep innovating, sell something people want and the best possible price. Unless your selling something tangable its always going to be a race to zero for the item itself.

      Working for an IBM business partner i see constant erosion of the products i work with by OSS. This means IBM must keep moving the products forward which i guess is a good thing.

      • by novalis112 ( 1216168 ) on Sunday November 23, 2008 @12:22PM (#25864975)
        The only problem with your rational is that if all the competition was from commercial entities, and not from people willing to work without compensation, then the bottom line would not be zero. Yes, competition would force the price lower, but the limit would be considerably nonzero. In theory all the competitors but one would eventually be weeded out as the company with the most efficient infrastructure (assuming the product quality was equal amongst all competitors) managed to sell the product for the lowest possible price while still maintaining the ability to pay for its business costs.
        • by TheRaven64 ( 641858 ) on Sunday November 23, 2008 @12:47PM (#25865151) Journal
          You are missing the point. Writing software costs money. Reproducing software costs (almost) nothing. Microsoft has already made enough profit on Word 97 that they have covered the cost of developing it. They could sell Word 97 for $1 for a site license and it would still be a profit. Now, imagine you made a word processor. If your did nothing more than Word 97 then you would have to sell for under $1 to compete. This was not the case with Microsoft - they still had WordPerfect and other competitors so they kept adding features and charging for new versions, but if Word 97 does all you need then you can pick up a second-hand copy for next to nothing. The number of people who need Office n and aren't happy with Office n-1 is smaller for each subsequent value of n. This is why StarOffice could compete with MS Office even before it went open source. It was a lot cheaper, but it did less. Unless you needed the features it didn't implement, however, you didn't notice and so it made more sense to buy the cheaper version.
          • by khasim ( 1285 ) <> on Sunday November 23, 2008 @01:26PM (#25865467)

            Don't forget file format lock-in and network effects.

            If you're the only one who can make a 100% compatible word processor ... and everyone uses that file format ... then you can do just about whatever you want. As long as the damage you are causing to your customers is less than the cost of them migrating (and causing problems with THEIR suppliers and customers).

            That's why there was such a big push for ODF. Once the file format is standardized, ANYONE can write a word processor and compete on quality and support instead of lock-in.

            Effectively driving the cost of word processors down to zero.

        • by Brandybuck ( 704397 ) on Sunday November 23, 2008 @02:46PM (#25866027) Homepage Journal

          Except your scenario has never happened in real life. At least never happened without the collusion of government. The scenario exists in some bad economic texts, but it's a myth. Without the force of government to competitors at bay, big businesses will always have small businesses keeping them awake at night. The history of 19th century "robber barons" is the history of lobbying government to stop the competition. In fact, the term "robber baron" was coined by a monopolist (Collins) complaining to congress about a competitor (Vanderbilt) encroaching on his government granted privilege.

          The more successful a business, the more people want to enter that industry to grab a piece of that pie. People used to enter the oil business just so they could get bought out by Rockefeller. And he only had 60% or so of the market. We may not have seen Windows clones come out in the late nineties during the heyday of the Microsoft monopoly, but we did see an explosion of software development all competing with various bits and pieces of Windows.

          Businesses come and go. It's the nature of economic reality. The Fortune 500 of 1958 had a very different roster than the Fortune 500 of today. And I can think of only one major U.S. company in 1908 that still exists intact today (IBM).

        • by Morty ( 32057 ) on Sunday November 23, 2008 @03:21PM (#25866293) Journal

          OSS aside, shareware, adware, bundling, and "free for personal use" push the software market to $0 or very close thereto. Think of the Windows anti-virus market -- there were a number of entrants who gave away a version of their product even before any open-source AV was available: anti-vir, AVG. Same for desktop firewalls: zonealarm, kerio/tiny/sunbelt. Same for virtualization: vmware server is a free download. Same for web browsers: IE and Netscape went free even before mozilla went open source. Same for Windows media player software: remember Real vs. Windows Media player? Same for disk compression software: remember the Stacker/Doublespace controversy back in the early 90s? Same for backup software: Microsoft has bundled a basic backup app in Windows for a while.

          So even in a "pure" commercial software world, you sometimes have to compete with free.

          The same effect can even happen in the COTS hardware market. If you released a 1GB hard drive in the early 1990s, you were sitting pretty. If you sat back and didn't innovate, though, your product's value would quickly erode over the next few years as competitors released larger and larger drivers. Today, your product's value would be effectively $0, with vendors giving out free 1GB USB keys at tradeshows. Similar for video cards: a video card that could command $100 10 years ago is nearly worthless now, with much faster devices available, and equivalent functionality integrated into cheap motherboards.

          Progress is a bitch. Evolve or die.

    • by nine-times ( 778537 ) <> on Sunday November 23, 2008 @12:14PM (#25864915) Homepage

      I think you're right, and the idea of "copyright" in general is headed towards some kind of reform over the long term. Eventually we'll find ourselves in a world where it's not sufficient to have done some valuable work at some point, and then sit around and collect money for the rest of your life.

      Now I don't know how long people will be able to hold that off, but I think it's just a matter of time. I don't think copyright is going away, but it's either going to be restructured or it's going to be ignored, as it's already starting to be ignored.

      Lots of people used to ask whether FOSS could compete with proprietary software. I remember reading lots of people ask, "Will Linux be able to catch up to Windows?" I haven't seen that in a while, and for good reason. I think the fact that lots of people can contribute and no one ever really has to start from scratch means more consistent progress. So if you're a developer and your livelihood is based around building a highly in-demand software and sitting on old innovations, while hoping that FOSS won't catch up, you'll eventually find yourself in trouble.

      So now to the big worry-- how are developers going to make money? I'm not sure. There will be demand for software development, and where there's demand, there's money to be made. I don't know if it's through support and services alone, or if there's something else. Maybe you just have a shorter term to make your money, and that term starts when you offer a new innovation first, and ends when other people get around to offering it.

      ...will eat your metaphorical lunch.

      I thought we were drinking metaphorical milkshakes now.

      • by Blakey Rat ( 99501 ) on Sunday November 23, 2008 @12:52PM (#25865183)

        Lots of people used to ask whether FOSS could compete with proprietary software. I remember reading lots of people ask, "Will Linux be able to catch up to Windows?" I haven't seen that in a while, and for good reason.

        Those people got sick of waiting and started using OS X?

        • by nine-times ( 778537 ) <> on Sunday November 23, 2008 @01:03PM (#25865289) Homepage

          I don't see a particular reason to drag OSX into this, but fine, it only goes to illustrate the point. Apple was able to make OSX such a successful OS as quickly as it did only because it was able to build off of an open source base. Darwin is based on BSD Unix, Webkit is based on KHTML, and OSX is packed full of GNU tools.

          But also I think Linux has become very competitive with both OSX and Windows. It seems like it supports a greater variety of hardware then either, it's just as easy to install, and it really is easy to use and attractive. The major downside to Linux that I see is still application availability, but I think that will only last for so long.

      • by Richard W.M. Jones ( 591125 ) <rich.annexia@org> on Sunday November 23, 2008 @01:09PM (#25865347) Homepage

        So now to the big worry-- how are developers going to make money? I'm not sure. There will be demand for software development, and where there's demand, there's money to be made.

        Agreed 100%. It's just like being, say, a builder. Is it a terrible thing if you build a house and then let the public live in it without paying you a fee every time they enter? Is that putting honest builders out of business? Will builders starve? Erm, no, because new houses are constantly needed, and old houses are constantly repaired and replaced.


      • by jotaeleemeese ( 303437 ) on Sunday November 23, 2008 @01:09PM (#25865353) Homepage Journal

        Most development happens in-house.

        The immense majority of developers need not to worry about a substantial reduction in the job market.

        • by perlchild ( 582235 ) on Sunday November 23, 2008 @01:35PM (#25865515)

          Hear hear, just because software "as a product" is going bad, doesn't mean software won't make money.

          There's software-as-a-service, software-as-internal-infrastructure, shareware, and possibly quite a few I haven't heard of yet either. Let's not become the MPAA or RIAA here, just because one business model failed(and presumably, some businesses) doesn't mean the end of the world if you can adapt.

          • Re: (Score:3, Insightful)

            by Lennie ( 16154 )

            This is something which seems to be better understood in Europe instead of the US. In the US OSS-companies are trying to sell OSS in a proriatary/shrinkwrapped way, just like the mentioned company.

            What you should be doing is sell development services, so someone needs something build, build what they need and atleast when you base it off an existing OSS project you will need to use a OSS-license for it. It could also be requested by the client that it have a OSS-license, so he/she can take the source code s

      • by Ruie ( 30480 ) on Sunday November 23, 2008 @01:18PM (#25865413) Homepage

        So now to the big worry-- how are developers going to make money? I'm not sure. There will be demand for software development, and where there's demand, there's money to be made. I don't know if it's through support and services alone, or if there's something else. Maybe you just have a shorter term to make your money, and that term starts when you offer a new innovation first, and ends when other people get around to offering it.

        Actually, when Open Source is more widely used I expect the demand for computer experts to go up. Back in the days when computers just got to the sizes to be useful the programmers wrote all software from scratch - in assembly or fortran. Their Open Source foundation consisted of centuries of accumulated mathematical knowledge.

        As proprietary codebases grew there was first increased demand for programmers to replicate competitors functionality, but than it shrunk as industry consolidation kicked in.

        Now the growth is limited by what you can develop for existing proprietary product.

        On the other hand, with more Open Source software there many more points to innovate. And very few packages can be used without some customization. So customers would need an expert anyway - and if they buy expert services they would also be inclined to pay a somewhat smaller fee for a commodity addon.

        • Re: (Score:3, Interesting)

          by nwf ( 25607 )

          On the other hand, with more Open Source software there many more points to innovate. And very few packages can be used without some customization. So customers would need an expert anyway - and if they buy expert services they would also be inclined to pay a somewhat smaller fee for a commodity addon.

          While that seems to make sense, reading messages posted to mailing lists and web sites, it appears that people who are trying to use FOSS aren't even programmers at all, and make it painfully obvious that they have no idea what the are doing.

          Then we have the companies that produce software using FOSS, and don't contribute back, which I think is much more common that believed.

          What may happen, is that FOSS may increase the demand for short-term contract programming. Need someone to integrate three packages w

      • Re: (Score:3, Insightful)

        by Bert64 ( 520050 )

        There will always be a need for developers, there just won't be a need for developers of shrink wrap software. Your job will be the same, the company you work for will just use the code you write for a different purpose...
        RedHat employ lots of developers, and most of the code they write is published for free, but it's designed to sit alongside their support offerings. Who better to provide top level support for a product than one of the original developers?

        Also most developers these days are employed to do

      • by toad3k ( 882007 ) on Sunday November 23, 2008 @02:14PM (#25865795)

        The idea that software development will somehow become obsolete because there are open source programs freely available is a fallacy. It is like when 20 farm workers are replaced by a mechanized piece of farm machinery, they don't just starve and die. Those twenty farm workers end up operating, repairing, and building those pieces of farm machinery instead of breaking their backs in a field and every benefits from the productivity increase.

        Software is similar. There's no less money being thrown into technology now than there ever was. The difference is that instead of throwing all their money on basics like OS and Office suite, now they spend your money on more complex things, custom internal software, employees capable of managing and aggregating FOSS, and highly complex systems that have not been tackled by the community. This is great for programmers in general as there will be less drudgery, more respect, and more rewarding work than have existed in the past.

      • by cliffski ( 65094 ) on Sunday November 23, 2008 @03:08PM (#25866205) Homepage

        "done some valuable work at some point, and then sit around and collect money for the rest of your life."

        This always bugs me. It's not like there is a major world problem that people who create something that sells lots then sit on their ass and do no more work. In fact, I'd say the opposite is true. J K Rowling could have quit writing after book 1, but didn't. Most big name pop bands could retire after their first hit album. Spielberg and Lucas could have retired after their first big movies (American graffiti and Jaws).

        When people make a lot of money from royalties, they very often will plough that money into doing it again, only bigger and better next time. Lucas spent every penny of his American Graffiti money to make Star Wars. Then he took all the SW money and used it to try and self-fund Empire, and cut out the movie studio.

        People often say that those who work for royalties "sit around and collect money when doing nothing"
        Those same people are the ones taking a daily wage for all those years when those royalty guys worked their asses off for zero salary, to try and get to that point.

        If working for royalties is such a meal ticket, why doesn't everyone quit their job and start their own business?

        I don't begrudge anyone earning royalties of any sort. if you can live off your royalties, you created one hell of an awesome product and likely made a lot of people very happy.

        • by Jah-Wren Ryel ( 80510 ) on Sunday November 23, 2008 @04:37PM (#25867011)

          Man, those are some bad examples.

          Most big name pop bands don't make a dime off their first hit album. Its only their 3rd or 4th hit album where their contract has expired and they are able to renegotiate based on how much money their work has earned for someone else. And the reason that is so is precisely because of the 'lotto-winner' effect of the current system which is directly caused by the stranglehold that copyright gives distributors.

          On the flip side, Rowling definitely didn't need even 0.01% of that money in order to keep writing more books. From a society's point of view, all the money in excess of what was required for her to continue writing was wasted and could have been spent better elsewhere on hundreds of other promising writers that have now been crowded out of the marketplace by the harry potter monster. Similarly look at how Lucas has squandered his royalties. Sure he made a handful of good films, but all he really makes now are "just" films. How much more utility would society get for its money if it weren't squandered on things like 'The Clone Wars' and the Ewok Christmas Special that coast on the good name of his earlier works?

          People often say that those who work for royalties "sit around and collect money when doing nothing"
          Those same people are the ones taking a daily wage for all those years when those royalty guys worked their asses off for zero salary, to try and get to that point.

          Your implication is tantamount to arguing for taxation without representation. Royalties and copyright are a 100% consensual construct of society, thus every member of society has just as much right to criticize the system. If anything, it is those who benefit directly from the system who should have the least say in how the system is run. The last hundred years or so of copyright extensions and copyright scope creep demonstrate what happens when those with a vested interest are the ones who have the most say.

          • by ScentCone ( 795499 ) on Sunday November 23, 2008 @07:09PM (#25868069)
            those who benefit directly from the system who should have the least say in how the system is run

            Let me guess ... Obama voter?

            To follow your logic, people who don't work at all should be the ones who get to say what someone who's willing to work 80 hours a week must do with the proceeds and output of that work. You are supporting a framework in which willingness to work is punished by submitting the worker to the whim of the non-worker. You are supporting a framework in which the ability to create something or to innovate means automatic slavery to those with less talent and motivation.

            "Society" benefits just fine from an author hitting a resonent note and producing a series of books like Rowling's. It benefits by demonstrating that there is the prospect of being well rewarded for sparking an interest in one's work, and prolificly persuing that audience. Your model - where some entity takes the audience's willingness to spend money on entertainment they want, and spreading that money around a 1000 other authors - is absurd on the face of it.

            The Ministry Of Entertainment might accidentally get it right once in a while, but the knowledge that a government agency is injecting itself between readers and writers and regulating that relationship - that might please you, but it all it would do for me is make me seek out authors willing to work for the reward of my wanting to pay them for their writings. Those who spend their day writing books while receiving their assigned sliver of the book-buying public's government mandated redistribution of entertainment funds don't strike me as the likeliest sources of what I want to read.

            Most big name pop bands don't make a dime off their first hit album.

            Unless, of course, they are clearly talented enough strike a deal more to their liking, and are able to show that it's not a risk for the people fronting the money. Most new entertainers can't demonstrate that sort of marketability, and they themselves know it, so they make an investment in their own success: they trade some early income in exchange for letting someone else take the early risks.

            How much more utility would society get for its money if it weren't squandered on things like 'The Clone Wars' and the Ewok Christmas Special that coast on the good name of his earlier works?

            Well, that sort of depends on how wisely that money is spent, and how concentrated it is on larger, more complex projects that require long-term funding during production. I'm curious which agency of the government you think should decide such things? Perhaps we can get Michael Moore to be Minister Of Good Taste And Wholesome Entertainment to direct those dollars and choose which artists are worthy? Yesiree, Change We Can Believe In!

            Or, are you just pissy because the consuming public is fickle and lazy, and you don't always love the choices they make, and think that it should be up to you, instead? Yeah, I thought so.
    • by nametaken ( 610866 ) on Sunday November 23, 2008 @01:24PM (#25865449)

      Eh. I don't really understand the question.

      Having thought about it, the submitter is disappointed that they must continually develop new, better software products?

      How is that a problem? Today, you're selling a simple app that people need. Tomorrow, someone will make a new one, but in the meantime you get to keep your developers busy (and paid) working on the next big thing.

      Some day open source developers will replace that, and you'll have already been working on the next next big thing.

      Sounds like a good scenario for a business... lead the market, make new products all the time, be known for being innovative and the model for everyone else's software.

      The only downside is that you actually have to BE A SOFTWARE COMPANY, instead of the marketing and sales company that many closed source co's turn into... just before they die.

      The mark of a good software development company is one that recognizes that writing one app is not the be-all, end-all of your existence. Some day you'll need something else.

      Even MS doesn't get to stand still for too long. If they never improved Exchange, we wouldn't use it. If they never improved their OS's (Vista jokes aside), we wouldn't use them. They're not really selling Windows ME + Office 2000 + Windows NT 4.0 anymore. Each of those have been long eclipsed by other software. The only argument left in the marketplace is whether their CURRENT software is good enough to warrant buying it.

      • If you think of the programmer as a creative artist (actually, in many ways there's more truth to this than seeing them as engineers) then this is fully justified. If you are a person who pimps^Wcontrols a rock musician, then the government will try to guarantee you an income even when your product is becoming completely outdated (like 70 years!). If you have a bunch of keyboard monkey slaves, you are expected to live in a competitive market. Nobody goes around changing the law to guarantee you money.

        I t

        • Re: (Score:3, Insightful)

          by ScrewMaster ( 602015 ) *

          If you think of the programmer as a creative artist (actually, in many ways there's more truth to this than seeing them as engineers) then this is fully justified.

          Most programmers (like most engineers) are paper-pushers: they do routine things, provide support and maintenance functions, but haven't a creative bone in their collective body. That's not intrinsically bad, it's just human nature, and the truth is that there are many aspects of complex systems engineering that are not best served by artistic types. In both groups, however, there is that subset of creative minds that can push the envelope, who can take matters to the next level. The problem is, the best an

    • by bahamat ( 187909 ) on Sunday November 23, 2008 @01:59PM (#25865695) Homepage

      For what it's worth, though, nothing would be different if your software were closed source, except that your user base would probably be smaller and, depending on how necessary your software is, open source competitors would be even more eager to push you out.

      Which explains all of those open sourced calendaring solutions that beat the pants off of Exchange. Oops, there aren't any that even come close. Oh well, so much for that idea.

  • You need to add more value to what you sell. The code itself is not valuable enough, so something like support or guaranteed compatible hardware/software (if applicable) needs to be thrown in the mix. If other people start selling those same perks, then what you are facing is basic business competition, which is inescapable.
    • Re:Value (Score:5, Insightful)

      by cgenman ( 325138 ) on Sunday November 23, 2008 @12:23PM (#25864981) Homepage

      Can I just say that as a user the "survive on service" model makes me uncomfortable. We're disencentivizing making robust, easy-to-use software in exchange for one that requires some degree of brokenness to survive. I'd rather pay someone for their software than being stuck with their services because their software is somehow unintelligible.


      • Re:Value (Score:4, Interesting)

        by betterunixthanunix ( 980855 ) on Sunday November 23, 2008 @12:56PM (#25865221)
        Empirically, supported software usually has fewer bugs. As for ease of use, some software is inherently difficult to configure, or has intrinsic nuances that cannot be coded around. For example, a security package (such as SELinux) needs to be tailored, and it needs to be tailored by an expert, or else the benefits are reduced. Supported software is backed by experts who can not only tailor such a package, but update the policies as security needs evolve. This is not about typical desktop software, where one-size-fits-all is an acceptable approach. A company can choose to hire a full time expert, whose services are only needed some of the time, or save money by buying support from a company that already employs experts. It is sort of like a bank: the experts derive their salaries from the support contracts of multiple companies, and as long as those companies do not all require that support at the exact same time, the system works.
        • Re:Value (Score:4, Informative)

          by gbjbaanb ( 229885 ) on Sunday November 23, 2008 @03:34PM (#25866435)

          I can say this is the model that directly affects us. I work for a large US corporate who sells enterprise software to governments and similar. We've been beaten in bids by our #1 competitor for a while, it turns out they are offering the software for free, as long as the buyer takes on a services contract (think outsourced IT type thing) that would support the software and hardware required to run it.

          We sell the software and let the buyer decide how to get support for hardware and other IT systems (we provide serious support for our software only, not stuff like Windows and email etc). So far, we've lost every bid. Unfortunately, our US overlords won't let us change our terms.

          So looking at this from a FOSS POV, it is a model that can work - give your software away for free, and then go and sell your consultancy and support services to corporates who buy it off you. You should be providing them with support services to get it installed and configured, not just "if it breaks we'll look at it for you" and "bugfix" support.

          Yeah, that means you have to work all the time, you can't just make something then lie back and see the money rolling in, but that old 'make loads of easy money without having to work" is a paradigm that died last year.

  • It seems that economics will set the price of a product at the intersection of supply and demand, and also drive the cost of an item towards its marginal cost (I'm not entirely familiar with the term, but it appears to be approximately the cost of manufacture). So it cost whatever it cost to develop the product, but now you can reproduce the developed, presumably, software at almost no cost (excepting the cost of the media or bandwidth). I'd suggest that if the free versions are as good as the paid-for vers
    • by LostCluster ( 625375 ) * on Sunday November 23, 2008 @11:55AM (#25864759)

      marginal cost (I'm not entirely familiar with the term, but it appears to be approximately the cost of manufacture).

      Marginal cost is the cost of making the next one of whatever you're selling. In software, this is a little tricky because the raw material cost of the next copy is bandwidth or the CD/DVD media. The marginal cost of the first copy is the big one... it absorbs all the cost of development.

      So, in this way of analysis, software companies take a big loss developing the software, then can make it back by selling enough copies, then can afford to make it near-free because the sales are pure profit.

      • Re: (Score:3, Insightful)

        by peragrin ( 659227 )

        except the last stage never happens. As companies don't like change, they can't see their software is worth less over time.

        Supply and demand fails for software as the cost of one copy isn't very different than a million copies. Unlike dell for each unit sold costs money to make, Software only costs you once to make.

        The only thing that makes software less valuable is a better version.

  • Evolve or Die (Score:4, Interesting)

    by Captain Jack Taylor ( 976465 ) on Sunday November 23, 2008 @11:44AM (#25864687)
    My company makes sure that doesn't happen by continually inventing things. Sure, a lot of people are afraid of big corps and patent troll fake-outs, but we've decided we're not, and we're moving.
  • commodity software (Score:3, Insightful)

    by Uzik2 ( 679490 ) on Sunday November 23, 2008 @11:46AM (#25864695)

    Personally I don't see there being a lot of value in paying for new versions of spreadsheets and word processors over and over again. There's not much, to me anyway, that's been added in the past 10 years. It keeps M$'s revenue stream high but is there value to me?

    If software became more about producing new product instead of reworking the same old stuff in the language of the month I would be happy and I think there would be just as many jobs.

    That's all strictly opinion, with no facts to support it.

    • Re: (Score:3, Insightful)

      Oh contraire, there are plenty of facts to support your opinion. Software does not age the way hardware does. There are systems out there that have been running the same software, on newer and newer hardware, for decades, because the code does exactly what it needs to do and there is nothing new that can be added. As an example, look at any of the uptime pissing contests that occur on Slashdot, and see some of the VMS and mainframe examples that people bring up. Companies charge yearly fees for such sof
  • by tgatliff ( 311583 ) on Sunday November 23, 2008 @11:50AM (#25864717)

    You are correct with the race to zero when you talk about developed code... The more time that goes by, the more it will erode existing code bases.

    As far how to deal with it... Change your business strategy to help your users more. Meaning, instead of selling code, consider working on a support model where you offer support and monitoring services to your user base. Also, another good strategy is a hosted approach. Meaning, maybe you can offer connectivity to your users...

    In the long-term there is little doubt in my mind that that proprietary software will be mostly obselete for a number of reasons. First is certainly cost, but security and quality are good other reasons. As a comany you can either change or die. The choice is yours..

    • Re: (Score:2, Insightful)

      by jshindl ( 157371 )

      I've heard this argument before. "proprietary software will be mostly obselete for a number of reasons"

      In a world of ideals, perhaps that would be true. But the real world contains a lot of factors other than ideals. If that mantra was true, how do you explain the success of Windows against Linux on the desktop. Linux has been around for 27 years, and has almost no market share among non-techies. How about Microsoft Office versus OpenOffice? How about in the world of games... can you think of one successful

    • Re: (Score:3, Interesting)

      The problem with the "sell support" model, is that it gives the wrong incentive. You make the most money if your software is not too good.

      I once worked at a company that wrote software that was sold at retail in stores, and included free support. Management was constantly urging us to raise quality, as every time we had to actually give support, we lost many times the profit we made on the sale to that customer. Our incentive as programmers was to produce the best code we could.

      As a software user, I'd ra

  • by Darkness404 ( 1287218 ) on Sunday November 23, 2008 @11:53AM (#25864741)
    The problem is OSS businesses are doing things the wrong way. Rather than do it Red Hat's and some business's way of adding in features in the community version they instead make the community version spartan and the paid one with support oozing with features, naturally this makes it a great target for some weekend coder to take that version and reverse-engineer or just get the source of the paid version and add it to the free version. Paid versions = Stable versions, community versions = unstable versions. Keep that in mind and your business will not have the community rebelling and forking your project every other month.
  • by DaleGlass ( 1068434 ) on Sunday November 23, 2008 @11:56AM (#25864771) Homepage

    Open source or commercial. WinZip's value to me is also effectively $0, since on Windows I have 7zip which does the job competently enough, and on Linux I have multiple tools to choose from.

    It can get even worse, Vista's value for me for instance is negative -- I wouldn't use it even if given it for free, because I'm perfectly happy with Linux at home, and even installing it would be an inconvenience in exchange for no gain.

    Even without free software such things happen: the value of a buggy whip is $0 for me, because I have no use for one.

  • So it goes. (Score:5, Insightful)

    by ZorbaTHut ( 126196 ) on Sunday November 23, 2008 @11:56AM (#25864775) Homepage

    The world provides no guarantee that you can forever be profitable at the thing you currently make money on.

    Many years ago, people spent their lives painstakingly copying books. Today, we have printers that can do the same thing at a tiny, miniscule fraction of the cost.

    More recently, people made money doing repetitive calculations, over and over again, and compiling the results into books. Now, obviously, computers can do it faster, cheaper, and more reliably.

    Perhaps you're used to writing operating systems for a living. Well, operating systems are now valuable enough that people are willing to spend effort to make them free - CEOs realized, hey, I *could* spend $100,000 on licenses of an operating system. Or, I could spend the equivalent amount of money by taking an existing operating system and improving it for me . . . and for all future users . . . and then not have to spend $100,000 on next year's licenses, but instead just spend a relatively tiny amount of money maintaining our local patches.

    And, hell, I could submit those to the central repository too. And now they'll maintain it for us.

    Here's what it all comes down to. The core software in a computer is now too important to pay for. If you pay for it once, that implies you can be asked to pay for it again . . . and again, and again, and again . . . and if it's that important, you may simply have no choice. You don't want to contract out the necessities to someone who can withhold them on a whim - you want them available to you, for free, whenever you desire.

    I don't know about you, but if I had to pay some dude $50 every time I wanted to flush my toilet, I'd be buying my own toilet with free flushes pretty damn fast. And, at the risk of stretching the analogy, I think people are tired of putting up with Microsoft's - or any other large company's - shit.

  • by Anonymous Coward

    the way to go is to have it be open source, and then your company should be willing to 'contract out' and do customizations on demand for their clients. I do a lot of customization of my company's software (nobody likes it 100% out of the box, no software ever does things just the way the client wants). If your company charges for customizations, then you build up a base of customizations. If you find that 20% of your customer base wants the same customization, just incorporate it

  • How this works (Score:4, Interesting)

    by imsabbel ( 611519 ) on Sunday November 23, 2008 @11:58AM (#25864787)

    You just have to develope OSS applications, very carefully.

    You have to make it prone to breaking, unintuitive and with a horrible user interface. That way, you can earn money forever by support contracts and paid-for maintainance/seminars/schooling.

    The worst you could do would create a "just works" application, because that way you would steal your own future.

    • Re: (Score:3, Insightful)

      Well, MS (and others, of course) has amply shown that you can do that also if your application is not OSS. What was your point, exactly?
  • ...Something that was worth $5K last year is suddenly worth $0 because the free version is just as good as the paid...

    I submit that if your software is suddenly worth $0, that is your problem. Why? Because folks at Red Hat will not believe you though there exists CentOS, which is just as good, and many others.

    Here is what you should consider. Change your business model...that could help. Agree that not all software is good to survive on in an open source environment unless you can get a way to lock customers in, or do what you do really really well. Better than anyone else in the business.

  • by fuzzyfuzzyfungus ( 1223518 ) on Sunday November 23, 2008 @11:59AM (#25864795) Journal
    In the sense of "who pays for it and why" most software has always been a by-product of other industries. The stuff that isn't(mostly games and consumer utilities) is highly visible; but there just isn't that much of it(and, even then, much of what you are buying in your package of Quake or Quicken isn't software per se; but software wrapped around art or accounting expertise). Open Source, though, has really accelerated the move from the "who pays for it and why" sense to the "quite literally produced by" sense of by-product.

    Whether this is a good or bad thing depends on who you are. For a substantial percentage of developers, it probably doesn't make much economic difference. Somebody always needs to write the software, whether those somebodies are all bunched together at SomeBodieSoft Inc. or spread across SomeBodieSoft's former customers. People who have invested in selling software are likely to suffer a net loss(as a whole: Redhat may be doing fine; but their gain will be less than Redmond's loss). People who have traditionally bought software will likely enjoy some gains, mostly captured from the losses of the sellers. I suspect that a certain number of software operations that are on the cutting edge will remain proprietary, and largely as they are today, as will producers of software packages that are mostly about non-software stuff(a big-name videogame, say, has economics much more like a movie than like an OS. Games will probably use more OSS plumbing and libraries and stuff; but will continue to be sold more like media).
  • "My company is an open source software vendor/developer .. Over time we've seen our business model eroding as other open source projects produce free versions of the same extensions and utilities that are our bread and butter"

    What's the name of your company, what are the names of the companies that eroded your business model. Under what license did you provide your software. Do these other 'open source projects' provide the software under the same license. If not shouldn't you report them to the FSF?

  • by zotz ( 3951 ) on Sunday November 23, 2008 @11:59AM (#25864801) Homepage Journal

    "My company is an open source software vendor/developer. We maintain a popular open source project and keep ourselves afloat by producing commercial products derived from or extending the value of the core project."

    If I understand this correctly I think the business model is what would keep me away in the first place.

    I am happy for "the same code base" to be available gratis with no pro support or for a fee with pro support, or free with paid pro support available.

    But since one of motivations for operating in the Free software realm is to get myself out from under the vendor lock in problem, your business model makes me mistrust you. And note that this is not a case of wanting everything gratis as there is a situation I know of now where we cannot consider moving to the Free software option because currently there is a Free software option but it does not have the needed paid for support option at a competitive price that we are aware of.

    I still think there be to be some future for industry association funded software development and support. But perhaps I am way off base on this as it has seemed obvious to me for years and I have seen no move towards this in all that time.

    Now, if the world can get all to software it could need "developed" gratis by people who get a kick out of it so much the better but somehow I think that people will be able to get paid to develop software for a good long time to come. Getting paid for a monopoly on producing and distributing copies of software is another matter.

    all the best,

    -- []

  • Specialize (Score:2, Insightful)

    by Cogneato ( 600584 )
    One of the big keys to making money off of software is specialization. Great versions of most any type of general program can be found in open source form. However, projects that develop for very specific needs of many different industries are often perpetually stuck at a fledgling stage. When you address the very specific needs of a certain type of user, it is easy to find markets that can be profitable for commercial software, while at the same time not being widely interesting enough to be addressed by t
  • by astaines ( 451138 ) on Sunday November 23, 2008 @12:07PM (#25864851) Homepage

    I work with a Government agency in Ireland, (I work for a university to avoid confusion). We developed a really innovative information system with them, a web-based system which allows flexible mapping, GIS work, sophisticated calculations, open ended queries, loads of pre-specified reports and more. It is entirely open source.

    It would have been economically unfeasible, and, I think, technically impossible, with closed source software.

    The developers were paid, and are still being paid, quite a large amount of money to build this for us, maintain it, and keep it moving forwards. My view is that give great value for money. All the stuff they develop for us is GPLed.

    This seems like quite a viable model to me. What's not viable is the 'write a better video-processor' model which you describe. You need to work with your clients, support them in improving productivity, ease of use, cool new features, whatever it is they need for their business.

    Good luck,

    Anthony Staines

  • inevitable (Score:3, Insightful)

    by wasabii ( 693236 ) on Sunday November 23, 2008 @12:07PM (#25864853)
    Well, some of this is inevitable, and something you can't change. People are spending time writing free software, and it will undercut commercial software... and you can't stop these people. The fundamental problem is pretty much exactly as MS says it. A commercial software is written, extensive R&D is done on the target market in order to design it, it's released, and a year later somebody else has simply copied the idea. It goes to show that the SOFTWARE isn't the important part there. It's the IDEA. This is why MS makes claims about innovation all the time. Most of the industry already knows this, and their solution is simple: protect the idea. Patents. And you know what? I can't think of any better idea. The alternative is to let it continue. Maybe that is an alternative. The best we can do then is guess about the future... will people just stop investing in R&D? I don't know for sure. And if you're idealogically against patents for some reason, well... I can't help you! There are some people ideaologically against private property ownership at all. I can't help them either. =)
  • What I believe is that software business is overrated. Even that almost everything is going to digital format and will coming depending computers, there is too much developers actually to get a payment from what they do. This would not be the case if IT "world" would be closed at least as much as it was middle 90's. You can fight, use patents to stop others competitors and do everything what you just could, to "protect" your own work. But same time you slowed down the whole world development.

    In Open Source,

  • Wrong, very wrong (Score:5, Insightful)

    by jsse ( 254124 ) on Sunday November 23, 2008 @12:07PM (#25864857) Homepage Journal
    Really, I'm surprised you still selling opensource solutions without being driven out of the market.

    I didn't say you should switch to closesource. My friends' companies develop with, on, from opensource projects and still make profit with them. Why? Because they know how to keep up with the market.

    They sell Appliances, like those CISCO routers and Checkpoint firewall, but perform some other functions like MTA, Virus scanner, load balancers, etc.. Appliances with opensource elements in them, such that they can be trademarked and brand-protected, can be maintained, without paying huge royalty. Above all, you can still contribute opensource projects back to the community, and keep it growing.

    This is just one example to make use of opensource projects. Honestly I don't really know your business so I don't have further suggestion for you. But I'm very sure the problem doesn't lie in adopting opensource projects. Someone else makes money with them, if you can't, don't blame opensource projects, blame your marketing strategy.
  • I view open source software as something that is produced for practical motivations:

    1. drive the cost of basic infrastructure towards zero so more money is available for a business's specific problems and applications. I am an independent consultant and from my point of view when the costs of projects are reduced, then there can be more projects. Also, projects are judged based on cost vs. benefit, so more projects can be successful.

    2. large companies like IBM make money off of services - open source increa

  • There is no market (Score:5, Interesting)

    by TheRaven64 ( 641858 ) on Sunday November 23, 2008 @12:11PM (#25864879) Journal

    There is no market for selling a commodity with a zero cost of production. This is basic economics. If you want a good business model, sell something that doesn't have a zero cost of production. If you want to be in the market, then you have to do this by selling software that doesn't exist yet, since any software which does exist can be reproduced for zero cost.

    The commodity off-the-shelf model for software only works because we have laws that let us pretend that software is a product.

    Look at the market for commercial writing for an analogue. The vast majority of writers are employed writing for newspapers, magazines and web sites. Quite a lot are employed for in-house publications. A (comparatively) very small number write books. The software industry is exactly the same. Most developers are employed writing bespoke software. For these, open source lowers their costs, because they are not selling a product, they are selling a service: writing some software that solves a given problem for their customers. If they build their solutions on easily-modifiable, open source, commodity building blocks then they can charge less or profit more.

    It sounds like this is what you are doing already, but you are seeing the number of people who need more than the commodity version shrinking. You now have two choices:

    1. Look upwards in the market. If you are currently selling solutions to small businesses, aim for larger corporations. Look at much bigger customisations.
    2. Broaden your service base. Look at what other problems your existing customers might have. Offer to solve them too.

    Option 1 is a good short-term solution, but again you will find that you eventually have a shrinking market. Option 2 is more effort, but a good long-term business model. Hopefully your existing customers already trust you to do a good job, and you can get them to recommend you to their suppliers and customers when they have other problems.

    • You're right, but people picked you apart as your first line was too broad. Try this instead:

      There is no sustainable market for selling a commodity with a zero marginal cost of production.

      When the marginal (ie. incremental) cost per unit is zero, this directly implies that no proprietary resources or secret sauce were required in its production, which in turn implies that effectively anyone can produce the commodity. Thus, while there is always a market initially for something new, there can be no sustain

  • paid legacy is dead (Score:5, Interesting)

    by mlwmohawk ( 801821 ) on Sunday November 23, 2008 @12:15PM (#25864921)

    The whole notion of a software "industry" is a new and novel idea whose time is more or less come and gone.

    Speaking as a long-time software developer, I find it hard to believe that software has been considered a "product." It is so amorphous and ever changing, it is hard to say that a "purchase" has any durable value what so ever.

    Prior to the "write it once and get rich" mentality that ISVs dream of was the software as a service mentality which is seeing a resurgence.

    Also note, most software written does not run on personal computers, in runs in microwaves, embedded devices, phones, routers, TVs, etc. Only a few companies really make money selling "software." Most P.C. based "software" companies make money selling a service around their software.

    For instance, "QuickBooks" is a software product and has a lot of competition, but it is the service that keeps it afloat. TurboTax is the same way, they work all year to have the next years revision ready.

    The "write once" software industry has only existed for a short time and for a very fortunate limited few. For people like myself, who have been developing software since the late 70s/early 80s, I don't see any major problem because I don't really see any real effect on the vast majority of the market.

  • Plumbing (Score:5, Insightful)

    by Kupfernigk ( 1190345 ) on Sunday November 23, 2008 @12:22PM (#25864973)
    Do you remember when it took real skill to be a plumber? To attach a faucet to a pipe, you had to be able to melt solder and shape it with tools while using a kerosene-fueled blowtorch. Get it wrong and you melted the lead pipe. Putting in a faucet was half a day's work. When it froze, pipes split and had to be cut out and repaired, also at vast expense. The training to do all the jobs was expensive and took years.

    Now go round the hardware store. In ours there are several kinds of push fit and screw fit plumbing. The pipe is plastic, you cut it with a simple little tool. I recently had to replace the water softener and the new one had different plumbing. It took me nearly half an hour to put in four bends and a few joints.

    That's the race for the bottom. Basic plumbing skills now take a day to acquire and, by following the instructions, you can do a safe job. But plumbers are still employed. I'm not about to service my boiler, or install a bath. I have more sense than to try to put in an oil tank and all the safety equipment, following all the codes.

    It's like that with software. It is not a race for the bottom, it is called progress. An SMTP server is now a basic piece of kit. The learning curve for spreadsheet design is, basically, over. Unlike the so-called creative arts, engineering does not recognise the idea that somebody should be rewarded forever for a one-off contribution. In a knowledge society, new knowledge has value but old knowledge is free.

    Eventually, kicking and screaming, I expect we will get Open Source Law, and so-called lawyers will no longer be able to charge excessively for basic legal advice in simple cases. But specialist lawyers and the Supreme Court will still be needed, because there will still be hard cases. The same should really apply to all professions. And if you want a guaranteed source of income, make something essential that wears out. Grow food, make clothes or shoes.

  • by thethibs ( 882667 ) on Sunday November 23, 2008 @12:46PM (#25865145) Homepage

    As is often the depends.

    If you are working on software that's of interest to developers, someone who can will almost certainly build a FOSS version of it rather than pay you. With a few very notable exceptions, FOSS development is essentially self-serving. On the other hand, if your product is aimed at a non-techie audience, it's unlikely to stimulate FOSS competition.

    The Gimp is an excellent example. It tends to be compared to Photoshop, but the comparison is unfair. Photoshop is a heavily-funded complex product aimed at a community that uses computers as tools and has no interest in how those tools come into being; it has nothing to fear from FOSS. In terms of its capabilities, The Gimp has yet to reach the level of my five-year-old version of Jasc Paint Shop Pro, and its features curve is leveling off. It's fairly evident that The Gimp has reached a point where it's good enough for the developers and their friends. They may add a few features for the fun of meeting the challenge, but I don't see myself switching from Paint Shop to The Gimp any time soon, or ever.

    There will always be a commercial software market, but not for development tools, operating systems, or technical utilities. The big players will continue to fund development of open software that will allow them to compete with Microsoft, and the occasional labor of love will crop up. For the rest, it's either pay for it, or no one will build it.

  • by Animats ( 122034 ) on Sunday November 23, 2008 @01:02PM (#25865275) Homepage

    This is a classic manufacturing issue. The killer point is when an expensive item becomes cheap due to mass production. The makers of expensive items seldom survive that transition.

    Historically, this has happened time and again. It happened to basic watches around 1890, when Ingersoll introduced the $1 pocket watch. The watch industry got hit again in the 1980s, when quartz crystal watches became both cheaper and more accurate than mechanical ones. (Neuchatel, Switzerland was hit hard by that.)

    One strategy is to position a product as a luxury item. Rolex took that route in watches. Their CEO actually says "We are not in the watch business, we are in the luxury business. Apple positions themselves that way in computers and audio/video gadgets.

    If that doesn't work, you're toast. There used to be a high-end graphics hardware business, with companies like Evans and Sutherland, Dynamic Pictures, Matrox, and SGI. They all got clobbered when gamer graphics cards got good enough to take over pro jobs. I visited Sony Pictures Imageworks around 1997, when all their animators had SGI workstations, with a few PCs being tried out. When I went back in 2001, everybody had a PC, with a few SGI machines still around to run legacy stuff. SGI went bankrupt in 2006.

    Open source is just another form of commoditization. Most open source software isn't very original. There's usually some predecessor commercial product that did roughly the same thing. Open source is the same kind of competitive threat as white-box generic hardware.

  • It's all about value (Score:3, Interesting)

    by tremoloqui ( 1413943 ) on Sunday November 23, 2008 @01:09PM (#25865349)

    What is really happening with open source is that the value proposition has changed. With closed source the value is attributed to the software itself. Some open source businesses try to kludge themselves into this model as well. In reality what the open/free software movements have done is shown that the real value is in the time and effort of the developer. Once the market realizes that they are paying for service and expertise from the developer, the market will start to make sense.



  • by dcavanaugh ( 248349 ) on Sunday November 23, 2008 @02:07PM (#25865735) Homepage

    If you think it's tough to be an open source vendor, just imagine what it's like as a proprietary vendor who might have an even bigger investment at risk -- watching the open source market chipping away at it. I don't mean Microsoft or the other major players, as they have already had more ROI than they deserve. After all, it was overpriced "cash cow" products (originally Unix itself) that led to the open source concept in the first place.

    The rise of Microsoft marked the halfway point in the race to the bottom. Back in 1980, IBM needed a cheapie OS that would not add $3000 of licensing fees to what was already a $3000 product. The market for $6000 PCs was less than 5% of the potential market for $3000 PCs. IBM was perfectly capable of adapting Unix for the mission, but not without bloating the cost. And besides, the original 8088 was not much of a CPU anyway. Any serious computing would be done via 3270 terminal emulation to a "real" computer elsewhere.

    At thsi point, all software races downward approaching a price of zero. It's only a matter of time.

    Competing with free is a losing proposition. So don't do it. Unfortunately, management has fallen in love with offshore outsourcing. As a result, the quality of commercial software has no way to avoid the open source juggernaut. It IS possible to out-invest the open source community and still make a buck. That involves real investment and real risk. As long as management stays focused on cost at the expense of innovation, quality and customer satisfaction, the open sourcers are in the driver's seat.

    Consider the simple concept of tech support. Blog posting vs. a vendor's offshore call center. Which one responds first? With a workable solution? Resulting in a self-service workaround and a patch for all users? Why do we pay a PREMIUM for "supported" products that are supported by morons? We all know which vendors I am referring to.

    I think Apple does a great job of exploiting open source on one hand, while avoiding price erosion in its own products that depend on it. We can't all do what Apple does, but they are onto something.

    The IT industry has become an awful place to work. This created a large community of under-utilized, frustrated people who are very anxious to deliver software as it should be. For free, if necessary. Look closely at the key contributors of any major open source project and you will find people with spectacular credentials -- the type of folks you couldn't dream of hiring to work in your company. Competing with these people (at any price, especially zero) is a waste of time and money. The more we dumb down the commercial development business model, the more we feed the process.

    Understanding the trend is the first step towards figuring out what to do about it. I think the trick is to plan ahead for the likelihood of commoditization, and maintain a pipeline of new products and ideas that runs ahead of it.

    Although I do not have the answers, I am absolutely sure that swimming against the tide is a loser's game.

  • by spiffmastercow ( 1001386 ) on Sunday November 23, 2008 @02:47PM (#25866039)

    There's no future in being a commercial developer because someone else will do the same thing, for free. Now, I can understand the positive side of this, and I will say that software now is 'better' than it ever has been.

    But it has destroyed a lot of job opportunities. Someone with my level of skills could, 20 years ago, work on the next big OS or database or something, and make a living at it. Now I'm relegated to making web apps. Why? Because all of the big jobs have already been done, and there's no incentive to compete when the net value of the market is zero. The older Linux and BSD programmers made out pretty well since they got into the game early, but there's no way for a programmer to started in these areas anymore. The amount of work that goes into getting started on, say, Linux kernel development, is beyond what can be done in your spare time.

    Am I lamenting the fall of proprietary software? Only indirectly. I'm more upset that there's not as many opportunities to do __interesting__ work because of open source.

  • by firewood ( 41230 ) on Sunday November 23, 2008 @05:26PM (#25867345)

    Every product or service is in a race towards the minimum price at which it can be physically produced and delivered (price including any available manpower and start-up capital needed).

    Every stand-alone software product only has value until its function and value can be reproduced or supplanted (by patent expiration, stolen trade secrets, the time it takes to reinvent or develop from scratch, the time it takes to equal the original products reputation, the time it takes competitors to make/build/package your open source, etc.) To have a non-zero revenue window, you need to make sure the time you offer something unique is non-zero.

    Of course, humans are stupid, and this allows you to use their lack of information to create some additional value. If potential customers think your brand name implies something better than the identical bits under some other name (e.g. Coke vs. generic cola), then you might be able to maintain a non-zero pricing.


  • by HermMunster ( 972336 ) on Sunday November 23, 2008 @10:37PM (#25869401)

    A while back some guys derided open source because it was killing their product. Actually, it wasn't killing their product it was just changing the business market.

    What the bozo at that company couldn't understand was that the problem lay with them, not with open source.

    They had a product where open source competed directly. They felt that the open source version was so close to theirs that it was taking away their revenues because people were opting for the open source instead of their product.

    What this means is that they weren't adjusting fast enough to create products that were worth choosing the paid version. This is the same thing. These guys won't adjust fast enough and produce fast enough to actually keep ahead of what open source is able to do.

    What does this really mean? It means that unless commercial product developers get off their lazy asses and build faster and better tools their competition is going to catch up. This is the same for everyone everywhere, not just them, and certainly not just the company related in this story.

    It means that commercial and open source products will gain parity sooner or later, hopefully sooner and we'll see that the level head prevails. The level head is the one that chooses the best product for the price. That means that open source (once parity is attained) will be the better choice.

    It also means that we will be able to get rid of the likes of predatory companies such as Microsoft, sooner or later. The sooner the better. On top of getting rid of Microsoft we'll have better products than they can produce.

    I hope Microsoft is paying attention here. Open source will overcome them sooner or later. If it takes another 20 years then so be it. But it will happen.

    Microsoft, get rid of the draconian DRM from the heart of your OS, stop accusing everyone of being a thief, cooperate with open standards and stop trying to usurp them with your closed standards in order to lock your customers into different products. Then, maybe you'll have a chance in the long run.

    Business case studies have shown that no company has held top spot for 2 consecutive decades running. Microsoft has. Microsoft is trying for a third. It won't hold. This is the start of the decline. As we understand that their "added" complexity (unnecessarily added) is reduced to easy reproduction through open source (concepts they intentional made far excessive in complexity is sifted through and made easier for the average person) we will be able to overcome their lock in models and that will send Microsoft on a slide. They'll always be there, just as IBM is there but they'll never again be able to hold everyone in a choke hold forcing them to use their product.

  • by Garwulf ( 708651 ) on Sunday November 23, 2008 @10:48PM (#25869451) Homepage

    I'm not in software, but I am operating a small publishing company, and I'm about to undertake a project that leads into similar issues to what you're facing.

    In order to increase my revenue streams, I'm about to start a line of public domain reprints of mostly-out of print books. Now, this leads to a similar question to what you're looking at - if this book is available on Project Gutenberg (P.G.) for free (and it is - that's my source for the texts), then why should any customer in his/her right mind drop down $20-30 for my product?

    And that's where added value comes in.

    If you just do the basics, then yes, it is a "race to zero." If all I do is reproduce the text from P.G., then a customer has no reason whatsoever to choose my version over the P.G. version.

    However, I do things that add value. I commission a new introduction to the book, for example. I redo the typesetting so that it looks really nice, I give it a nice cover. That way, when the customer is making up his/her mind, they're not just getting the text for their $20-30 - they're getting a nice, easy-to-read volume for their library with extra stuff that you can't get online.

    It seems to me that the same solution applies to just about any product in any business where there is something with your product that adds value that a competitor doesn't offer.

  • by jandersen ( 462034 ) on Monday November 24, 2008 @02:53AM (#25870571)

    The short answer: Yes. It is a "race to 0" if you will.

    The longer version is that there has always been something suspect in property rights, at least as implemented in modern society. Yes, yes, bloody communism, I know; let's get past that one, OK? I'm not saying that we shouldn't be able to own our own houses or cars or whatever, or benefit from our own efforts - that is and has always been the pipe dreams of people with too much time on their hands. Communism, in the essence, has always been about finding a fair balance between the amount of work you put in and the benefit you get out. If you would care to check it, it is all there, even in Marx' works - he talks about the means of production, in a context where a tiny upper class of people who had mostly inherited their wealth, lived as parasites on the ever more extreme exploitation of a working class. Who knows what he would have come up with in this day and age? But he would probably have approved of the open source idea.

    The brilliance of OSS stems from the fact that it builds on the same principles as scientific research and publication: the free exchange of ideas amongst peers, which allows everybody to make improvements. The only criterium for success is whether it is received well and gets used by the community. The absurdity of property rights is never more obvious than when it comes to the concept of intellectual property; we have seen over and over how new ideas come, not from one unique person, but from many sources at once. Take the theory of evolution - Darwin got his name on it because he managed to publish it first in the place where it mattered at the time, but he wasn't the only one who has that idea; it had been bubbling in the scientific community for years - if he or Wallace hadn't come up with it, somebody else would soon after.

    Software is just another example of ideas written down - you can of course refuse to let others see how you did it and treat it as your property, but as OSS shows, it is never that difficult to come up with that very same idea - and the cooperation of OSS means that it will eventually become better than the closed source version. So, how to make money from your work? Well, how does any craftsman make money? By making a product and selling it. But once it's been sold he has to make another. When you make a living from your ideas, you are in the same boat as scientists and artists - those that do it only for the money are at best mediocre and most of them only just scrape along, which I think is fair enough. If you do it because you really love doing it, you are either good enough that you can make a living, or you have a day job that gives you enough to finance your real interest.

    That's the way it is, and the way it should be. Don't whine about it, or it will be my turn to call you names.

Given its constituency, the only thing I expect to be "open" about [the Open Software Foundation] is its mouth. -- John Gilmore