While starting to analyze the business successes and failures I came to surprising finding about the size of the companies in question. Whereas the largest OSS company - North Carolina-based Red Hat Inc. employs 2000 employees worldwide[1] compared to its commercial competitor Microsoft that comes above 79000 employee headcount[2].
The second largest OSS company - Uppsala-based MySQL AB employs 360 employees[3] whereas its closest competitors are also significantly larger - 75000 in Oracle[4], more than 4000 in Sybase[5] or more than 1500 in Progress[6]. So in average the companies that have chosen to do business and provide the public with its source code are tens of times smaller than their fully commercial equivalents. Through keeping the number of employees down, making them work from their home-base open source also cuts down on essential research and development costs while at the same time speeding up delivery of new products.
Most of the other OSS companies seem to be small corner offices that usually employ a few fanatics. What is their motivation? In plenty of cases they indeed work with the passion to turn the world into a better place. This kind of approach together with user innovation probably makes them success already on the grassroots. When we look at them - there are a few who are proudly announcing to be geeks[7].
Success Story - How to make good money with OSS?
It seems to be an oxymoron - to make money with free / libre / open source software. When most of the customers would be able to use freely available source code to build their own - why would they pay anybody for anything related to the OSS?
However, there are still several possibilities how to make money with open source. Open Source Business Models and Strategies website [8] displays web-roll of numerous success stories.
The open source business model relies on shifting the commercial value away from the actual products and generating revenue from the 'Product Halo,' or ancillary services like systems integration, support, tutorials and documentation.)[9] In most cases this is associated with related services. One strong example would be JBoss, which is a division of Red Hat. JBoss has managed to sell conferences, support, certification, even reference manuals.[10]
How to fail with OSS?
But then on the other hand it is difficult to identify any failure stories. This is so probably because the very nature of the open source development principles. When a commercial company faces huge losses or enters bankruptcy then usually we can see big headlines - numbers of people were laid off, the managers were kicked out from their positions, shareholders were left empty-handed, customers did not receive their services. However, as the open source development is frequently based on the operations of volunteers - when they stop their activities usually none of the previous would either be applicable or hit a major news channel - the developers simply leave for other alternatives, no managers would have been employed, any financiers would not have committed their funds, and mostly the customers are psychologically ready to accept that whatever they got free until this moment should account for a new alternative thereafter. Hence looking around in yahoo finance, CNN headlines or even some hard-core IT portals did not provide good links on the events that would demonstrate a major failure in OSS business.
Hence I decided to take an approach of a social Darwinist. The very principles of social evolutionary theory provide that there is constant variation of new ideas where only the fittest are selected and retained in the long run. The variation of the OSS ideas is mostly captured in open source software development web sites. Looking at SourceForge.net website[11] their number of registered projects accounted at the end of 2007 to 165234! Appears to be a rather large number! When I tried to trace their discontinued projects - there are really hundreds of projects that demonstrate active development for a few months and have died out thereafter. Hence it could be concluded rather easily that the social Darwinism with combination of lack of stakeholder interests could be used in order to explain the silent failure stories of the open source software development.
References
[1] http://www.redhat.com/about/companyprofile/facts/
[2] http://finance.yahoo.com/q/pr?s=MSFT, with the history of the headcount during the past years displayed here: http://blog.seattlepi.nwsource.com/microsoft/library/msftemp.jpg
[3] http://en.wikipedia.org/wiki/MySQL_AB
[4] http://finance.yahoo.com/q/pr?s=ORCL
[5] http://finance.yahoo.com/q/pr?s=SY
[6] http://www.progress.com/uk/about_us/index.ssp
[7] http://www.landley.net/
[8] http://www.opensourcestrategies.org/
[9] http://www.extropia.com/tutorials/misc/opensourcebiz.html
[10] http://www.linuxplanet.com/linuxplanet/opinions/6417/1/
[11] http://sourceforge.net/
No comments:
Post a Comment