Saturday, March 17, 2007

What’s open about Open Source?

At a conference in January, Michael Tiemann got mad at me for one slide suggesting open source was antithetical to profits. In trying to flip 14 slides in 12 minutes on a complex topic, I was grossly oversimplifying, and I grudgingly conceded that my point (that many FSF-types don’t want money made off of software) could be misinterpreted, although I don’t think that’s true of the written version.

Friday I was catching up on other blogs and found Matt Asay’s entry about his own participation in (and endorsement of) the Red Hat Exchange. Now I get Tiemann’s point.

The Red Hat business model has always been about creating switching costs — getting buyers to adopt and find “sticky” the Red Hat implementation rather than embracing a truly open (and thus commoditized) open standard. Red Hat Exchange they have added vertical integration as well: a one-stop shopping for support for a wide range of open source packages. This seems to be in competition with IBM, which might seem strange since in 1999 IBM put them on the map. OTOH, Microsoft and Intel didn’t pay a price for ingratitude, either.

In our research on Linux adoption, Jason Dedrick & I found that Red Hat buyers ascribed an option value (in the sense of a stock option) to the possibility of getting an alternate supplier for Linux — something they obviously didn’t have with Windows. But if this is an option that is never exercised — or from a practical standpoint, can’t be exercised due to “stickiness” around the service offering — how is Red Hat’s business model different from Microsoft’s? Other than they only have to pay for roughly 13% of their R&D instead of 100%?

I’m surprised that the Microsoft-like property of Red Hat wasn’t mentioned by Matt — who competed with Red Hat when he worked for Novell (until he bailed), and who’s thought more about open source business than anyone I know in industry. Certainly the possibility of Red Hat as the next Microsoft is oft-reported news — in 1999, several times in 2002 (at NewsForge, eWeek & ZDNET) and earlier this week — as well as Red Hat’s stated ambition. Larry Ellison doesn’t think it will happen, but then Larry’s not God.

Is Red Hat one of a kind, or leading the way for a whole wave of not-very-open “open source” business models? Open standards (when they worked) were about low switching costs, and thus about choice. Is “open source” destined to become just a marketing slogan, akin to OpenVMS?

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