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"Open Source Works" sez former VC 45

Posted by Hemos from the recognize-my-skillz dept.
Suydam writes "J. William Gurley, a former venture capitalist turned writer, talks about how Open Source works in his latest "The Rising Impact of Open Source". There's nothing earth-shattering here for the Slashdot audience but it's decent press for the OSS movement and a worthwhile read. " Remember-the PHBs have heard of News.com. Make 'em read this.
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"Open Source Works" sez former VC More

"Open Source Works" sez former VC

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  • Re:sez? (Score:1)

    by Suydam ( 881 )
    I submitted the story....but I certainly didn't use "sez"

    That said, I don't really find it annoying either.

  • ...for more static content than a DS3 could handle. However, many don't serve on even a DS3 or serve static content.

    Just look at Microsoft's own site.
  • Sure, but the same argument can be turned around and used against PC OSes. The server isn't just the OS but the whole package. 'OS support' only creates an edge for part of the solution. You still may have issues with the 'rest of the solution'. Thus complete solution providers provide even more comprehensive support. Plus when you own or can merely modify the OS, you can provide and even greater level of support when coupled with full hardware support.

    Linux and the BSDs allow for the proliferation of IBMs and Suns.
  • Past a certain point, net connectivity on many ISP's is already metered. So that is a bogus point.
  • There is some interesting news about him. Check out the URL about instant company [nytimes.com].
  • What has Netscape got to do with Apache?

    Umm... Netscape used to (and still technically does under AOL/Sun) sell a commercial Web Server. Ran on a variety of Unices and POSIX type systems, IIRC.
    --
  • A lot of the open-source contributions (fixes, enhancements, ports, drivers, adaptations, etc.) probably come as a byproduct of other in-house development projects - which is the thing the developers actually get paid for.
    --
  • So...the developers at RedHat (or SuSE, etc.), who get paid to program open source code for Linux, are volunteers? Hmm...

  • That is, if they've entertained serious dreams about landing big bux from a high-profile Valley venture firm.

    This is a very nice source for a (perhaps) surprisingly good summation of the OSS phenomenon for business types.
    -- Ryan Waldron
  • With open source you can't differentiate your product by making it better quality, because your competitors can legally redistribute exactly the same software you do. The way you differentiate is with marketing, price, tech support and extra bonuses (eg: commercial software, manuals, penguin dolls, pretty boxes, etc.).

    The Linux software market is quite different from the "normal" software market. Linux users care about open source and are less likely to buy software from a company that they don't think contributes. The average Windows or Mac user really doesn't care.

    Because Red Hat sells Linux distros, it's in their best interest to have developers because that's good PR in the Linux market. If you were selling utility or application software for Windows or the Mac you wouldn't need developers. If someone starts selling an improved version of your product, you can start selling it too. As long as you have better marketing and a prettier box, you'll make more sales.

    Ironically, the one thing that could possibly force you to innovate is the existence of "proprietary" software. You can't just go and redistribute proprietary software, so they'd be real competition. If all the world was open source though, competition would be reduced to marketing and packaging. Technical innovations could just be copied off the competitor's FTP servers...

    Also, consider what would happen if you developed an open source application for Linux and tried to sell it. It would be almost impossible to sell, because it would probably appear on the next Red Hat CD if it's any good. No matter how much "quality" you put into it, why would people buy it from you, when they can get it from Red Hat? They've heard of Red Hat, not you.

    It's also interesting to note that for support sellers, improving the quality of the product can actually be a conflict of interests. They make money on support, and lose money on development. It would be even worse if development started doing things that would reduce the amount of money made on support. This depends on the model of payments for support of course. When talking about the "free XX days support" included with a distro, then they want to reduce the amount of support required. But when talking about $XX/hour support, they'd like to increase it...
  • The most disturbing thing about this is that the article goes on and on about the software being produced by volunteers. In other words, he's talking about using open source so you can get free (as in beer) labor.

    Anyone with half a brain knows you can make money with Open Source. The problem is, you don't make that money by developing open source software. You make it by selling open source software other people wrote. Well duh, of course you can make money sell the work of others. Cuts downs costs quite a bit too, not having to hire developers.

    When is someone going to come up with a business model where developers can actually make money on open source software? Every model I've seen so far sucks because it relies on making money off of something other than the open-source software, ie: support (support-sellers), hardware (widget frosting) or closed-source software (loss-leader). In other words, the open-source developers are either an expense or unpaid volunteers.
  • No they're not. But if you look at the article, you'll see he uses the word volunteer an awful lot.

    But since you mention Red Hat, how about trying this simple mental exercise. Imagine we created graph where the X-axis is the worth of the contributions a developer has made to Red Hat 6.0, and the Y axis is the amount of money that developer has made directly as a result of those contributions. Now take all of the developers that have contributed even the tiniest fragment of code that ended up in Red Hat 6.0 and plot them on this graph. Ideally, those developers that contributed the most will have also earned the most. In actual fact, almost all of the developers will be somewhere on the X-axis, having made $0 for their contributions.

    The Red Hat developers will be in the small group of points not on the X axis. They might have made some fairly significant contributions, but much less than the sum of contributions made by unpaid developers.

    Red Hat makes their money from support, printed manuals and pretty boxes. If Red Hat started doing poorly, the developers would probably be among the first to lose their jobs. After-all, they don't contribute to the bottom line. (except as an expense...)

    One also has to realize that Red Hat's product is not used by "normal" people. It's used by Linux users (like myself). Linux users would get ticked off at Red Hat and probably stop buying their product if RH were to fire their developers. So Red Hat has a strong incentive to keep their developers for PR reasons. Companies selling software with more non-open-source-activist users would have far less incentive to actually pay developers if they can just rely on volunteers to do the work.

    I would like to see a system where all developers, whether or not they were hired by Red Hat, could earn a profit from their contributions, proportional to the worth of those contributions. Of course, that wouldn't work too well for Red Hat, because they'd have a lot more expenses than any of the other distributors. There doesn't seem to be any way to fix this and stick with the GPL.
  • Pointy Haired Boss (see Dilbert...)

    "That's the great thing about kill-bots, you can always make more."

  • Open source software has to survive in a market where the selling point as it were is quality. Just because something is free (beer) does not mean that it gets used, the quality becomes the determining factor.

    Now lets say a company has as it's product services and support for an open source peice of software. The short term gain would be to just milk this without putting anything back, long term gain means that in order for this software to survive it must compete, and compete well. This entails employing developers to improve the product and ensure that the quality remains high. Otherwise the software fails to compete and brings down the companies "product" with it.

    So I feel that in order for any company to do well in the open source environment developers have to be employed, hence the free labour model is not as competetive as "controlling" and "enhancing" and keeping the quality high that employing developers would entail.

    For example I could release a distro tomorrow, but would it overtake all the other distro's out there? Probably not, because for example I do not add anything new, and over the long term it would be left behind by the "competition".

    Well thats my take anyway.

    Ice Tiger
  • Just as a point of correction, an ADSL line is a direct connection to the ISP by way of the phone lines, you're not sharing it with all of your neighbors like with cable modems, the only thing you're really sharing is the bandwidth of the server you're connected to, which ISP's usually keep ahead of the demand for that bandwidth.
    But as for free bandwidth, thats something that is hard to predict the future of. ISDN's were super fast compared to the modems they were competing against Back in the Day, but for that speed you not only paid a monthly service charge but you also paid hourly like early ISP's (remember when the $19.95 flat rate was the exception to the rule?). Now ADSL and cable modems are for the most part unlimited bandwidth (although my cable connection's been killed after long transfers from the school servers) but thats because high bandwidth connections needed for the servers is relatively inexpensive and the slack bandwidth can be put to use by selling it off to co-locations or hosting services. But who knows if these services are going to become constricted as they become more popular. I certainly hope not, unlimited bandwidth means freedom of sorts by notm aking you worry if you're going to run over your quota and have an extra ten bucks added to your bill per hour. This would most likely lead to Joe Average going back to their v.90 connection simply because they dont have limits on their bandwidth.
  • Oh, it's going pretty well. Do I know you?

    --Jamin Philip Gray
    jamin@DoLinux.org

  • in the first paragraph....

    --Jamin Philip Gray
    jamin@DoLinux.org

  • I suspect that our author doesn't know what a .org is; every link listed is www.x.com, and apache is the only one that doesn't have a .com address. I reckon he's a compulsive domain dipper; can't find anything that doesn't fit in the standard www.thingy.com
  • Pointy Haired Boss, from the Boss character in Dilbert [dilbert.com].

  • Sorry to be off topic but I just read userfriendly's strip for today and noticed that there was a character with a T-shirt on which was written "I love Jar Jar". I couldn't help laughing about that given all the anti-jar jar crowd at /. (I'm in the UK so I haven't seen the movie yet (Argh two more days to wait :( )).

    Will I be moderated to -1 because I am offtopic or to +5 because this detail is funny? Wait and see ;)
  • girly is well-known...the article will appear in fortune as well as news.com. basically, the open-source model is now being accepted by vc's as legit and thats good for all you linux weenies out there because more startups will be formed around the model. basically this is all part of the natural commoditization of software - to add value vendors are moving to a service-type model where software is either provided as a service or the architecture of the software is based on the presumption that organizations have a live net connection at all times linking them in realtime to suppliers partners and customers...
  • eopinions.com is a nice idea, but:

    "By submitting Content to epinions.com: (a) you automatically grant to epinons.com (or warrant that the Content owner has granted to epinions.com), a nonexclusive, royalty-free license to use, modify, copy, distribute, transmit, publicly display, publicly perform, publish, adapt, create derivative works of, distribute, transfer, or sell any such Content, for any purpose whatsoever, including, without limitation, a commercial purpose, without any compensation to you; and (ii) you agree that you will not publish, submit, or display such Content to or on any other web-site or on-line service (except your own personal web-site) without epinions.com's prior written consent."

    Ugh. Stay away.
  • As Mr. Gurley says, "...get over it."

    While he is referring to disbelief that the open source model can produce robust and complex software, I think it applies just as well here.

    Consider the statistics for server growth... *Somebody* must be choosing Linux. Further, as we've seen, success breeds success in the software platforms world. When the "Sky Magazines" and computer management journals start to tell PHB's that Linux is the Next Big Thing you'd better get out of the way. Just make sure you dump your Microsoft stock before the herd instinct takes over and the stampede away from Win2000 begins!
  • A shame he mispelt Deming's name in the last paragraph: cuts the impact (of what is a fairly strong statement) quite a bit.
  • He's no former VC. He just changed firms. Bill Gurley used to work for Hummer Winblad, he's now with Benchmark Capital.
  • Netware 5 comes with Netscape fasttrack webserver.
    nifty little program.. not sure i'd run a big business high traffic site on it, but definately cool for a small shop


  • The risk of choosing an albatross for an information technology solution is increased in the OSS area. Sure, we have seen some very overpopularized examples (Apache/Linux) but IBM and Microsoft have, for the most part, withstood the test of time. If I'm a CIO and my Microsoft product flakes, I know that this company has resources beyond my imagination and in the end, they will make the product work (though maybe requiring more time and idiots).

    I love the OSS movement, too, but the establishment isn't going to vanish quite yet.
    OSS is going to need more demonstrable successes.
  • What has Netscape's war with Microsoft (I'm presuming he's refering to browsers) got to do with apache's growth.

  • Um (Score:1)

    by TummyX ( 84871 )
    According to Netcraft, Apache runs on more than 57 percent of the world's Web sites and has gained consistent market share, even during Microsoft's aggressive attack on Netscape. What has Netscape got to do with Apache? We all know that IIS is faster than Apache don't we ;P
  • What I find interesting, is that people are CONSTANTLY comparing Linux, and other open source projects, to closed source markets. You CAN'T do that. Open Source uses a completely different development model, and in turn, has completely different distribution channels. You can compare Linux to Windows as an Operating System, but you can't compare it's retail value. Sure, you can easily say "Well, you can buy Linux in stores same way as windows, right?" Yes, that's right, But can you download Windows from the internet? (Legally?)

    Open Source is not streamed to the market in the same manner as closed source. Microsoft makes windows, then in turn sells it to OEMs and Retailers, who then sell it to End Users either as a standalone product, or bundled with a system. Open source products (such as Linux) are written by thousands of hackers across the globe, and bundled in distributions available for download or purchase. You can't compare the methods of distribution, because they use different means of marketing from the start.

    This is the main reason Linux will be so successful, and why Windows will eventually Fail, or change it's distribution method.

    -- Give him Head? Be a Beacon?

  • Remember the PS/2 debacle? Overpriced, uncompetitive PCs with a new, proprietary bus. Allot of companies went with Big Blue, and allot of heads rolled, as cheaper and faster EISA and ISA bus clones came to market. With the advent of Linux and Open Source, those who cling to the "I can't get fired for choosing Microsoft" run an increasing risk of suffering the same fate. We are paid to be technically savvy, and to investigate and (presumably) select the best technology for a particular job. When an employer discovers they've missed the boat, and become less competitive as a result, the head of the "play it safe, don't innovate" IT manager clinging to an outmoded and unreliable technology becomes one of the first targets on the hit-list.
  • remember that saying?
    right now a network administrator is far more likely to choose an established OS with ready lines of support--ie Novell, Unix, etc, than an OS held together with "duct tape and mt. dew". Before you hollar at me, I love linux, just thats the point of view of much of the establishment. If you want to help linux succeed, get out there and offer support to companies, and when the Linux Certification process is further along, get certified so we can give linux numbers of qualified support people. (yes, certification doesnt=knowledge. but if you are a linux guru, what better way to show the unknowledgeable that you know a lot).

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