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Open Source Economics and Why IBM Is Winning
Posted by
kdawson
on Fri Apr 13, 2007 08:18 AM
from the committed dept.
from the committed dept.
driehle writes "In an article published in IEEE Computer magazine I recently looked at the economics of open source. I argue that large system integrators will do best and that open source startups will keep struggling. For developers, open source creates independence and new career paths as committers, while non-committers will fall on hard times. The race is on!"
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Saw this earlier this month in Computer magazine (Score:5, Interesting)
While there's certainly some truth in the example of how loyalties are shifting - and individuals might stay loyal to a project (or set of projects) across employers, just as IT professionals have always carried skillsets, language preferences, etc. across employers - I don't think this necessarily means more movement in this direction, for a few reasons:
1. Developers get involved in multiple projects. Core open source folks might start as contributors and become committers on a single project, but that is more a reflection of their interest in being involved than it is of their interest in that specific project - if the employment environment (quick Optaros plug here?) is explicitly supportive of that engagement across projects developers might discover new loyalty.
2. If the employer can uncover enough opportunities for developers to get paid to use their favorite project - for example, keep a developer busy working on Drupal based applications - they might accept the variety of new projects as compensation for the single employer. The joys of systems integration and consulting work is that if you change client projects frequently enough that it can be like changing jobs without all the paperwork.
3. How much of the whole "employees becoming 'free agents'" thing is really voluntary to begin with, at least on the IT side? Maybe a better way to look at this is to say that Open Source increases the level of portability of the knowledge an IT worker gains over time with any single employer, or decreases the barriers to leveraging that existing knowledge in a new firm.
Regardless it's a very good read for business stakeholders who struggle to understand why anyone wants to open source an in-house project or contribute to an existing open source project.
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How is this different from any other business? (Score:4, Interesting)
Substitute restaurants, or retailers, and the situation is the same ... most smaller ones fold within 5 years, some extyablish a niche, some grow, and some get bought out.
This is so pre-dot-com and so obvious that its not even funny. What next: 2+2=4?
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Re: (Score:3, Funny)
I was saying 2+2=11
My friend insists 2+2=10
Now you come and tell us 2+2=4, thanks for worsening the discussion.
Old news (Score:5, Insightful)
Re:Old news (Score:4, Insightful)
That's true... today. However, if corporations start using open source contributions as a yardstick to measure potential candidates en masse, the landscape will change dramatically. Consider college - used to be, you didn't go to college unless there was really a point in learning for the sake of learning. Them employers started demanding degrees. All of a sudden, degree mills start popping up, grade inflation makes 4.0 GPA's meaningless, colleges are pushed to teach "practical" "skills"...
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Re: (Score:3, Insightful)
However, if corporations start using open source contributions as a yardstick to measure potential candidates en masse, the landscape will change dramatically. Consider college - used to be, you didn't go to college unless there was really a point in learning for the sake of learning. Them employers started demanding degrees. All of a sudden, degree mills start popping up, grade inflation makes 4.0 GPA's meaningless, colleges are pushed to teach "practical" "skills"...
What I find interesting is that corporations using open source as a yardstick has the potential to reverse that trend at colleges, at least as far as computer science goes. If open source projects in general become widely recognised and highly regarded then hands on experience on open source projects related to the hiring field is going to look much more valuable than a CS degree with no promise of actual experience. That could easily lead to a trend where getting a degree is much less important than manag
Economics of Open Source - Bruce Perens (Score:2)
http://www.riehle.org/computer-science/research/20 07/computer-2007-article.html [riehle.org]
IBM has nothing to do with the origins of 'Open Source' or Free software for that matter.. they just tagged along.
Re:Economics of Open Source - Bruce Perens (Score:5, Informative)
http://perens.com/Articles/Economic.html [perens.com]
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Economic insanity (Score:5, Interesting)
Millions of people and businesses all buying the same software is economic insanity. It's not at all the same thing as millions of people all buying the same kind of car. A car has intrinsic value related to the cost of the components, software doesn't. Software sunk costs are incurred during development. Once complete the only ongoing costs, outside maintenance, are for distribution and the media. You don't have any intrinsic value of metal and parts in software.
Instead of paying money to buy software, a company can instead choose to pay less money to modify an open source project to meet their needs and leverage the contributions other companies have made modifying the same project to their needs. It's game theory in action. Five companies all pay a little to modify an open source project instead of all five paying a lot for some big box software solution. Collaborate with competitors in the same field for the common product they all need, then compete in pursuit of their market. Game theory.
What was needed for the theory to become disruptive to reality was a base of open source software to start with. We've had that for a while. All the pieces are there. And, as the author pointed out, it presents an opportunity for integrators.
Software really does fit the utility economic model better than a manufacturing model. Which is one of the things that really scares me about the US shipping manufacturing capability overseas and relying on a brain share economy.
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No. In the same way the writers institute of Japan couldn't fund a better wordprocessor then MS Word, Wordperfect, or openoffice etc. Free market competition and economies of scale.
Do you think the Association fo Computing Machinery could fund the best software development environment for their needs?
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I was responding to this: "Collaborate with competitors in the same field for the common product they all need, then compete in pursuit of their market." It might not be inherent in the open source model, but it was I was responding to.
I don't see why you're interpreting "collaborate" to imply that the collaboration has to take the form of hiring an internal developer, instead of hiring a contractor, or simply providing funding to a project along with recommendations.
In any case, I don't think that many open source projects are going to change priorities in response to outside companies' needs unless the contribution is very high.
I'm not sure I understand. My company uses a lot of open source software (as well as closed source). If we need that software to do something it does not already do, we either have a developer code that, or pay someone else to do so, then that code gets contributed to th
Dont understand it (Score:4, Insightful)
MSFT also has very "innovative" pricing schemes. In one instance, paying a flat fee per every computer owned by the univ, whether or not it has Office installed, was cheaper than paying per copy of Office. Effect of such pricing is that, there is no incremental cost to a dept to run Office. To use any other software, the dept head has to budget for it and justify the cost to the bean counters.
All I know is this, MSFT is far more sophisticated in playing Corporate pricing games, budget games and such things than any simple model used for research purposes by Open Source advocates.
My most common grouse is that the key is Open Standards, not Open Source. If MSOffice and OS products conform to a open standard and anyone can develop applications that cleanly interoperate with them, the playing field will be level. There will be many vendors, some playing at the Open Sources and some in Free Software, some closed and for-profit players. Without leveling the playing field one can not see how Open Source is going to win. But what do I know.
If I am so smart why am I coding for a living instead of smooching with the bean counters in the country clubs?
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All I know is this, MSFT is far more sophisticated in playing Corporate pricing games, budget games and such things than any simple model used for research purposes by Open Source advocates.
Most of what you cite are simply strategic pricing by MS. Discounts for large customers help motivate buyers to remain loyal if they want to remain large customers instead of be undercut by the competition. This is differential pricing, classic monopoly maintenance. Pricing schemes for education help remove the tendency of price sensitive, but highly capable university clients to move to cheaper, open source products. None of this really relates to the models presented which are a point case revenue model
myopic logic (Score:3, Interesting)
"While this explains some of the volunteer work, it doesn't explain why companies today employ people who contribute to open source projects on company time."
Maybe it is because the company sees the open source project as a strategic component to its product or service offerings and its in their best interest that the project succeeds and they can influence its direction?
"Il-Horn Hann and colleagues found that the salaries of Apache Software Foundation project contributors correlated positively with the contributor's rank in the Apache organization [6]. They therefore concluded that employers use a developer's rank within the foundation as a measure of productive capabilities."
For me, that is not right conclusion, or at least not the only one. It is often the case that people contributing to open source on company time only started contributing because they were told to by their employers. A developer salary at his company and their rank within the open source project are both determined by his technical skills and teamwork abilities.
good article (Score:4, Insightful)
My vision for the future (from an independent consultant's viewpoint) is the development of such a rich open source ecosystem that the cost of building unique applications is drastically reduced. As development projects become less expensive, companies and organizations will fund more projects because the cost to benefit ratio gets lower - and "fringe" projects start to get funded.
Re:I can't wait for RMS to die (Score:5, Insightful)
I may not like the man, and I may not like his zealotry, but when looked at as a piece of the whole, he needs to be there.
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Re: (Score:3, Interesting)
His implementation of Lint (Splint) has reduced me to nervous wreck on more than one occasion, but it did improve my C coding skills.
About the only thing he wrote that I don't use is Emacs. I can appreciate its quality, and have taught its usage in the classroom, but I prefer Vim.
Thing is, politics aside, the guy is one awesome hacker, with few equals and fewer betters. Ok mos
Re: (Score:2, Funny)
Here, have an ego cookie...
Re:OSS only shifts the problem, dont solve anythin (Score:5, Informative)
Hate to burst your bubble, but IBM only makes a bit more on hardware than it does on software. IBM is winning because they sell services. Have a look at their 10-Q [edgar-online.com]
In millions:
Hardware: 5,583
Software: 4,406
Services: 12,017
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Joel Spolsky said it first (Score:3, Interesting)
If you are primarily selling services, software that you need to provide those services is a cost. If you commoditize software, you create more opportunity to make money from services. Those fancy four-color graphs are simply restating something Joel On Software said a while back in words.
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oh (Score:4, Funny)
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Re:Open Source Strike? (Score:4, Insightful)
The cash flow is not broken. The cash goes to those who deliver what the customer wants, and who charge for it. Firstly, IBM, Red Hat and the like. Secondly, the makers of useful products that charge for them.
The makers of useful products who give them away, on the other hand, I thank from the bottom of my heart, since you saved me filling out a PO and numerous levels of approval.They can! Feel free to charge for your product! If it's any use, somebody will pay you for it. But you can't both give it away and charge for it.
Don't get me wrong, I am not dismissing Free Software (which has legitimate political aims) or Open Source (which has legitimate practical aims), but as an individual you should only contribute where you would anyway contribute. i.e. in projects that qualify as "your hobby" (or "your mission" if you have strong beliefs)
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