Open Source Economics and Why IBM Is Winning

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!"

Old news

[BibelBiber]

Whoever commits to OS projects is likely more involved in the whole process than an outsider who simply tries to skim off some of the profit. As a customer I'd rather spend my money on a company that is involved in committing to what I pay for. After all developers tend to know best what they have done so far.

Re:I can't wait for RMS to die

[Aladrin]

No, actually, I think Stallman is a good counter-balance to the 'earn money at all costs' types out there. His extremism balances out the other extreme and let's us normal people see both sides of the equation more clearly.

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.

Re:Old news

[computational super]

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"...

Re:Saw this earlier this month in Computer magazin

[cibyr]

Look at his name...

OSS only shifts the problem, dont solve anything

[Anonymous Coward]

IBM is winning because IBM sell hardware, and since you can't copy hardware...well you are forced to buy at the price asked if you need something from them....
Open Source is only a solution for IBM to maximize its margin by lowering the cost developpement by shifting cost to other companies or naives individuals.

and of course, open source still offers NO guarantee of working.

but well at least, you can have it for free.....

Dont understand it

[140Mandak262Jamuna]

Though I like what he says, I am not sure I understand it well. His figure three has comparison of prices quoted to customers for the open and closed sources. He shows constant price quoted, irrespective of the number of items sold for the closed source model. But we all know that it is not true. MSFT charges much much lower price/per unit sold to large customers. Infact "unlimited use licenses" sold to Dells and HPs mean that they pay a flat fee irrespective of the number of units sold.

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?

Re:Open Source Strike?

[KenRH]

The basic idea behind open source in not to write software to make money,
but because you need it. You open source it so other people that has the
same or simmilar requirements can chip in.

Then it doesent really mather that 98% of your users never contribute as
long as the projetcs commuity is large enough to drive the software forwards.

That said, there is ways to make money from open source, mostly by services
like consulting, customising og support.

Re:Economic insanity

[maxume]

The US still exports the second most real goods in the world. The leader? Germany.

http://www.bbc.co.uk/blogs/thereporters/evandavis/ 2007/04/the_state_of_trade.html [bbc.co.uk]

And it is better than that. The manufacturing moving overseas because of labor prices is by its very nature the lowest margin business(because higher margin businesses are more sensitive to things like quality), and to some extent, the least capital intense(because there is generally less political risk in developed countries -- Germany is as unlikely to nationalize Mercedes as the US is Ford, China probably won't do similar, but it is less certain), so losing them is cheap(in the sense that it doesn't take much to build such a factory if all the sudden you need to).

good article

[MarkWatson]

I especially liked: "Every dollar a system integrator saves on license costs paid to a software firm is a dollar gained that the customer might spend on services."

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:Open Source Strike?

[eraserewind]

Look, you should never do an Open Source project to get hired somewhere. You should do it because you enjoy doing it and it's your hobby. IBM earns multi millions each year. Red Hat earns less multi millions, but multi millions all the same. They don't need your charity. <your niche interest community goes here> however benefits greatly from any contribution you make. If you want to get a job somewhere special, then first get a job somewhere else slightly less special.

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.

it would be good if the people who've put effort on something can get a fair contribution back.

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)

Re:oh

[Bemopolis]

My gods, man, didn't you see Indiana Jones and the Last Crusade? By jumping on the 'j' unused in Latin you would have Alfred Molina'd yourself into the abyss, denying yourself a front-row seat to the cool-ass dessication of the head jackass.

See — grammar (er, spelling) has consequences!

Re:Old news

[Coryoth]

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 managing to make significant contributions to open source projects as far as getting a job goes. University can go back to being about theoretical computer science, and people who want to earn job credentials can put in the time on open source and point commit logs and reccomendations from projects maintainers.

Re:Economic insanity

[dan the person]

Don't you think that The American Institute of Architects (for instance) could fund the development of a Free CAD application to suit their members needs for less than the members pay in licensing currently?

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? Who needs gcc, eclipse, or Visual Studio? Better to centralise our efforts surely?

Event the soviets recognised the importance of competing design studios.