Oracle Wants Proof That Open Source Is Profitable

An anonymous reader writes "Since Oracle's acquisition of Sun, all open source projects that now have Oracle as their primary sponsor are worried about their future, and FUD is spreading quickly. Very few public statements have been made by Oracle executives, particularly regarding OpenSolaris. The community is arguing about the difficulties of forking the code base when most (if not all) of the developers are employed by Oracle. Now Oracle wants the community to prove that open source can be made profitable. What arguments can the Slashdot crowd provide to convince Oracle about that?" Reader greg1104 tips related news about licenses for Solaris. According to an account manager, "Solaris support now comes through a contract on the hardware (Oracle SUN hardware)."

IBM

[Jaysyn]

IBM & Red Hat are profitable, right?

Seriously?

[Monkeedude1212]

Redhat does pretty good for itself, doesn't it?

Re:IBM

[Anonymous Coward]

IBM does mostly closed source. I think the best we can say is "sometimes open source can be profitable". Even that may really be a bit charitable though. It is probably more like, "every once in awhile, with the right business model (which is extremely difficult to achieve), open source has a chance of being profitable.". All the closed source vs. open source bigots (on either side) really need to come to grips with the fact that yes, sometimes open source can be profitable and no, it isn't all the time or even a majority of the time.

Services

[gmuslera]

Open source by itself is not profitable. But services around it surely are.

Not from FOSS

[AnonymousClown]

IBM sells many different services and hardware which the FOSS operations augment. That wasn't the case with OpenSolaris.

RedHat, is a Linux corporate support company that was the first and so far as I know the only company that's making money doing that. Although, almost half of RedHat's income is from financial activities [wordpress.com]. In other words, they're not making all their money from FOSS.

So, there hasn't been a business model based upon FOSS that's really been proven - completely.

Yeah, yeah, yeah, FUD blah blah blah. But just brushing off criticisms as FUD doesn't cut it to the accountants, I'm afraid.

Clarifications (I'm the quoted source)

[Anonymous Coward]

Ok, so I'm the author of that message that is quoted in the article. And while an employee, I was *not* speaking for Oracle. I didn't use an Oracle e-mail account, or a Sun account for that matter.

I am not authorized to speak for Oracle. So please make sure attributions are correct.

Also, most of the posters here are confused due to lack of sufficient context. I was talking about Open Development (where anyone can integrate changes and participate in design, etc.) -- not Open Source. Open Source is clearly a win for everyone involved, I think. I'm personally less convinced that Open Development is a win for Open Solaris. There are lots of people using it, but almost nobody contributing, and the contributions are expensive to support.

Oh yeah, and in case anyone thinks I don't know what I'm talking about -- have a look at https://www.ohloh.net/p/opensolaris/contributors -- that would be my name at the top of list. And yes, I integrate changes for other people in the community as well, but those numbers are mostly not part of the ohloh statistics.

Re:Clarifications (I'm the quoted source)

[Bill, Shooter of Bul]

Mod up, even if he is new here.

Re:IBM

[QuantumRiff]

Not only that, but Oracle makes money selling a clone of Redhat to its customers as part of its total support package. You can run your Oracle DB on an Oracle Unbreakable Linux box.
http://www.oracle.com/us/technologies/linux/index.html [oracle.com]

Re:Why write something people give away for free?

[Red Flayer]

IBM had a traditional business model that involved giving the OS away for free to leverage hardware sales, and did quite well with it. IBM supports Linux because it can still be used to leverage hardware sales, but the support costs are much less -- all they really need to do is support the drivers specific to their own hardware. Sun and Apple also used software to leverage hardware sales.

Woah, dude... it's 2010. That business model has been on the outs for more than a decade.

IBM's revenue is now dominated by services, not hardware. IBM was tanking until they moved away from that model... now both hardware and software play into services and consulting as the drivers of revenue.

Oracle, as a traditional software-only vendor, does not understand this. However, I believe the best strategy for Oracle going forward is to sell databases pre-installed on hardware they control. This both allows them to charge a lot more (see Network General Sniffer) and lowers their software support costs.

Oracle is looking to supply the whole stack to its customers. Hardware, software, support -- tailored products for specific industries. Look at today's announced acquisition of Phase Forward.

And FWIW, services is also where Oracle forecasts the most growth.

Re:Clarifications (I'm the quoted source)

[gdamore]

Okay, this is not anonymous. I had forgotten my password. But yes, those clarifications above are from me. The same as the poster. The subject of this article is totally, and completely wrong. Open source was never in question. Only Open Development.

Re:And The Flip Side ...

[krelian]

Based on Sun's financial demise I'm sure that Oracle is already aware that closed source software isn't always profitable either

I remind you that Sun open sourced almost their entire software portfolio.

Re:Clarifications (I'm the quoted source)

[Trisk]

I can confirm gdamore [blogspot.com]'s authorship of the parent post. Anyone trying to understand his statement on ogb-discuss that was linked should read the preceding messages in the thread. A transcript of IRC discussion of this article is available here (search for "slashdot"): http://echelog.matzon.dk/logs/browse/opensolaris/1271368800 [matzon.dk]

that's it

[zogger]

..you got it. The value (primarily) in open source is using it in *another* business.

I have an analogy I use:

Home Depot (which would be the software only company) makes a lot of money selling tools and stuff, the materials used to do..things, a lot of different things. It's a good business but the market is limited to how many of these sorts of businesses can really exist. Now just one more step away, the amount made using the tools and stuff that comes from home depot dwarfs it. All the other businesses use Home Depot's stuff as an economic force multiplier. A simple carpentry job say requires X value lumber from Home Depot. Home Depot makes Y profit from that X, and it isn't all that much, much less than X. But, the carpenter, by doing value added work done with that lumber, probably makes 10x or better profit, at only 1X cost to him for what he bought at Home Depot.

If every business out there wanted to be just another Home Depot, it wouldn't work. Same with "software-only" as a stand alone business. The industry can support some, but not everyone can be in the software selling exclusively business, but USING the software is some unrelated business..that's where a lot more can be made. Yellow pages, A to Z, hundreds of thousands of businesses use software now, and can be profitable doing what they do. Open source and sharing helps drop the cost of X for all these other businesses, and savvy managers would realize it pays in the long run to share and share alike, as they get better tools to use in their unrelated business, meaning, they can help fund it a little by using their own devs or at least being good testers and users and contributing back what they can upstream.

Re:refocus

[IANAAC]

When it comes to openoffice, I'm getting kind of tired of having to apologize for it. It just isn't a very good office suite in terms of usability, quality, or features.

Well, outside of OpenOffice, there really isn't anything else that can remotely compare. There's Lotus Symphony, but if you're complaining about OpenOffice not being a very good suite, you won't like Symphony either. As a matter of fact, the next version of Symphony being developed is based on - you guess it - OpenOffice's code base.

I've used OpenOffice since the 1.x days, and StarOffice before that. It's progressed a *lot* during that time. Frankly, I don't have a problem running my business with it. I routinely exchange *.doc and *.ppt files with many other companies (although I rarely have to actually exchange *.xls files, I do often edit them for internal use).

Oracle is too choosy about profits

[s.petry]

This is a very hard argument for numerous companies, not just Oracle. If the answer was simple, then Linux on the desktop would be much more prevalent. Instead we see it hidden away in the Server rooms happily consuming Microsoft's market share.

Profit models are always based on software sales with a percentage cap. As an example, a CAD support company will sell you AutoCad. They pay $400 US to Autodesk, and charge the customer $600 US. Sure, many companies offer support, but in the application space it's not easy to make money. How hard is it for a Windows power user to install a Windows application on their own? In reality, it's not difficult so most companies have minimum installation support. They can count on each year receiving a check for the latest version of AutoCad. Even if the company pays for installation service one year, there is no assurance that the customer will pay again for the services.

Some companies have "Managed Service Models", where you don't have to pay the 600 bucks for AutoCad. Instead you lease the seat with support for a fixed rate. This is closer to where you want to go since it covers both guaranteed software sales, and guaranteed support staff payments. Even still, these are pretty limited since most companies can not see much benefit in paying a company a large monthly rate for something one of their power users can handle. You also run into numerous issues where power users convince the people they work for (and rightly so) that it's a waste of money to use the managed service model. This could increase their pay, and add stability to their job (pretty important in this economy).

Where companies like IBM and RedHat make their money from OSS is a much lower level of Managed Services. When you can package the app, package the OS, security, patching, infrastructure to support everything, and have a knowledge base able to reduce down time companies see much more benefit. They can also cater lower cost services to companies with lower budgets. It's cheaper to get a start up moving with RedHat Cluster, Apache and MySql than it is an equivalent Oracle package. IBM and RedHat can not only show you the benefit, but will help you implement it.

This is where Oracle needs a different mind set, which I doubt will happen. Oracle does Oracle. They don't want to support SunOne, MySQL, or Netscape Products. They want customers to pay for Oracle Directory Server, not get SunOne for free. They want customers to pay for Oracle DB, not use MySQL. They want customers to use Oracle Web server, not the SunOne products or other proven free software.

The big bucks revenue that Oracle receives each year from contracts like Oracle Apps, Oracle DB, Oracle Identity Manager, etc.. comes from huge players with tons of cash to spend. Small companies don't have the budgets to pay for Oracle, and Oracle has traditionally had an attitude where they don't want to deal with small budgets. I have seen Oracle Sales reps laugh at customers with small budgets, or just completely blow them off and ignore them.

As long as Oracle has the mind set that they should make a mint off of every deal, there is nothing anyone can do to show them OSS is profitable. Profit to them is a relative term.