Wednesday, December 03, 2008

The FOSS business Model

There are many objectives and purposes of FOSS, while boxware has only the purpose of selling units. That is tough to compete with because boxware, from an investor perspective (person investing in the company selling it, not the ones buying it) it is successful when they sell so many units, and fail if they sell too few. Very straight forward.

FOSS in every way is more complicated. Investors of Red Hat want to see subscriptions sold, but that also depends on who you would call an investor. Many people profit from Red Hat's work, and any FOSS progress is perpetual. Red Hat will always live on in a way because of its nature. People can always expand and support Linux no matter what happens, By contrast, whatever way it could happen, if Microsoft one day went belly up, EVERY investor, stock holders and users are totally burned.

So another contrast. The purpose of Windows is for the software to be sold. The purpose of Linux / FOSS is to be productive. FOSS doesn't need to be profitable by the box as much as it needs to be useful, and proprietary software doesn't need to be as useful or productive AS MUCH as it needs to sell box units.

When we are talking about a movie company, there are two routes to go. Movies are not FOSS, remembering that the last 'S' means software. Movies make more sense under a CC license if you want it to be that type of free, but that is something else entirely. FOSS v. proprietary for a movie studio is the argument of whether or not the company is going to use make all their own software (very impractical, they are not a software company), or pay someone to give them the software they need. On a larger scale, individual companies can make their own software (again, makes no sense cause not a software company) or movie studios as a whole can pay one big company to provide for all their needs. In a way this can make a lot of sense, but has certain limitations when it is proprietary.

The FOSS solution says use this open model, build upon it as you need, BUT if you share that code or want to sell it, you need to "share-alike". This means that movie studios can meet their own individual specialized needs, and have the benefits of a community that is 'invested' in having quality software. There is also the motivation and hope that if you choose to share parts / tools that are good for you, others will build upon it and improve upon it making it the best software possible.

So if 100 movie studios work together sharing their best in-house tools for making quality movies, then many things happens. You have great software everyone can use. The software is superior than what any one company could develop. The tools are more flexible than could have been possible by one company, and profitability will come down to the ability for companies to utilize that software to make a good movie. Software engineers got paid for their work, the software is very valuable, but 'worthless' as a stand alone package. So now the questionable investment is whether or not it is going to be worth your money to invest in someone looking to make money contributing to such a project that is not directly involved in the movie production itself. Red Hat is such a company (for another industry, of course), but when such business models 'fail', the ability to quantify the failure financially for that company is 'simple' (sort of) but not for the software as a whole, something MUCH more complicated.

But again, the only thing special here is that when proprietary boxware fails, it fails for EVERYBODY and entirely. FOSS just can't be judged the same way, even if it is something very difficult for people design a business model around.

And I'll just say it now before anyone needs to point it out, I do casually program and use Linux but I am not a software engineer, and certainly not involved in the industry beyond consumer and fan. This is just my observation and opinion as an outsider with a strong belief (even if a naive one) in FOSS.

Note: As usual this was an inspired post as linked above. The original article regarding the subject matter came from here.

Afterthought from reading this post:
What good does FOSS adoption mean if there's no money exchanging hands?
Cause sometimes software is made to be used. One way you could measure FOSS profitability (albeit unfairly) would be to add up the profits of all companies invested in FOSS, like IBM, Sun, Pixar, HP to name a few. These companies don't ONLY use FOSS, and they don't give away all their software secrets, but they ARE big investors in FOSS, and FOSS is a big part of what they use to be profitable while contributing to it.

So maybe FOSS profitability is a lot like the restaurant business; Never trust a skinny chef :)

And why not one more. This post kinda pissed me off.
One thing i think we will see FOSS project's movng away from is giving away the software. if you GPL something, it doesn't mean you have to give it away, it just means who ever you sell it to gets the source code along with the program.I could for example write some software, sell it to others and then give them access to the source where only paid customers could make commits and see the source. source is only required if you distribute something....
I have said this so many places, but I think it needs to be said again given your post. I don't think you GET free software. I know this is separate from the article, but you fail to see the primary goal of free software and why it works. Sharing code makes better software. THAT'S IT! It was never about making profit directly off the software. Profit is made from productive USE of the software. What people want to try to do is take this great, powerful, and successful thing Linux and make profit off of it directly, like business people have tried to do with everything forever! Free software is just really hard because its nature. And as many commented, and my interpretation of what you said, people are not going to turn free software into proprietary software. Hmm... I take that back, noone is going to turn GPL software into proprietary software. DAMNIT, technically, you are right, it is called Mac OSX. Personally, and let people flame me for saying this, exactly the fears you are expressing that will be the death of FOSS are exactly what has happened to BSD. This is why I think the BSD Free model is going out because people are recognizing that for free to stay free comes at the price of making sure it stays that way. That is what GPL is all about. Torvalds disdain for GPLv3 I think reveals some reveals a lot about how the classical belief in free software is dead as people are forced to take harder and harder lines on free v. proprietary, where before it was just about free, and not necessarily what happened to it.

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