FLOSS - whats in it for the companies?

[falkenberg_cph]

Hey
Gathering arguments for my university project.
I was thinking. You can easily find the good sides to FLOSS, for the user. But whats in it for the companies. The way i see it, they just face a bunch of problems:

Negative sides (taking that making money is the most important job for a company):
1. No patent, the company is not protected from other companies copying their product.
2. Earning money from sale becomes harder. why pay when you can compile?
3. Earning money from support is unchanged - i usually gather support from forums like this.
Hmm. cant come up with anymore.

Positive sides:
1. bugfixing becomes faster and better.

This isnt a critique of FLOSS, more like some things i was thinking about, and i had to concider for my project. I should probably check how comapnies like SUN, RED HAT and IBM makes money.
Please give me some more pros and cons, or comment on my few points.

/Carsten

[Tomosaur]

1. This is more of a matter of opinion - many people really, really dislike the idea of patents - particularly those relating to software. The discussion is far too big to go into here, but it is certainly a factor. The company in question may not support patents. Code can be copywritten - it's actually very, very easy to protect open-source code - except when a proprietary company comes along and closes it all up - since then you can't just download the code and say 'Look - here's what they stole'. Patents are different matter altogether - if all existing patents were actually enforced - we'd still be sitting in caves banging sticks together.

2. Open source software is not necessarily free (price-wise). The GPL stipulates that the code is available in the same manner that the software itself is. This means that you are still free to sell your software and give the source code to only those people who purchase it. There's no way (in my understanding at least - this appears to be what is in the GPL, but if you know of an accurate interpretation I'd love to see it) of enforcing what the recipient does with this code though - since GPL code is freely distributable. It could well end up that the purchaser of the software makes the code freely available. This is why some developers release the CODE under the GPL, but the data files (for example, if it's a game - the maps, sounds, images etc etc) under a more restrictive licence which forbids redistribution. This ensures that the GPL is adhered to, but people who did not buy directly from the creator cannot actually compile and run the code - without either buying your content, or creating their own (there are quite a few projects which work similar to this - they create an open-source engine, but stipulate that you need the original developer's content before you can play. This helps work around compatability issues e.g - bringing a previously windows only game to Linux - while ensuring that the original developer gets at least some benefit - since the end-user still needs to buy from them.

That being said - proprierary software still suffers the risks of piracy and copying anyway. All programs are simply instructions - easily copied and redistributed. All it takes is someone smart enough to crack the encryption method. A proprietary company may well spend a lot more money on all of the protection they plaster their software with - when the problem could easily be solved by loosening up the licences. Added to this - many well known developers create both open AND closed source software. Sun is a prime example - they're responsible for OpenOffice (and are releasing Java as open-source gradually) - yet they're a massive company, and well established. Red Hat and Novell too - both companies which make lots of money through open-source. The myth that companies like Microsoft like to spread - that open-source is a poor model and that you can't make money from it - is false.

3. Individual users tend to use support forums - this is true - but big business who invest in open-source software may need technicians from Company X to visit their premises and help them out if and when issues arise. Schools, businesses etc all tend to invest in paid-for support - in fact, Canonical provide commercial support for businesses who use Ubuntu - as commercial support is generally more direct and 'quick' than volunteer support. By entering into a monetary contract with the company - that company takes liability - they are responsible for fixing problems - whereas volunteers are under no such obligation, and if problems arise, you're generally relying on the knowledge of 'passers by' to fix some solution. This is generally fine for invidual, home users - but not great for companies to whom stability and uptime of their computer systems is paramount.

[falkenberg_cph]

Thanks for the long feedback. I was gonna comment on your points, but i have to read the GPL and other licenses first. I might return with comments or other suggestions of flaws in Open Source - if i can.

/Carsten

[az]

Floss is a services industry.

IT represents about ten percent of the US or EU GDP. It is the fastest growing portion of the GDP. Only about ten percent of software written is for a proprietary product that will end up being sold, according to a recent study on FLOSS in Europe. Google "MERIT study economic impact" and read the pdf.

So the remaining 90 percent of software written is done so to make computers do stuff. This is where free-libre software can create opportunites for business and profit. Free-libre software is currently a multi-billion dollar industry.

You make money writing the software. That is providing a service. That's the business model you need to look at.

[az]

But whats in it for the companies.

The ability to use a platform that is of world-class quality for their infrastructure, on which to run their business for free(no need to pay a fee every time you create a new database, or hire a new person who needs access to it, for example.)

The ability to take existing world-class software and build upon it. For free.

All the other features of community-driven projects: Security fixes, new features added, etc. all done by the community.

Open standards by default.

I'm sure there's lots lots more...




The way i see it, they just face a bunch of problems:

Negative sides (taking that making money is the most important job for a company):
1. No patent, the company is not protected from other companies copying their product.
2. Earning money from sale becomes harder. why pay when you can compile?
3. Earning money from support is unchanged - i usually gather support from forums like this.


1. Copyright is a better way to protect your software than patents. Microsoft recently had to pay 150 million because there was a dispute about the mp3 patent. Just like that, out of the blue.

But anyway, Patents are a completely different business altogether. Generating revenue from patents is part of the legal trade, not the software trade.

2. If you charge for the service and not the software, it can create a lot more opportunities. Every dollar that gets invested in FLOSS code makes the software better for everyone. Every dollar spent on proprietary software just pays for something that was written last year.

Take for example Mark Shuttleworth's startup: Thawte. At the time, there were not many people who could see the benefit of providing the internet with the ability to use encryption to secure online transactions.

By using free-libre software, he was able to build a business that provided the service of securing online transactions using encryption and certificates and made millions.

3. If you are running a hundred or a thousand desktops at your work, I guarantee that you have a few people paid to work in an IT department. It's the same whether the computers are running a proprietary OS or a free one - you need those services to be around. You will use paid-support whenever you are running a computer that is mission-critical. FLOSS saves you the licencing fees and restrictions, but does not mean that you are on your own and have no support options.

[falkenberg_cph]

I have had that paper printed out for a month now. But its 287 pages and im lazy :D
Anyway. All good points you make out. I did have a problem understanding how you did the math in the first reply.
Yes IT is a big market, and FLOSS is 90% of it (atleast thats what you say) - but that doesnt mean FLOSS create 90% of the money flow within the IT business. Maybe the 10% proprietary earns all the money. I'll have a look at that MERIT paper - i guess thats where you have the numbers from.

Thanks
Carsten

[Adamant1988]

I had this very discussion with a lad in #foresight last night. I'm going to summarize this into a blog post because I think it's a solid idea, so I'll let you know about that on Monday when I write it ;)

[falkenberg_cph]

@Adamant1988: great!

@Tomosaur: As far as i understand, the GPL gives me as a user the right to redistribute a GPL licensed program. That would mean (atleast with a simple program - and not as in your example with games) that the producer has no way of protecting his program from redistribution, as soon as he has sold just 1 license (Given that the program is not free). So eventhough the producer has his name written all over the program, he has no way of preventing redistribution or even resale, and thereby no way of exclussively making money from sale - atleast in theory. Of cause the general user probably dont go and compile from source.

Quoting the GNU General Public License (GPL) (http://www.gnu.org/copyleft/gpl.html):

1. You may copy and distribute verbatim copies of the Program's source code as you receive it, in any medium, provided that you conspicuously and appropriately publish on each copy an appropriate copyright notice and disclaimer of warranty; keep intact all the notices that refer to this License and to the absence of any warranty; and give any other recipients of the Program a copy of this License along with the Program.

You may charge a fee for the physical act of transferring a copy, and you may at your option offer warranty protection in exchange for a fee.

/Carsten
PS: What exactly is a Verbatim copy

[Somenoob]

It makes the product more appealing to programmers if released under the GPL or other Free/Open Source software licenses.

[Tomosaur]

A verbatim copy is one which is an exact replica of the original - ie: unmodified.

Yes - you are correct about the GPL's stipulation. As soon as one copy is sold, the code can be redistributed if the person who bought it feels like. I don't see how this is any different to closed-source apps, which are routinely victims of piracy, and rarely prosecute those who pirate the software. It's better then - for the developer to lower costs and forget about protecting software with other software, as it just doesn't work - never has, and never will. The GPL is only one example of open-source licences - there are others, and it's up to the developer which he or she uses. The GPL requires that that code is always GPLd however - you can't use GPLd code and then re-licence it to stop people passing it on, it always has to remain GPL. It's a much bigger debate than can be realistically argued here. Many would argue that the freedom to redistribute is far more important than the profit of the creator, that closed-source software causes piracy by virtue of the fact that it is locked away and thus engenders an environment of greed and self-importance, while open-source software promotes sharing and freedom. Most open-source advocates are absolutely against theft - while many people locked into a propietary world may not feel any qualms about piracy or whatever. As I've already said - companies which revolve around open-source software make lots of money by upholding the idea of sharing and co-operation, while those companies which create closed-source software make money primarily through legal tactics - patents which help stamp out competition, hiding information (ie, closed-source) which means you HAVE to do what they say you can do, even if the product has problems - suing people who violate their conditions - and, in the case of Microsoft - threatening companies who try to sell non-MS products, pricing them out of existence, and generally being 'not very nice'.

[falkenberg_cph]

I found this link (http://www.builderau.com.au/strategy/businessmanagement/soa/How_to_make_money_from_Open_source/0,339028271,339191343,00.htm) from google. Its a quite good article, and also it features some other articles in the bottom of the page.

@somenoob: For what kind of company would that matter? I don't see any apparant pros or cons in that. Could you elaborate.

[falkenberg_cph]

@Tomosaur: Who would be the main advaocates for GPL: Open Source Initiative and Free Software Movement? Should i concider them like think-tanks for FLOSS? Do you know of any famous blogs advocating for or against FLOSS

Just a comment. you wrote:

As soon as one copy is sold, the code can be redistributed if the person who bought it feels like. I don't see how this is any different to closed-source apps, which are routinely victims of piracy, and rarely prosecute those who pirate the software
I would say the main difference is that with proprietary software, the creator has the full ownership to his creation. Even if it is being pirated. And as with FLOSS you are giving that ownership partly away - I think there is a huge difference. Which ever is better i'll leave to the creator to decide.

Please, again, dont think that im in anyway trying to dizz FLOSS. after all i have chosen to use it myself. But for my uni-project i need to understand the benefits and pit-falls of FLOSS.

/Carsten

[az]

Yes IT is a big market, and FLOSS is 90% of it (atleast thats what you say) - but that doesnt mean FLOSS create 90% of the money flow within the IT business. Maybe the 10% proprietary earns all the money.

FLOSS is *not* 90 percent of the IT market. Proprietary software sales generates much more money, but they also have greater market share.

The point is that only one in ten paid software developers work for a product that will end up being "shrink-wrapped" and sold. The other nine work and make money writing code as part of a service industry. The point is that the minority of software written is sold as a product. That relates to your original question as to how to mak emoney from free-libre software.

You don't make money out of it in the same sense as if it were a product. Those rules don't apply. When software is a service, you don't care about copy-protection. You don't care as much about selling it as a product. The ability for your company to write software that someone wants is the product.

[falkenberg_cph]

Ah ok. i had totally misunderstood that :D
/Carsten

[EDIT]: I have to end my part of the conversation for today. I'll be back tomorrow, and hope to have many new inputs.

[Tomosaur]

@Tomosaur: Who would be the main advaocates for GPL: Open Source Initiative and Free Software Movement? Should i concider them like think-tanks for FLOSS? Do you know of any famous blogs advocating for or against FLOSS

Just a comment. you wrote:

I would say the main difference is that with proprietary software, the creator has the full ownership to his creation. Even if it is being pirated. And as with FLOSS you are giving that ownership partly away - I think there is a huge difference. Which ever is better i'll leave to the creator to decide.

Please, again, dont think that im in anyway trying to dizz FLOSS. after all i have chosen to use it myself. But for my uni-project i need to understand the benefits and pit-falls of FLOSS.

/Carsten

Free Software Foundation (http://www.fsf.org/).
GNU (http://www.gnu.org/). GNU is actually an operating system, although a complete system/version of it has still not yet been released. Most of the GNU software is currently used on Linux.
FreeBSD (http://www.freebsd.org/). Another operating system, closely related to open-source and Linux (it has a Linux compatibility layer which allows you to run Linux apps. There is a BSD licence (http://en.wikipedia.org/wiki/BSD_license) which is more commercial-oriented than the GPL.
The Open Source Initiative (http://opensource.org/) a non-profit corporation dedicated to upholding the open source philosophy and presenting it as a valid business model to commercial world.

A number of things for you to read through there. You're unlikely to see a debate about open source without running into a couple of those.

[BoyOfDestiny]

Well, I hope these links help you out.

"Linux Weekly News has just published one of the most interesting analysis pieces on Linux that I've seen in ages. In it, LWN executive editor Jonathan Corbet addresses the common misconception that Linux, and other major open-source projects, are maintained by volunteers."
http://www.linux-watch.com/news/NS6523449045.html

Good example of open source delivering value:

"Red Hat Delivers Incomparable Value to Kingfisher for its Leading DIY Stores in Continental Europe"
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070220005384&newsLang=en

And well, a quick look at what happens when you are at the mercy of closed source (tongue in cheek ;) )

http://www.cs.auckland.ac.nz/~pgut001/pubs/vista_cost.html

Unfortunately, there was another article I could not find again... It dealt with why it was more effective to build off open source as a base, versus re implementing it. And how companies could have employees work with the devs to get some patches in, so they wouldn't have to redo their work with every release. It's basically win/win, at least the first link I posted shows that companies large and small are contributing... So there is a need. If I stumble upon the article I'll post it here.

Good luck on your paper, hope you get an A.

[falkenberg_cph]

Thanks for the links. I also found one myself:
“Commercial” is not the opposite of Free-Libre / Open Source Software (FLOSS) (http://www.dwheeler.com/essays/commercial-floss.html)

/Carsten

[DoctorMO]

Not sure you understand the GPL correctly; if I sell a GPL software to party A I am a distributor, party B who has never paid for anything can then demand that I release the source code to them without charge. as long as the copyright is complex (more than one author) or it was writen by someone else. obviously if it's your own works and yours alone then you can tell them to bog off. the point is that EVEN if you sell the software as a product (daft) someone else can still demand you release the software without restriction (including cost)

Money is made from what _is_ done not from what _was_ done; once written software costs nothing it's the writing that costs and for all those developers who effectively take out code loans and hope to repay them with copyright controls, don't you think you're being a bit silly?