Monday, November 30, 2009

Open Source as a Model for Business Is Elusive

November 30, 2009

Open Source as a Model for Business Is Elusive


SAN FRANCISCO — In many ways, MySQL embodies the ideals of the populist software movement known as open source, in which a program’s creator releases it to the world free of charge, and legions of volunteers contribute improvements that are also freely shared.
The start-up company came out of nowhere, building a database application beloved by vibrant, young Internet companies. Logging in from homes scattered around the globe, its workers seemed more a part of a virtual commune than a corporate monolith, and they relished taking on proprietary software giants like Microsoft.

But like most open-source companies, MySQL’s sales, tied to support deals, never matched the astronomical number of downloads for its product, about 60,000 a day. In January 2008, the founders decided to sell the company for $1 billion to Sun Microsystems. And this year, Sun agreed to sell itself to Oracle, which makes database software aimed at larger companies and tougher jobs, for $7.4 billion.

Now, disagreement over the value of MySQL — both as a stand-alone entity and as part of a big company — lies at the heart of a bitter public battle between Oracle and the European Union over the Sun acquisition. The fight illuminates a larger truth about open-source companies: their societal and strategic importance far exceeds their financial value as operating businesses.

The rest of this New York Times article…

The open source software movement is living proof that we do not need the profit motive to create innovation.
The open source movement is an example of work as it should be done: people who are passionate about a subject, in this case computing, dedicate their talents to meeting a perceived need consumers, including themselves, or improving the product simply out of intellectual curiosity. Unfortunately, the need for money in the current world has open sourcers also looking for ways to make it in ways that span the range from asking for donations and selling branded gear to selling support deals, doing I.P.O.s or being acquired.

The latter two are especially at odds with the ideals that gave birth to the open source movement: democratic, community-driven production that puts tools into the hands of the community to further still other kinds of work. The I.P.O. makes the enterprise serve the stockholders rather than the consumers. If you have stockholders, you have a fiduciary duty, enforceable in law, to get them the highest short-term return you can. This is why you see from time to time a lawsuit to force a company to accept a take-over bid.

The corporatists claim they favor free enterprise, but in practice, they compete to conquer each other and gobble each other up. (To wit: MySQL, whose founders wanted to make lots of money, was sold to Sun, which, in turn, was sold to Oracle).

The proprietary business model is based on exclusivity and control. You can only have the product if you can pay the price demanded. You can only work on changing the product if you are a member of the club: i.e. an employee or licensee. Ideas about the product become “intellectual property” controlled by patents, shrink-wrap licenses, DMR and a whole host of other contraptions to control who uses the product, when, how and how often.

To an economist, free enterprise means free entry and exit of capital and labor into the market. In reality, that which an economist would call free enterprise is an early stage of capitalism and not its endpoint. The tendency of capitalism is toward the concentration of economic power into few hands.And the difference between corporate capitalism and true free enterprise is the difference between the Microsoft Corporation and your local farmers' market. In corporate capitalism money is used as a gatekeeper, rather than as a convenient medium of exchange. Pricing facilitates exclusivity. And it is used to control entry into the market because it costs money to get the tools to create a product which will provide the much-vaunted competition in the marketplace. How many of you have an idea that you have not been able to materialize because you can’t afford the tools to even build a model?

Money has become more trouble than it is worth. How can we make the transition to a money-free world? Any ideas out there?