Big Money and Open Source May Not Compute

Open source has the adherents and the contributors, but what about the income? Patience, says the developers.

 By Andy Patrizio
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SAN FRANCISCO -- For more than a year now, there has been an ongoing debate among bloggers and industry observers over one simple question: 'Where are the open source billionaires?' Why have we not seen a GPL Bill Gates or Larry Ellison?

The view here Monday at the CommunityOne conference, an open source gathering in advance of Sun's JavaOne confab, is that the industry is still young and has not yet reached its earnings potential.

Until it does, the open source community is living off mom and dad. In this case, that would be Google, IBM, Sun, HP and other vendors that keep most open source programmers employed. Even Red Hat (NASDAQ:RHAT), the largest of the open source vendors, is dependent on Tier One hardware vendors, particularly IBM (NYSE:IBM). Of course, so was Microsoft in its early days.

Indeed, it's been that way for a while. Before he finally left the nest to work independently, Linux creator Linus Torvalds worked for chipmaker Transmeta. Sun has hired Ian Murdock of Debian fame, hired JRuby and Python developers, and bought MySQL. Take away the contributions of IBM, HP, Sun, and SGI, and Linux suddenly loses a lot of enterprise-level features.

And the community really owes Google (NASDAQ:GOOG) multiple debts of gratitude. The company is built on open source software, but makes its money from ad and search revenue, not the sale of open source software. Still, Google gives back in many ways. The search giant employs a large number of open source developers, who are able to work on their projects while gainfully employed in a company that, to put it mildly, faces no imminent financial danger.

Also, Google is the single-largest source of income for the Mozilla Foundation because it buys placement via the Mozilla startup page. According to Mozilla Foundation records, 85 percent of its $66 million in 2006 income came from Google.

So how much longer will the open source community need to lean on the likes of Google/IBM/HP/Sun? A while, some open source advocates admit.

"We have an ambition to be completely free and open source and at the same time, we have an ambition to stay in business," said Marten Mickos, senior vice president of the database group at Sun and former CEO of MySQL, during a morning roundtable at CommunityOne.

An industry 'just out of college'

Neelan Choksi, chief operating officer for SpringSource, later said during a lunchtime conference "We're just out of college as an industry, as far as lifespan goes. We're not going to reach our full earnings potential until we get into our mid-thirties, figuratively speaking."

Part of the problem is that open source companies simply don't live for the high margins that made closed source software companies grow so rich. "We're the fastest growing database in the world, but we're still one of the smallest and we don't have 'Oracle's' margins," said Mickos. "It can be done, we can grow to their size but it will take longer."

A lot of open source firms have asked users of the software to give back with either "code or cash," as Mickos put it, and many chose code. That's great for the software but doesn't pay the office rent.

So the relationship with bigger, profit-driven companies will continue for the near future. "If that means working with commercial companies, we will do it," said the former CEO whose company was just bought by Sun for $1 billion. He compared open source firms working with commercial companies to using salt in food; salt is good for flavor but not healthy to live on.

Article courtesy of InternetNews.com

This article was originally published on May 6, 2008
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