Big Money and Open Source May Not Compute

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

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/guides/hp-networking/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
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

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