Open Source Software Made Developers Cool. Now It Can Make Them Rich

[Randy Burge-2]

Open Source Software Made Developers Cool. Now It Can Make Them Rich
By Daniel Roth Email 03.24.08 | 6:00 PM

http://www.wired.com/techbiz/it/magazine/16-04/bz_opensource

Last spring, marketer and blogger Hugh MacLeod posted a question on his
site: If open source is such a phenomenon, where are all the open source
billionaires? His audience wasn't amused. Open source software relies on a
community of volunteer developers who tinker on, write for, or amend a
program, then give it away free. MacLeod's site filled up with complaints
that even to look for billionaires violated the spirit of the open source
movement. "There have to be rewards," one commenter wrote, "but they don't
have to be financial." Another simply recommended that MacLeod "shut the
fuck up," adding: "You don't know what you're talking about."

But not every open-sourcer has proven so averse to filthy lucre. A number of
open source companies have recently attracted investments and merger
interest: Whether they like it or not ? and let's face it, they probably do
? more and more open source creators are striking it rich.

In 2007, some 30 open source software companies were purchased for more than
$1 billion ? double the number of sales in 2005, according to consulting
firm 451 Group. And 2008 is proving to be even more frenetic. In January
alone, Sun Microsystems announced the purchase of open source pioneer MySQL
for $1 billion; open source development players Covalent and SpringSource
merged; and Nokia agreed to pay $153 million for the open source
mobile-software maker Trolltech. On Wall Street, bankers are rooting around
for a good open source company to take public. "People call us all the
time," says John Lilly, CEO of Mozilla, which oversees the open source
Firefox browser and Thunderbird mail application. "We're a valuable thing."
On his Silicon Alley Insider site, defrocked Wall Street analyst Henry
Blodgett recently estimated that the for-profit arm of Mozilla was worth
between $1.5 billion and $4 billion. Lilly says the estimate is about right
but that Mozilla is staying private. "As long as we can pay the bills, we
can take a long view of the world that we couldn't if we had shareholders
and quarterly reporting."

Which is not to say that open source companies can't hold their own in the
business world. The software is penetrating realms that few thought it ever
would. It's being used to create trading platforms for hedge funds ? which
are notoriously insistent on proprietary systems ? and Wal-Mart is deploying
an open source-based system for its workers to track their health care
records. The cost savings come from not having to hire engineers to write
code in-house or pay costly per-seat licensing fees. "I think the
software-license business model is archaic," says Kevin Harvey, a venture
capitalist at Benchmark Capital, which recently cashed in on its investments
in MySQL and the open source mail-client firm Zimbra, which Yahoo picked up
in late 2007 for $350 million. "I wouldn't fund a company with that model,
and I don't think anyone else would, either."

How can you build a business by giving away the store? The money comes from
selling add-ons, service contracts, and hardware to go with the software.
But that model works only if you master a couple of basics. Open source
software makers have to win enough users that even the small percentage of
customers who pay will generate a torrent of dollars. (Mozilla gets most of
its money from Google, which pays to be the browser's default search
provider ? something Google is willing to do because Firefox has so many
users.) More important, software makers depend on the goodwill of outside
developers, whom they rely on to keep updating their products. So the new
open source billionaires might want to think twice about going 767 for 767
with the Google guys. For the coder drones, accustomed to being paid in warm
feelings, such displays might make them take their coding skills elsewhere.

---------

Wired 2008 Business Trends:
Sure, there's bad news out there, what with the panicky Fed and people
whispering the R-word. But somehow, the wired world continues to churn out
smart, useful, occasionally game-changing ideas.

>From the rise in instant manufacturing to the growth of open-source business
models, these trends show that innovation can bloom even in a grim economic
climate.

Here's a look at nine trends driving business in 2008 (from Wired

1: Open Source Tycoons
http://www.wired.com/techbiz/it/magazine/16-04/bz_opensource
2: Social Networks Grow Up
http://www.wired.com/techbiz/it/magazine/16-04/bz_socialnetworks
3: Green on the Outside
http://www.wired.com/techbiz/it/magazine/16-04/bz_green
4: Invisible Internet
http://www.wired.com/techbiz/it/magazine/16-04/bz_internet
5: Rise of the Instapreneur
http://www.wired.com/techbiz/it/magazine/16-04/bz_instapreneur
6: Building a Better Banner
http://www.wired.com/techbiz/it/magazine/16-04/bz_microsoft_yahoo
7: Invented in China http://www.wired.com/techbiz/it/magazine/16-04/bz_china
8: VCs Look for a New Life
http://www.wired.com/techbiz/it/magazine/16-04/bz_lonelyvc
9: The Human Touch http://www.wired.com/techbiz/it/magazine/16-04/bz_curator

Evil/Genius: How Apple Got Everything Right By Doing Everything Wrong
http://www.wired.com/techbiz/it/magazine/16-04/bz_apple

Vote!: The Most Effective Self-Promoters of All Time
http://www.wired.com/techbiz/it/magazine/16-04/bz_selfpromotion


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[Owen Densmore]

Interesting you bring this up at this time.  The Santa Fe Complex is  
working with Joyent (for dedicated hosting on OpenSolaris) and  
Virtualmin (for an ease-of-use administration webapp) for our web  
presence.

All of the software we are using is open source -- and additional  
software not in Virtualmin's 78 open source installation scripts is on  
a huge package repository (Blastwave and CoolStack), again open and  
free.  And Joyent is making its site-specific groupware open source.

So both companies are making their living on open source and are  
contributing to the open source community.  And both are absolutely  
unique and invaluable.

How do they make money?

Virtualmin is doing interesting split development: a GPL basic system,  
and a for-pay advanced system (with the 78 additional install  
scripts).  There is some "Tom Sawer-ism": folks build plugins for them  
of packages they want to administer via the Virtualmin "console".

Joyent is based on a synergistic set of Solaris, Apache, MySQL, PHP  
(LAMP w/ the L replaced with S  :) .. and are open sourcing their  
Connector software.  They also have a sneaker: most Linux based  
hosting uses VMWare, not open sourced or free, to run their shared  
accounts.  Joyent instead saves that cost by using Solaris Zones  
directly.

Both companies have a huge community, which serves to answer each  
other's questions, vastly reducing their support costs.  They also  
work together as partners, giving each other support and new customers.

Cool!

    -- Owen





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