OT Free Software 3421

In a message on Thu, 21 Apr 2005 18:26:25 GMT, wrote :

Here is a real life example:

IBM sells computers, small and large. Some of the people who work for IBM work on the linux kernel making sure that there are drivers for ALL of the hardware IBM sells. Also to make sure various other system stuff (like journaling file systems) works well under linux as a way of value enhancing things like IBM server hardware. IBM *used* to sell their own in-house O-Ss for their 'big iron' (RISK minis and large super-computer mainframes), but seems to be shifting away from bothering with closed-source, in-house O-Ss. It is actually *cheaper* for IBM to hire a pile of Linux system programmers and make all of IBM hardware work with Linux. And ALSO make sure all of their various closed-source, in-house application and middle-ware (eg database server and E-Commerce software) software also run under Linux. The linux system programmers are paid out of profits from selling both the hardware and the specialized software products. And from money from things like IBM's B2B support services (such as E-Commerce support deals).

IBM is just one of the *largest* companies that support Open Source ("Free") software as part their overall business model. Other companies do similar things. In some cases some corporation needed some random in-house utility that was not otherwise available and some in-house program wrote the first version. Given that this utility would be of general interest and given that maybe the utility would be outside of the corporation's main product line, it often makes sense to open source the utility. Programmer(s) at the corporation would continue to work on the utility *on company time* (as part of their job(s) maintaining the internal IT infrastructure) AND make the updates available to the general community and also accept patches from outside programmers, who are also working for *other* corporations that are using this piece of software for part of their internal IT infrastructure and are also paid to maintain this same piece of software. Meanwhile this same piece of IT infrastructure is also being used in home networks and other such places. I believe there is a network print server package that was developed this way, by Cisco, who sells things like network routers and has no interest in having anything to do with 'selling software', but still needed to print stuff here and there and everywhere throughout their corporate IT infrastructure.

Apache is maintained by a group of webmasters (who are paid to keep their various web servers running). The programmers maintaining Apache are paid by the various web hosting companies they work for. The web hosting companies make money hosting web sites (providing a service). The *software* that implements their service (web hosting) is available as 'free' open source software. Nobody directly pays for Apache (but feel free to contribute to Apache.org). IBM uses Apache and instead of 'paying' for it with cash (they found there was no one to make the check out to), contributes open source code to the Apache group (IBM pays programmers to write open source code as a way to 'pay' for another piece of open source software).

One little known factoid: 90% of what programmers do is fix bugs. Normally a software license only pays for the creation of new software or at least that is the theory. In practice, it is impossible to actually make money only selling software. Microsoft was only successful due to three special happenstances: 1) during the 'ramp up' from virtually 0% of people owning home computers in 1980 to virtually 100% of people owning home computers by 2000, the market growth was so fast that Microsoft's gross sales for todays software could pay for maintaining yesterdays sales; 2) most of the people buying software in the 1980s and 1990s were pretty much ignorant of what they were buying (many still are), so Microsoft could (and did) say anything about their software to sell it; and 3) Microsoft very early on acquired a monopoly position and still maintains it, allowing Microsoft to raise prices at will. At this point, it is virtually impossible for anyone to duplicate this -- *selling* commodity software ala Microsoft is just not cost effective. And Microsoft no longer makes money just selling commodity software either. The *only* software companies that are successful *selling only software* are ones that sell niche software, often for rather high prices. Otherwise they are selling 'throwaway' software, like games. Packages like Turbo-Tax only sell because you need a new version each year and Intuit makes money from E-Filing services.