Hugh MacLeod asks, if open source is so great, where are all the open source billionaires?
This is a companion discussion topic for the original blog entry at: http://www.codinghorror.com/blog/2007/04/where-are-all-the-open-source-billionaires.html
This is a companion discussion topic for the original blog entry at: http://www.codinghorror.com/blog/2007/04/where-are-all-the-open-source-billionaires.html
Bob Young (Red Hat founder) once said something like (sorry, no reference) of Red Hat circia 1999, “our goal is not to beat Microsoft in revenues, it’s to commoditize the market so Microsoft makes less”. This strategy is working as designed. Folks like Dave Winer might grouse about this in the context of not being able to sell applications that have been commoditized, but this is just the way any market works (at least given free trade). The market ownership gravy train doesn’t go on forever, as IBM found out, Novell after them, and Microsoft will soon. There’s just no such thing as royalties in perpetuity.
Chris, I was thinking of that exact quote too, but I can’t source it.
“Gross profit margins [through mid-2006] in the Software sector ranged from 95.0% (CHKP) down to 31.1% (FISV), with the median for the group at 76.8% and the average at 67.2%.”
I always thought gross margin didn’t make any sense in the software industry, since it doesn’t consider “fixed” costs…like development costs. You end up with insane margins like that, with actual net margins down in the 5-10% range (or worse).
You forgot Fermi Linux which begat Scientific Linux to my knowledge.
SELinux is not a distro… DUHHH
I love it…
“There are real millionaires-- even billionaires-- who built companies on open source software. Just ask Larry Page and Sergey Brin. Or the YouTube founders. The real money isn’t in the software. It’s in the service you build with that software.”
Exactly… do you think we would have sites like Digg, Google and YouTube if these guys had to pay Microsoft for the software to startup their business?
They are no open source billionares becouse people who use open source are not money grabing evil people hell bent on taking over the world and making everything controled by there company.
“Duplicating software is about as close to legally printing money as a company can get; profit margins regularly exceed 80 percent.”
Aren’t you overdoing it? It may be true for one Microsoft product in 2002 (the article is from 2002, when MS was higher-flying than now), but “regularly”? I don’t believe that.
Also, as a software developer, you know full well that software has a cost. In a commercial world, it’s obviously covered by the companies that do it. In OSS world, it’s mostly covered by commercial interests. Volunteer work helps, and motivations are normally honorable, but it doesn’t seem to me that it’s volunteer that work gives basis for the stability and long life of OSS products. All the important things (GNU/Linux, OO, Firefox) have corporate backing, which pays for the work. My point here being, printing CD’s or hosting software downloads is far from printing money.
Great post!
Copying software being as close to printing money as you can get?
Nah, that would be the Wizard of the Coast with the magic the gathering franchise. Printing 15 cards, putting them in a wrapper and then sell the package for several dollars. Now that is printing money 
Bill Gates and Larry Ellison are paper billionaires. They’ve paid themselves a lot in salary over the years (Ellison much more than Gates) but it only amounts to a few million - maybe $100m tops. That’s directly come from customers buying the products.
These guys are paper billionaires because they hold a lot of stock in the companies they founded, and the stock market has decided that the stock is worth that much. This valuation isn’t really based on anything in reality, otherwise Microsoft’s stock, based on huge sales of real products with a large barrier to entry, would be worth much more than Google’s (large ad sales, no real products to speak of beyond the ad system). If they tried to realise those assets by selling the stock, they would immediately depress the stock price and wipe huge amounts off their personal valuations.
Microsoft’s major benefit over open source - although it may not feel like it at times - is that they test their software in-house before shipping. Go look at Firefox’s test ‘plans’. Barely even there. And Firefox is good in the test department - the Linux kernel has no public test plans whatsoever. Also, Microsoft plan ahead and give you a schedule of when new software is likely to arrive and the features it’s intended to have (yes, sometimes they cut features late or delay the release). Release planning seems to be alien to most of the open source world. Windows Vista is a real exception to the rule - it’s the first time I’m really aware of where Microsoft have so publicly messed up and been unable to complete the original project. Windows Vista isn’t really “Longhorn” at all - they pretty much restarted from scratch (well, XP SP2) about two years ago, and if you assess on that basis, it’s quite impressive what they got done in the time.
A href="http://en.wikipedia.org/wiki/GNU/Linux_naming_controversy"GNU/Linux/a my ass.
Linux. Not “GNU/Linux”, no matter how much Stallman stamps his foot, and no matter how long the Debian people persist.
Sorry. Pet peeve there about GNU credit-grabbing.
(When Torvalds decides to rename Linux to put GNU Iin front/i, I’ll stop thinking it’s a petty thing for Stallman to do.)
Also, “iThe lack of open source software billionaires is by design. It’s part of the intent of open source software – to balance the scales by devaluing the obscene profit margins that exist in the commercial software business./i”?
Was that the intent of the BSD license? To “devalue … obscene profit margins”?
Or maybe the idea was just to let people have some cool software and spread it around?
I wouldn’t assume the former ideology is universal or defines “open source software”. It might define “GNU-Style Open Source Religion”, though.
Nobody “designed” “open source” as such. People gave away or shared code before Stallman and his crusade. He deserves credit for popularising it, and for amassing that huge GNU library of tools, which is staggeringly useful.
But I personally like “obscene profits”, since they pay salaries and get me products that wouldn’t otherwise exist.
(Then again, the economist in me suggests that fiscal competition for actual profits, “obscene” or not, produces a superior product. Seeing how well free software often Idoesn’t/i work, the argument seems empirically correct as well.
Photoshop vs. The Gimp.)
Why are we all so money centric? Hardly anyone here acknowledges the great advances that could be achieved through open source (…and has been achieved).
Of course you could argue that “everyone has to pay rent” but why a billionaire. Frankly, I think one could work on open source and make enough money to live. Stop confining yourselves to the goals of society…the “American Dream” or more recently “Get rich or die trying”.
Seriously folks, life have a little more to do about progress and personal growth than it has to do with financial wealth.
Finally, criticize the open source model all you want but that does not affect its effectiveness. There are so much examples of good development out there…Linux
The trick is to corner the market so that the worker bees think that there’s no other option than to buy your product, simply because everyone else does… that way you can charge $120 for a product that is only really worth $15.
I’d be pretty happy with windows and office at $15 each… …that would be good value. But 120 for XP…?? It leaves a bad taste in my mouth for sure…
Now open source… if windows was $15, how many people would feel anti-microsoft enough to give Linux/buntu/suse a try…?? alot less I think.
I agree, the money is made with the service you provide with the software.
I had a conversation with an Austrian whose name I forget while I was at Buenzli in Switzerland, a demoparty, and she told me that the European demosceners figure the reason why the demoscene and demos in general haven’t caught on in America is because people would want to get paid for doing demos because they require so much effort.
The open source movement is a good example why this is incorrect, but some of the comments here are an example of why it might actually be a good reason. Jeez, guys, I don’t know about you, but once my rent and utilities are paid and I don’t have to put all my car repairs on a credit card, I’m pretty content with how much money I have. Let the fanboys at gizmodo blow all their money on dumb gadgets and the nerd equivalent of ricing up your car.
I almost don’t know how the education sector could provide services expected on campuses these days if it weren’t for open source. Money is usually very scarce for college IT departments, so open source is the name of the game unless there is a commercial solution that does 10,000 more things than the open source equivalent, does them better, and comes with really good support.
Wow. I’m impressed. By the end of that post, it turned out that someone finally sent the memo to Jeff. 
Um, the FSF has been shouting that claim from the rooftops since RMS came up with his bright idea. Whether or not it’s a good idea is an entirely separate question - but the open source people have been saying “give away software, sell sevices” for as long as there has been open source.
Also, Bill Gates didn’t make his billions from software - he made it from his business. It’s a pedantic detail, but there’s a lot of people working at Microsoft who aren’t billionaires because it’s the business people who make the money, not the coder. Bill is rich because he applied his business skills to software, not because of his l33t hackz0r skillz. (He may be a great coder for all I know, but he bought the original DOS, he had brilliant marketing and business strategy, and that’s why the original DOS was so effective for him.)
Debates over morality, legality and coding skills aren’t the point here - the fact is he’s a brilliant businessman which is why he has the money.
“Open source billionaires” will be the ones who apply their business skills and use open source accordingly.
Open source is a software development model, not a business model. To get rich you must have a strong business model. Now let me repeat this in front of a mirror …
Where are all the closed source billionaires? Oh thats right, theres only one.