Open source: Less profit, more fun

It's a bad time to be an open source startup trying to survive on support revenue -- but it's a great time for open innovation

Open source ain't what it used to be. It's both more and less.

On the "more" side of the equation, let's start with a big number: 19,000. According to Black Duck Software, that's the approximate number of open source projects started in 2009. As Peter Vescuso of Black Duck told me, "While the economy and IT budgets were declining, the open source community was busy coding."

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At the same time, "the tag 'open source' is no longer cool, nor is it a differentiator in itself," says Michael Skok of North Bridge Venture Partners. Instead, Skok says, the emphasis is on real ROI and payback, which has had the effect of making open source a "mainstream, reliable, de facto part of the landscape."

So if open source has gone from show horse to workhorse, what are all those developers working on? Certainly a diminished percentage work for healthy open source software vendors, where the old-fashioned business model -- give away the code and make money on support -- isn't doing so hot. "The vendors who are scaling have more ways of making money," says Skok, such as the extensive professional services and consulting offered by Red Hat.

But the real open source explosion, says Black Duck CEO Tim Yeaton, is in enterprise app dev. Rather than code from scratch, enterprise developers are collaborating across company boundaries to develop components that can be shared under open licenses. "They're co-mingling third-party open source code with their own development," Yeaton says. Black Duck estimates that in the United States alone, the potential to offset enterprise app dev spending through the use of open source code amounts to $17 billion.

Skok dubs this use of open source "entersource," which he sees chiefly as a means for collaborative development. "Very few of these projects will reach the critical mass required to create a company," he observes, adding that, "a good product doesn't make a good open source project." In fact, he says, it's the reverse: You need a community first -- and then a project to serve that community.