Red Hat's $1 billion proves value of software freedom

CIOs have become slaves to licenses and restrictions placed on them by software vendors, except when choosing open source

This week, an open source company -- Red Hat -- reported annual revenues of more than $1 billion for the first time. For the full fiscal year 2012, total revenue was $1.13 billion, an increase of 25 percent over the prior year. That's more remarkable than it may seem. As Red Hat exec and open source pioneer Michael Tiemann comments, "I have found that for every $1 Red Hat sells, we have to displace $10 of proprietary junk that never really worked in the first place." Red Hat didn't get big the easy way; instead, it's been a purveyor of liberty to CIOs.

Those Red Hat revenues are the result of enormous numbers of corporations of all sizes discovering that software freedom translates into business value. The so-called four software freedoms are not just a source of philosophical comfort -- they are a practical source of business benefit.

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A focus on software freedom isn't just for the revolutionaries. All the values that make CIOs pick open source software are derived from software freedom. You can use the presence of software freedom as the marker for value to your business.

Indeed, the free software definition reads like a revolutionary manifesto, partly because it is. The people behind it often eschew the pragmatism of the term "open source" and focus on liberty alone. It's worth looking behind their philosophy, though. I paraphrase the free software definition as guaranteeing the liberty to use, study, modify, and distribute software without interference. Those four liberties create value for business:

  • The most obvious value is the freedom to use the software for any purpose, without first having to seek special permission -- for example, by paying licensing fees. This liberty reverses the relationship with suppliers by removing their control point over your use of the software to meet your business needs. It allows you to prototype solutions freely and iterate prototypes from initiation to production, choosing when (if ever) to buy commercial insurance (service agreements). It allows you to move in and out of commercial arrangements according to your budget and needs. The freedom to use the software for any purpose puts the "c" back in CIO.
  • That value is made real by the freedom to study the source code. Not that you want to, but the skills of suppliers depend on the liberty to engage with the software and build expertise. They have had no barriers to studying the source code, experimenting with it, and deploying it. From that freedom, the market in open source tools and consultants is getting richer and more vibrant by the day.
  • Having committed to a software set, you need to know your investment is secure. Open source brings the assurance that vendors can't withhold the software from you. Under an open source license, anyone has the freedom to modify and reuse the source code. If a vendor decides to end support for open source software, another company can step in and carry on where the vendor left off. If a company tries to shut down those first two freedoms, a competitor -- or a consortium of users -- can intervene, fork the code, and render that commercial control play moot. Just ask Oracle.
  • The freedom to pass the software on to anyone that needs it, even with your own enhancements -- including your staff, suppliers, customers, and (in the case of governments) citizens. This is bigger than it sounds. It means that instead of policing "software assets" on behalf of your suppliers to avoid a backlash from their trade-association enforcers, you're free to have anyone use the software they need. Unless you're making changes to open source software, license compliance is not a user issue.

As its CEO Jim Whitehurst hints, Red Hat's success has come from delivering those valuable freedoms. When software users are deciding which suppliers to deal with, they need to know whether their software freedoms are being respected and cultivated, not out of a sense of philosophical purity but because their budgets and success depend on it. All the values that differentiate open source for the CIO are derived directly from the seemingly abstract concept of "software freedom."

This is why I believe it's appropriate for procurement policies to prefer open source. It's not just a development methodology; it's also an indicator that the CIO is the one in control of the business relationships, not the suppliers. Open source is the software that lowers costs, avoids lock-in, and enables unexpected future uses of data and software. It's not a matter of angels on pinheads or out-of-touch geek obsession. It's exactly what the enterprises need today -- and Red Hat's billion-dollar revenue proves it.

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Copyright © 2012 IDG Communications, Inc.

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