Where all the open source parasites?

Hugh MacLeod is at it again. He asks the question, if open source is so great, where are all the open source billionaires (as if that is the right way to gauge the success of the software)? Never mind that we could ask the same question of proprietary software: "Where are all the proprietary billionaires?" There just aren't that many. There aren't even that many proprietary software companies that do over $1B/ye

Hugh MacLeod is at it again. He asks the question, if open source is so great, where are all the open source billionaires (as if that is the right way to gauge the success of the software)? Never mind that we could ask the same question of proprietary software: "Where are all the proprietary billionaires?" There just aren't that many. There aren't even that many proprietary software companies that do over $1B/year in revenues.

Will open source pass the $1B barrier? Yes, it will. But just as with the proprietary old world, it will take open source's new world a few years.

But I fundamentally disagree with MacLeod on this, as well as with Jeff Atwood, who responds with his own (well-reasoned) answer to the question. Jeff's conclusion? There will be few (if any) open source billionaires, but that's on purpose:

The 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. Duplicating software is about as close to legally printing money as a company can get; profit margins regularly exceed 80 percent.

That's interesting. It's interesting because it's both wrong and misinformed.

Wrong, because my company and others are getting those "obscene" 80% profit margins. By selling 100% open source software. Yes, you can. We're all doing it, and the margins are awesome. You just have to manage your business a little differently.

Misinformed, because he uses the wrong data set to inform his conclusion:

Most competition for open source software comes from other open source software. It's far more cutthroat than the commercial software market could ever be.

This used to be true. It was true for a few years. It hasn't been true for at least five. It's true for companies that spring up around community-originated projects like Linux, Apache, etc. It's not true of companies like Alfresco, SugarCRM, Pentaho, Loopfuse, etc.

But the bigger complaint I have with Jeff's otherwise well-argued post (however much I may disagree), is with his contention that the real money is in services that run on open source software (i.e., Google, YouTube, etc.). I buy the argument that there's a lot of money to be made off "Web 2.0" (and certainly Google's billions came a lot faster than Red Hat's, MySQL's, etc. will).

But I dislike the implication: the only way to make money from open source is by being a parasite. If the only way to make money from open source is by co-opting others' work (and giving nothing back) and spewing ads at them, then let me off the bus now.

Of course, I don't believe that this is the only way to make money with open source (and I pray it's not the only way to make money from the web - I really, really, really dislike wading through ads all day). I like GPL-based models where you monetize the software directly. But I'm willing to accept the Web 2.0 angle, provided that Web 2.0 companies stop treating open source like a free good to be plundered, and rather as a valuable resource to be replenished. It is in their interests to do so.

Google gets this better than most, though it has done little to replenish some of the core projects from which it derives value (e.g., Linux). My hope is that the Web 2.0 world will recognize that open source will only be available to "plunder" to the extent that these companies, like IBM and others before them, give back. Generously. Not out of charity, but out of self-interest.

Related:

Copyright © 2007 IDG Communications, Inc.

How to choose a low-code development platform