BURN OUT  
 

by Nancy Cohen

      
 
 

Bruce Momjian, a core PostgreSQL developer, became VP at Open Source-based Great Bridge only to see the company tank within a year. Now he says the demise of promising companies is spurring reflection among the Open Source community. They're too intelligent and committed to throw the baby out with the bath water. Nonetheless says Momjian “There’s certainly a lot of soul searching going on at companies trying to base their business on  Open Source.”

  
     
  In a sign of the times, this year, the Linux Users Group in Ottawa, is organizing a symposium under the theme “The Business of Open Source Software (BOSS).” So don't expect to hear any hacker haikus. This group is serious about asking questions, and summoning fast answers: How can vendors of Open Source software survive and prosper? What business models don’t work?

Not lost on developers and software entrepreneurs in the Ottawa group are the failures of companies like Great Bridge, Eazel, and Stormix Technologies. While it’s easy to issue a press release blaming it on the economy, stupid, it's hardly open to conjecture whether some Open Source businesses tanked because they had unrealistic expansion strategies and ran before they can walk in line with revenues. Today's Open Source companies are not taken lightly the pronouncements of analysts that making money off of services for free software is naďve.

“Open-source-based companies are finding that venture capitalists (VCs) are losing interest in funding companies that give their software away for free,” says analyst Bill Claybrook in an Aberdeen Group advisory report issued earlier this year. Claybrook says that Open Source companies need to modify their models to include fees for their software.

  
 

Among Open Source people, says the BOSS event’s main organizer, Dave Edwards, who works at Achilles, ISPs offering Linux services from firewall to file servers, “there is a certain perplexity about how production software can work and how to sell support. That’s why we took on this topic. We are trying to specify models that have failed utterly and models that work.”

Some companies have been successful at mixing proprietary add-ons, or what Eric S. Raymond refers to as “hanging some proprietary tinsel off the product.” He hardly recoiled when VA Linux announced it would sell proprietary add-ons to Source Forge, for example. “This makes it psychologically easier for Mr. Middle Manager to sign the check. He can think ‘I’m buying something real,’ wrote Raymond  in an e-mail message to news editors shortly after the VA Linux announcement.

Answers will not come in ones but in twos and threes and maybe more. One model is to wait out a certain period before releasing proprietary software as Open Source. Or selling proprietary add-ons to Open Source (VA Linux) and affixing low-cost licensing fees to the package. Or charging usage fees for free software.

Those in the business of selling on Open Source, Edwards adds, need to find more than one good model. “The models have to be codified, recognizable, and be capable of being imitated.”

  BOSS SNAPSHOT  
  Event:
The Business of Open Source Software (BOSS), a symposium on Open Source/Free Software
Event movers:
Ottawa Canada Linux Users Group (OCLUG)

Keynote speaker:
Eric S. Raymond

Where:
Ottawa, Canada

Date:
Sunday, November 25th.

Main sponsor:
Xandros Corp

  
 

http://www.advogato.org/proj/BOSS/

 
     

Apart from finding answers on models, the other goal is to get business users and Open Source developer-entrepreneurs “shaking hands.” We are still at the stage,” he says, “where software made freely available just boggles business users’ minds.” To a large extent, the Ottawa LUG is the right climate for staging an Open Source business climate for shaking hands. Membership is largely professional, made up of people in the IT industry and, among that segment, members working for companies explicitly into Open Source software, or connected to Open Source, or members who are actively advocating Open Source within their companies.

Even better sign of the times: In weeks, from the August conception of the Ottawa symposium idea to building a mailing list to getting the word out to participants and sponsors (Xandros as principal sponsor and Roaring Penguin Software), the response has been electric. Edwards says it is not unreasonable to guess that about 200 participants will actually show up at the symposium, scheduled for November. And Eric Raymond has been scheduled as the keynote speaker.

But as Open Source business modeling enters Round Two in survival mode, another question hovers. How much debate will come out of a symposium that wants to examine a variety of models, including those that are, in purist Open Source quarters, seen as contrary to the meaning of Open Source? How far can talk go about mixing proprietary and Open Source without enraging those who will cry pollution?        

 

Edwards isn’t bothered by the fact that purists will equate the word options with selling out. “Making money from licenses is part of the discussion. We have no intention of being politically correct.”

Eric Raymond pulled no punches in his message to editors of Open Source news outlets. “It’s pretty much raining crap out there macroeconomically,” he said. He noted that until there’s a turnaround, middle managers will be more averse than ever to change.

Raymond, as usual, speaks for a collective ‘conscious’ of Open Source mindsets.  “We’ll take any edge we can get, even if that means we MPL some stuff instead of GPLing it and have to have a few meg of closed code lying around.”

Claybrook, too, articulates what could be the next business mindset of companies selling on Open Source: “When Open-Source-based companies accept the notion that Open Source is a software development model and not a business model, they will quickly discover new ways of generating revenue, while still utilizing the collaborative nature of Open Source development.”

Yet another twist: Bruce Momjian, core developer of PostgreSQL says the service-and-support model is not as doomed as some might think. In his experience, enterprise-class database system software, service, and support are nothing to sneeze at. (Great Bridge had offered differing price levels for support, differentiating between standard technical support and a premium service plan ).

“Look at Open Source end users. You have people at companies who are really capable of doing their own support.” The Wireless Developer Network (for the wireless web industry) and GeoCommunity (for the Geographic Information Systems industry) are sister sites that present a good case in point. Techies themselves, they thought nothing of downloading PostgresSQL and have had the expertise in-house to explore the software and assess its performance capabilities against MySQL based on their own information needs.

But targeting database software to a business-user base means the Open Source vendor has every opportunity to build income and branding via service and support: “As you move into larger organizations with database system needs, these people want to work; they don’t want to twiddle,” says Momjian, “with the underlying systems.” Database users are particularly motivated to make decisions on vendors of choice based on track records of support.

 “If you do the support properly, you can make money.” Momjian’s observation is hard to disqualify, considering Red Hat’s strategy with PostgreSQL. “They needed to move up the food chain into the larger-scale enterprise, and knew the way to do it was through service support offerings for software like PostgreSQL.” Red Hat Database is powered by PostgreSQL 7.1 and includes Red Hat Linux 7.1. targeted for mid-sized businesses, as well as enterprise workgroups and departments.

A SERVICE MODEL BELIEVER

In 1999, when I started searching for the technology to build an ASP solution for small business, I found the proprietary solutions from the giants where just too expensive. So I was forced, after many years as a Microsoft solutions provider selling the crumbs the giant dropped along the way, to learn the magical ways of Open Source software.

  
 

A universe of wonder opened up before me. Programmers who, much early than I, had become disenchanted with the software giants had created systems capable of all the enterprise needs that I envisioned. I abandoned my chains and jumped into the fray. The result, a total business solution built on Open Source software.

Now, as CEO of EVERYDAYoffice, I am frequently asked to speak at events or lead seminar series that investigate the Open Source business models. It is not just programmers who are interested in Open Source. There are business people, end users, and myriads of other folks clamoring for answers.

"How do you fold Open Source software into your existing user environment? What's the ROI? What are the dangers? What are the business models out there doing stuff with Open Source? How the hell do you make money off this if you are a vendor or systems integrator?'"

My answers to these questions are evolving. And given the confusion in the world today, it is hard to tell what direction the business of software will go. Nonetheless, the growing movement of market globalization is something that every enterprise must deal with successfully to remain in business.  It is here, that the worldwide closely-knit Open Source community offers a distinct strategic advantage.

Already, as a small business not far past the start line, we have networks developing in Great Britain, Canada, and Japan. We get calls from many countries around the world. This is largely attributable to the Open Source nature of our infrastructure. And we are not the only company realizing the global benefit of Open Source. IBM invested $200 million in its Linux ventures in Asia. These foreign business partners of ours want the affordability of free software and the comfort of knowing that their fate is in their hands.

And to answer one often asked question; we make money buy building and selling Internet enabled business services that are resold through the channels being developed. It doesn't hurt that we get paid to help install, customize, and/or host the technology as well. We believe the business of Open Source software is not software; it is service. When you start thinking of the business as software, you inevitably think of it as a product. And products are hard not to sell.

So what is the state of Open Source business now? In the wake of the World Trade Center tragedy, our company and most other companies here in New York saw a tremendous drop in business. What was considered hot a month ago, now seems cold. However, I can say this. Because of our network, developed due to Open Source software, we have kept growing. And there is still an excitement about our model, and we are still getting calls from around the world. Our shareholders saw this and saw this was good. And somewhere, giants trembled in their sleep.

Joseph Franklyn McElroy
CEO, EVERYDAYoffice

  

     

With arguments and cases in point all over the place, the time is  now for Edwards and other LUG members to discuss them and move further to the business of Open Source. “You know, there’s that element of GPL-or-Nothing among us,” he says, “and we’re willing to encourage debate and argument that includes that view. We have no problem with contentiousness and we want to  get at every corner of this.”