China DOS Union

The Open-Source Model Disappears in Hard Times


The idealistic purity of the open-source software business is being diluted by a new age of pragmatism, and the original start-ups are revising their business ideas to adapt to the economic downturn.


Open source represents a collaborative software development model that allows program code to be freely shared, with no single company owning its copyright. Volunteers take part in many Open-source development projects, while companies hope to make use of this collective intelligence to compete more effectively with software giants like Microsoft. The Linux operating system is the most typical example.


In terms of the business model, companies often use free software to attract customers and then make profits by selling services and support.


But it seems easier said than done.


Take Sistina for example. It is a company that develops a “general file system,” and its product can use multiple computers to form a clustered file system.


“We used to think we could get more profit from services and support, but after some time we found that this is not a sustainable business model,” said Sistina vice president of business development David Sass.


Sistina changed course in August this year, and their Global File System 4.2 and the later released 5.0 became closed-source software.


Many other companies have followed a similar path, paying more and more attention to protecting their intellectual property. Just like the stumbling Internet economy, a large number of websites that once provided information for free have turned to charging fees or face disappearing.


“When everyone can copy at will, where is our business model?” said former SuSE CEO Holger Dyroff. “The question is where we can make money. Two years ago nobody cared about this question.”


The new line of thinking is often some kind of proprietary software built on an open-source foundation, and this may be the best thing, or the worst.


“Service by itself cannot bring profits. Market trends are pushing companies to place more importance on intellectual property, even in open-source-based solutions,” said Giga Information Group analyst Stacey Quandt.

A Revolution Triggered by Linux

The open-source movement—most typically represented by the Linux operating system and the General Public License (GPL)—allows all participants to work together. In the case of Linux, participants include not only the several companies selling Linux, but also big companies like IBM and Intel, as well as volunteers from all over the world. Precisely because so many developers are working on the same project, there has always been the argument that this kind of software can improve more quickly than Microsoft-style proprietary software.


Enthusiasm for Linux reached its peak in 1999 with the successful stock listings of Red Hat and VA Linux Systems, as well as the appearance of servers from IBM, DELL, HP, and Compaq with Linux preinstalled.


Soon, entrepreneurs began building companies around open-source projects—from e-commerce software, databases, Java, and instant messaging to e-mail, web publishing, and programming tools. Companies such as Lineo, TurboLinux, LynuxWorks, and LinuxCare all rushed to go public.


Companies with a longer history also got involved, hiring or trying to win the support of open-source celebrities. Apple, HP, Sun Microsystems, SGI, and IBM all released software that fit within the open-source category, so they would not have to worry about being called parasites that use open-source software without giving anything back.

Decline and Fall

But this revolution lost its momentum: first the Internet craze faded, and then the economic downturn tightened corporate budgets.


Ars Digita changed direction in April, selling proprietary web-based e-commerce modules that had originally been completely open-source.


VA Linux Systems gave up the server market and focused on proprietary collaborative development software on SourceForge. The company also hoped to remove Linux from its company name.


Great Bridge originally hoped to provide services for its open-source PostrgreSQL database, then shifted toward a business that placed more emphasis on the software itself, but in the end it still failed. “Customers will not pay increased fees for technical support contracts,” founder Frank Batten said at the time.


At the same time, there is a subtle change taking place in wording. Lutris Technologies, which makes Application Server e-commerce software competing with BEA Systems and IBM, has already been changing its image to reflect this newly arrived era. In March, it described itself as a “leading open-source enterprise software and services company.” But now the first thing it talks about is the software it sells, and its logo is “using the worldwide energy of open source.”


Some people think the turn toward proprietary software is unavoidable in the current economic and business environment.


“The open-source software development model is excellent. But do not confuse the development model with the business model. Some people have forgotten the most basic business principles,” said the Turbolinux CEO.


“It is really interesting to see these companies turning to the business model we adopted from the very beginning.” Turbolinux sells Linux systems that integrate its own proprietary software and that of other companies. Its partners include Oracle.。


Companies like Sendmail and Covalent Technologies, which sell proprietary extension software for open-source software such as Sendmail and Apache, are in a more secure position.


At least one company refuses to leave the open-source camp, and that is Red Hat—the biggest Linux company. “We believe the RedHat brand stands for open-source,” said CTO Michael Tiemann.


Tiemann was formerly the head of the open-source programming tools company Cygnus, which was later acquired by Red Hat. He warned that shifting to a proprietary software model is not a cure-all. Open-source companies in trouble should not expect that simply closing the source code in the next version will bring profits—Cygnus once tried this approach, but gave it up.


“I cannot imagine anyone being willing to buy a new proprietary software system from some inexperienced people, while at the same time there are already very experienced people selling the same product. We once hired people who thought proprietary software could help improve our open-source position. We were wrong—that is the lesson we learned.”


Tiemann also tried to distinguish Red Hat from its competitors. “We cannot apologize for the failure of the many companies trailing behind us.”

The Human Factor

One major factor driving volunteers to take part in open-source projects—to leave a permanent mark on the software world—has shown its limitations. “I’m tired of people who only complain loudly when there are problems, but fall silent when asked to solve them,” complained Christoph Phisterer, leader of the Fink project, when he resigned. “I once thought it was a good thing to share my knowledge, management, and time with the (open-source) community, but now I understand more.”


However, one advantage of the open-source model is that the Fink project can continue even without him.


A move to a proprietary system can also trigger resentment. Because of the free spirit of the open-source movement itself, older versions of software can continue on as competing products. The Free Software Foundation (FSF), founded in 1984, has always been ensuring that open-source versions of programs can continue for as long as possible.


For example, the FSF has already started a project based on VA Linux System's original SourceForge product, called Savannah. “Now is the time for people who value freedom to leave SourceForge,” said FSF's Loic Dachary, who helped with the Savannah project while accusing VA of not allowing developers to obtain all project information from the SourceForge site.


An open-source organization has also split off from Sistina's file system software and formed another project. “We think we have enough ability to keep our product ahead of the open-source development project,” replied Sistina's Sass.



Translated by: Lu Hongbing

November 23, 2001