Tuesday, September 19, 2006

open source revenue

I ended up reading this post because it talked about SourceForge (albeit the Enterprise software).

First, I don't agree that "serious" numbers are "multi-billion dollar" numbers. For one thing, of the 120k active information industry corporations which filed tax returns in 2002, only 264 of them received $0.25 billion or more in that year. (source) Personally, I can only think of 5 software giants which actually break into billions in terms of annual revenue - Microsoft, Oracle, SAP, Electronic Arts, BEA. There are probably some others but I'd be willing to bet it's no more than a dozen or maybe two dozen.

So one point I would make is that software revenue doesn't have to be concentrated in order to be serious. After all, the 119,476 information corporations that make <$50 million per year (under which VA Software falls) can account for, very roughly, $188 billion of annual revenue.

The second point I would make is that the nature of open-source is such that its value is hard to quantify with $. Different people may value an open-source software package at $1 or at $200 or at $2,000. But they all pay $0 for it, so it's hard to measure the value, but it's obviously not 0. I realize this has nothing to do with revenue, but recognition of this fact is a prerequisite to building a good open-source business model, which has everything to do with revenue.

Finally, one goal of open-source is to lower the cost of software to users. In principle then, open-source companies shouldn't be as big as proprietary software counterparts. The goal of open-source is to grow the economic pie while at the same time requiring a smaller slice for the software industry. This is directly opposite to proprietary software which desires more and more money to pour into the software industry - whether or not the economic pie is growing at all.

Basically, revenue-focused analysis is not simple in the open-source world.

Tuesday, September 05, 2006

(some) economics of open-source

Either fittingly or surprisingly, I came across a great blurb re: economics of open-source while reading The Long Tail.

George Gilder:
In every industrial revolution, some key factor of production is drastically reduced in cost. Relative to the previous cost to achieve that function, the new factor is virtually free. Physical force in the industrial revolution became virtually free compared to its expense when it derived from animal muscle power and human muscle power. Suddenly you could do things you could not afford to do before. You could make a factory work 24 hours a day churning out products in a way that was just incomprehensible before the industrial era. ... The whole economy had to reorganize itself to exploit this physical force. You had to "waste" the power of the steam engine and its derivatives in order to prevail...
From there, Chris picks up:
That suggests a way to put this in an economic context. If the abundant resources are just one factor in a system otherwise constrained by scarcity, they may not challenge the economic orthodoxy. They are then like learning curves and minimized transaction costs - drivers of production efficiency that serve to lower prices and increase productivity but do not invalidate the laws of economics.
So, how about open-source?

The open-source "revolution" has, among other things, made a factor of production virtually free - software programs. It costs someone somewhere maybe $0.000001 to produce another copy of ajaxMyTop and send it to another user. But, Information Technology and Information Systems (effective ones) involve more than just software programs. Open-source does not invalidate the laws of economics in IT.

In light of this, there are 2 very different lessons to take away.

For those who think open-source is economically infeasible, the analogy demonstrates that thriving markets can and do operate on virtually free goods. It merely takes some learning to understand where and how to charge money.

For those who think open-source is just a first sign of an inevitable economic reversals, the analogy shows that economic principles continue to hold. It is rather market actors and their perceptions which are upheaved.

MST3K is back!

One thing superior about this approach is that Mike can do any movie he wants to since he's not re-distributing any copyrighted material. It actually works pretty well. I set the laptop on the coffee table, start the DVD, and then start the mp3 when Mike says so. What a great mash-up.

Sunday, September 03, 2006

Camino is fired. Firefox is re-hired.

Okay, while I admit it's very cool to browse the web with a native Mac-style interface, I can never go back to using a browser without plugins. I mean, even IE7 supports add-ons. Camino is the kind of project that only an Apple myrmidon would (or can!) love. There's absolutely NO way to justify tossing plugin architecture out of a product just so you can get the spiffy razzle-dazzle of Mac OS X inside your browser.

So while I'm easily an Apple convert (I have bluetooth'd an Apple logo over to my Razr to serve as my mobile wallpaper), I'm not a zealot.

P.S. I'm not sure why I don't use Safari.