Is open source dead as a business model?

Advocates like to believe that the open source business model will change the world. But there's plenty of evidence that it will remain what it is now: A very useful niche that provides a valuable service for many, but that will never become an economic force, or challenge Microsoft or other large commercial software companies.

The New York Times today published an article examining this in detail. It looked at several pieces of well-known open source software, and open source software companies, and found that, for the most part, there's not much of a business model for open source firms to thrive.

It starts off looking at MySQL. The founders of the open source database and company certainly did well by themselves, selling out to Sun Microsystems for $1 billion in 2008. But the newspaper notes:

like most open-source companies, MySQL’s sales, tied to support deals, never matched the astronomical number of downloads for its product, about 60,000 a day.

Sun is likely ruing the day it bought MySQL, because European regulators are holding up company's acquisition by Oracle because of the fear Oracle would shut down or starve MySQL for potentially competing with Oracle's own software.

Red Hat, of course, is a clear success. According to the Times, though:

But Red Hat is a rare case. "There's only one company making real money out of open source, and that’s Red Hat," said Simon Crosby, the chief technology officer at Citrix Systems, which acquired the open-source software maker XenSource for $500 million in 2007. "Everyone else is in trouble."

The Times noted that as a general rule, open source companies have been purchased by big commercial software makers less for their revenue than as strategic assets. Most of the purchases were for specific, niche products. It says:

The larger technology companies have tended to buy these one-trick ponies for strategic purposes. With its core server business declining, Sun hoped it could piggy-back on MySQL's momentum with Internet companies. In SpringSource, VMware acquired a company that had cultivated deep interest with software developers and helped VMware diversify beyond its virtualization roots.

A bigger question, though, is whether it really matters whether open source succeeds as a business model. As the Times points out:

The grass-roots nature of open source has led advocates to view the projects as a populist foil to proprietary software, where a company keeps the inner workings of its applications secret.

But in the last decade, open-source software has become more of a corporate affair than a people's revolution.

It may well be that there really is no long-term corporate model for open source, and that measuring the success of open source by the revenue it generates is simply wrong. Open source's influence matters more than the bottom line. In that case, open source continues to succeed -- just one look at a runaway hit like Firefox is more than enough evidence.

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