Where's The Competition Between Open & Closed Source?

Is there really the level of competition in the Open Source world that we see in the Closed Source world? This is something that has been stuck in my mind lately as I have been told so many times by Closed Source developers that by opening the code you are creating your own competition. Today, I’m here to explore this theory and hopefully prove why it’s false.

With Open Source software, the business model is different from Closed Source. Take Songbird, for instance. Like iTunes, we have a music portal app that allows users to browse and listen to their music in a very innovative way. Unlike Closed Source alternatives, however, Songbird will play on all three major operating systems, in addition to letting the user browse embedded music on the artist’s site. Then throw in Firefox-like extensions for further user inspired customization and you have yourself a fantastic little media browser.

From there, plug these guys in with the changes seen happening at EMI (disappearing music DRM) and bundle the app with a decent music store and we could really start to see Songbird “sing” to a positive cash flow.

But considering that Songbird is still in the works, let’s instead examine a proven model that is shown to make more money that most could have never imagined possible for a Linux distribution-based company.

This Open Source Project is Making a Bundle.
On page four of this Inc. Magazine article from February 1 of this year, Mozilla was reported making roughly $70MM for 2006. And before I get into how it did it, let’s examine that crazy structure they call a “non-profit” and how generating this sum becomes possible because of it.

Ask anyone with a clue and they will disclose that the only thing non-profit about Mozilla is its Federal filings. Because Mozilla is a two headed beast — Mozilla Corp. and Mozilla Foundation — trying to determine whether or not they are to be considered a company becomes rather fuzzy. The easy way to look at it is though the non-profit eyes of the Mozilla Foundation, developer of Firefox, and the for-profit eyes of Mozilla Corp., the deal making machine that has signed on Google and Yahoo! as its clients to pay for Mozilla Foundation. Tidy little arrangement, isn’t it?

And even when some of you wish to exclaim that this is not that cut and dried, one thing that no one can argue is that the effort behind the notion that Open Source cannot be profitable.

Is There Really Competition in the World of Open Source?
I believe without a doubt that a serious concern that companies have when considering Open Source for software development is whether or not they are egging on the risk of competition. After all, in the business world, trade secrets can be everything. But with Open Source, there is generally only one of two actual outcomes here.

The first is that the second company takes the existing code, improves upon it, and re-releases it with its trademarks and additions. Whether or not this becomes competition depends heavily on the goal of the product in the first place.

Take Mozilla (Firefox), Songbird, and Flock, for example. Then we’ll consider Novell (OpenSuSE), Red Hat (Fedora), and Canonical (Ubuntu). But before getting into the Linux arena, let’s start off with the first batch of companies.

The only thing that Firefox, Flock, and Songbird have in common collectively is their love for the Mozilla code base. Beyond that, each is representative of a slightly different nature. Songbird, like Flock, is about browsing media. Songbird is for browsing and managing music, while Flock tackles the same concepts from the picture perspective. So why didn’t these companies simply take the Mozilla code and opt to create a better browser? Why bother? Why try to take existing code, only to duplicate it with minor changes? Unless you are starting a company around an operating system, there is really little motivation to do so, even from a financial perspective. On the application front, Open Source software success in the business world basically means being different, innovative and realizing the path to being shunned by your market to simply copy another person’s vision.

Linux Companies Compete, But Not How You Might Think.
On the Linux distribution front, the business model of the Open Source model can get rather convoluted. Let’s just start with two companies who are in direct competition, even if their code base really isn’t — Red Hat and Novell. As I have demonstrated above, in many respects, it is almost easier and more logical to tackle Open Source software than it is to try and offer the next great Linux distribution from a business perspective.

Outside of the community side of things, the lines have already been drawn as far as the big three distributions at this point in the business/academic world: they are Red Hat (Fedora code base), SuSE (OpenSuSE code base) and Ubuntu (Ubuntu code base).

Speaking as a full-time Ubuntu user and enthusiast, Ubuntu doesn’t have a prayer making their way in between Red Hat and Novell within the enterprise market. Yes, they’ll have some opportunities in the server market, but not on the enterprise desktop. No, I see Ubuntu in schools and in the homes of casual users. Why the negative thoughts regarding Canonical’s Ubuntu efforts? Reality. See, even though the Open Source projects that these three groups represent are not competing per se, the companies themselves are in fact, in competition with one another for revenue.

Having said this, what we must accept is that the success of each company isn’t about the distribution that they represent in the enterprise market, but more about how easily each company can make the transition away from Windows and how much usable support they can offer for the best price. That is for enterprise situations anyway. The home base consumer market is even more complicated when questing for revenue, as Ubuntu is now discovering.

Appealing to the “Home-sumer.”
Hate them or love them, Linspire has proven that OEM can be a sustainable business model for its Linspire OS, based on the Debian code base. Recently, its CEO pointed out that it was its OEM strategy that allowed it to bypass the distribution watch nonsense. Rather than swim around within those crowded waters, it opted for another distribution angle — plugging into Reseller and PC builder partnerships. It’s all GPL and its source code can be found here.

This is someplace where Ubuntu, by itself, is still getting its feet wet, although with vendors like system76, I see this issue of Linux on more desktops improving all the time.

With that said, there remains one issue that is a show stopper for any teenager — the lack of access to mainstream music. Seriously, with all of their friends downloading music from iTunes, you had better have a better alternative than eMusic alone. We might be inclined to buy from it, but the kids here in the States really couldn’t care less. It’s a good thing someone finally understood this.

AnywhereCD is a music store where for the first time you’ll find thousands of CD and MP3s from popular artists you know and love. All albums you buy you can listen to immediately, download MP3 files, plus you get the physical CD. With your support we hope to convince everyone to offer CDs with MP3s so please browse a chart or genre and buy some music. — Michael Robertson

The search feature needs work and it is still growing with its mainstream database, but by and large, it has a pretty decent library of what’s popular.

Final Thoughts.
So does Open Source have a leg to stand on? You bet it does! And while there will always be a market for Closed Source options as well, the Open Source market by and large enjoys a special kind of freedom that the Closed Source world does not. Open Source software cannot be pirated. It’s all out there for the users to enjoy. As for competition, there really are no issues here with the software itself. No, this is something that is more or less brought on by individual companies. But in the end, however, it remains a free market.

This article has been republished with the kind permission of our friends at Mad Penguin. For more news about the Open Source community, go give ’em a look or Subscribe to Mad Penguin’s RSS Feed!

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[tags]linux, open source, ubuntu, closed source[/tags]