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Why No Billion-Dollar Open Source Companies?

Soulskill posted more than 4 years ago | from the free-as-in-give-us-money dept.

Businesses 487

Glyn Moody writes "If open source is such a success, why aren't there any billion-dollar turnover open source companies? A recent briefing by Red Hat's CEO, Jim Whitehurst, to a group of journalists may provide an answer. Asked why Red Hat wasn't yet a $5 billion company, as he suggested it would be one day, he said getting Red Hat to $5 billion meant 'replacing $50 billion of revenue' currently enjoyed by traditional computer companies. If, as is likely, that's generally true for open source companies, it means they will need to displace around $10 billion of proprietary business in order to achieve a billion-dollar turnover. Few are likely to do that. Perhaps it's time for managers of open source startups to stop chasing the billion-dollar dream. If they don't, they will set unrealistic ambitions for themselves, disappoint their investors, and allow opponents of free software to paint one of its defining successes — saving money — as a failure."

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What about Google? (0)

Anonymous Coward | more than 4 years ago | (#32534414)

Isn't google a multi-billion dollar company with multiple open-source projects?

Re:What about Google? (5, Insightful)

Lunix Nutcase (1092239) | more than 4 years ago | (#32534514)

You mean the same multiple open-source side projects that add little to nothing to their bottom line? Google gets it's money from it's proprietary search engine and ad platform.

Re:What about Google? (3, Insightful)

Anonymous Coward | more than 4 years ago | (#32534690)

So? That's just showing how they are using the Open Source Software to help their main source of income. The point is to give away the abundant and infinite goods (How many copies of Google Chrome can you give away? About as many computers are there are in the world).

But how many ad spots can you sell to the specific people that want to sell to the specific people that want to buy? That is VERY SCARCE. Google has found a very valuable yet scarce resource, and uses the very valuable but abundant software to promote it and make it easier for people to access the scarce ones.

Open Source is a means to an end. You'll starve to death if the only thing you do is create things to go away. You have to make it work for you, while keeping it open source.

Re:What about Google? (4, Insightful)

Lunix Nutcase (1092239) | more than 4 years ago | (#32534750)

So what? This article wasn't about multi-billion dollar companies leveraging open source for their bottom line. It was about companies selling and supporting open source products that they create.

Re:What about Google? (1, Interesting)

Anonymous Coward | more than 4 years ago | (#32534710)

Google gets it's money from it's proprietary search engine and ad platform.

Built on their multiple open source projects. I say.. they ARE their bottom line.

Re:What about Google? (1)

DJRumpy (1345787) | more than 4 years ago | (#32535006)

Google is not an 'open source company', although they do have open source products. Even Microsoft has open source initiatives (granted theirs is rather pitiful), as does Apple (apple tends to release far more to the open source community and open standards of the two however). Google get's it's revenue from web ads, and unless they open the source code and algorithms for the web their proprietary web search, they are not an Open Source company. Projects like Chrome, and Android don't make them any money.

"Built on their multiple open source projects. I say.. they ARE their bottom line."

I find it funny that you mention "Bottom Line" when neither of those adds to their bottom line.

Re:What about Google? (1)

xoundmind (932373) | more than 4 years ago | (#32534716)

All running on GNU/Linux, of course.

Re:What about Google? (2, Insightful)

Lunix Nutcase (1092239) | more than 4 years ago | (#32534736)

You mean all running on an internal, proprietary fork of GNU/Linux, right?

Re:What about Google? (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#32534816)

I'm confused. Are you a Linux troll, or a Linux purist?

Re:What about Google? (4, Insightful)

Lunix Nutcase (1092239) | more than 4 years ago | (#32534844)

Neither. I'm merely pointing out the facts which are that the Linux kernel they use is an internal, proprietary fork, their GoogleFS is proprietary, and the version of Ubuntu they use is an internal and proprietary fork. Why would it make me a troll to make sure that the entire story is heard?

Re:What about Google? (1)

Renegade88 (874837) | more than 4 years ago | (#32534896)

Nothing, although I'm also confused as to what point you are ultimately trying to make.

Re:What about Google? (1)

labradore (26729) | more than 4 years ago | (#32535030)

And what is the problem with that?  Google's internal OS is not something that a lot of outsiders are envious of.  Google has open-sourced their internal protocols, their page and app-building tools, their filesystem, their database.  The list goes on.  They contribute to the Kernel and they most likely have some level of integration between their custom kernel and their core algorithm.  It may be located in a Kernel module.  Whatever their reason for not giving you a copy of their server OS on a platter, I think you have very little moral ground to stand on, demanding that they share anything more.  Frankly, they're not required to share anything they've made for themselves.  Too bad that companies like Apple, Cisco and Microsoft aren't as generous as Google.

Re:What about Google? (0)

Anonymous Coward | more than 4 years ago | (#32534876)

GNU/Linux ?? If that is the case, please show me the massively distributed modified version that they currently run please. I'd like to compete with Google.

Re:What about Google? (3, Insightful)

wealthychef (584778) | more than 4 years ago | (#32534772)

A relentless focus on profit over all else is the scourge of capitalism in our nation. We have forgotten that business exists to serve people, people do not exist for the sake of money. There are other business models other than focusing purely on profit. For example, ask Muhammad Yunus: 2006 Nobel Peace Prize Winner; Founder, Grameen Bank [youtube.com] .

Re:What about Google? (2, Informative)

Lunix Nutcase (1092239) | more than 4 years ago | (#32534852)

That's great and all but it doesn't change the fact that Google's actual business is in it's proprietary search engine and ads platform. They'd ditch their open source projects long before they'd over ditch those core business.

Re:What about Google? (2, Insightful)

wealthychef (584778) | more than 4 years ago | (#32534980)

Perfect! You dismiss my main point and focus back on business being solely for profit. Inside of that world, yes, absolutely, Microsoft, Apple, Google, they are the heroes of the world. Have you ever noticed that under that paradigm, businesses get more and more evil? The search for power and profit as an end in itself is a short-sighted context. I'm a scientist and a darwinist and I understand the arguments for it. I'm just saying it does not work -- it causes pathologies and we need to keep our humanity even as we use money to serve our needs as human beings.

Re:What about Google? (0, Troll)

wealthychef (584778) | more than 4 years ago | (#32535004)

PS I forgot to mention. The possessive "its" does not have an apostrophe.

Re:What about Google? (0)

Anonymous Coward | more than 4 years ago | (#32534874)

they're talking about revenue, not profit.

Re:What about Google? (3, Informative)

GigsVT (208848) | more than 4 years ago | (#32534888)

Says the man with a sig linking to a scammy late-night informercial style site.

Re:What about Google? (1)

wealthychef (584778) | more than 4 years ago | (#32535084)

LOL. It is an infomercial looking site, but I do not consider them to be scammy. The AMP program itself is very cool, and yes, I think that if they focus on money they will become a bunch of corrupt assholes. Just because I shop at Walmart doesn't make my point invalid.

Re:What about Google? (1)

srussia (884021) | more than 4 years ago | (#32534890)

A relentless focus on profit over all else is the scourge of capitalism in our nation. We have forgotten that business exists to serve people, people do not exist for the sake of money. There are other business models other than focusing purely on profit. For example, ask Muhammad Yunus: 2006 Nobel Peace Prize Winner; Founder, Grameen Bank [youtube.com] .

From the Grameen Bank FAQ: "Does Grameen Bank make profits?
Since its inception, Grameen Bank made profits every year, except for the years 1983, 1991 and 1992. For detailed information take a look at the Data & Reports section."


The fact is, the only way you would know that your business is serving people is if it makes a profit. Loss-making enterprises mean that there are better uses for your capital.

Re:What about Google? (0, Flamebait)

gothzilla (676407) | more than 4 years ago | (#32535016)

So when you grow a garden, you only grow exactly how much food you need to eat an no more, because producing extra profit is evil right? You seem to not understand what capitalism and free markets are.

You're leaving out the part that says anyone, regardless of class, race, sex, or anything can, if they choose, pursue as much profit as they wish. You don't even have to work if you don't want to. You can choose to sit on a corner and beg like a lot of people do. Capitalism and free markets are essential to freedom.

When government takes my work away from me in the form of taxes and uses it for schools, police, or fire departments, I don't really mind. It beats going out and actually helping build a road myself. Instead of working on a sewer system, I can do other work that I freely choose to do and trade that work in the form of money for a sewer system. Everyone benefits, including me, and I get something in exchange for my work.

Under socialism, when government takes my money and gives it to another person without giving me anything in return, that is no different than forcing me to work for that person for free, getting nothing in return. That is the very definition of slavery.

Unfortunately, there are lots of people out there who believe slavery is superior to freedom.

Re:What about Google? (0, Troll)

pitdingo (649676) | more than 4 years ago | (#32535124)

Ah a faux news watcher. Where did the OP say "...extra profit is evil..."? "Under socialism..." wow. how did you get to this point?

Re:What about Google? (3, Insightful)

wealthychef (584778) | more than 4 years ago | (#32535160)

This is the excuse that people give for focusing EXCLUSIVELY on profit. I did not say "profit is evil." I said what I said. Re-read it. I understand free markets, capitalism etc. YOU sir seem to not understand what it means to be a human being. Are we supposed to be slaves to money? Is your life's purpose to maximize shareholder's value so you can buy another ski jet and park it in your garage? What is money for? These are not simply idle questions for a conversation over beer.

Ali Waqas (0)

Anonymous Coward | more than 4 years ago | (#32534436)

The reason may be is this that they are not more interested in money matters.

www.microsol.biz

Re:Ali Waqas (0)

Anonymous Coward | more than 4 years ago | (#32534740)

Red Hat is a for-profit publicly traded company. They had better be interested in 'money matters' - it is the reason for their existence.

Pftt (4, Insightful)

somersault (912633) | more than 4 years ago | (#32534444)

they will [..] paint one of its defining successes — saving money — as a failure.

Hmm.. so they're bringing in 10% of the revenue of non open source equivalents - basically meaning that their clients need to spend 90% less.. how is that not saving money?

Re:Pftt (-1, Flamebait)

larry bagina (561269) | more than 4 years ago | (#32534538)

Open Source is only 90% cheaper if your time is worth 10%.

Re:Pftt (4, Insightful)

Anonymous Coward | more than 4 years ago | (#32534656)

because we all know that closed source programs require zero administration time.

Re:Pftt (-1, Troll)

Anonymous Coward | more than 4 years ago | (#32534712)

that's not what it means dumbass

Re:Pftt (3, Insightful)

quantumplacet (1195335) | more than 4 years ago | (#32534830)

you're right, that's not what it means. It's a completely meaningless meme that gets tossed around every time there's an article about open source.

Re:Pftt (3, Interesting)

commodore64_love (1445365) | more than 4 years ago | (#32534762)

I think you'll find the same thing is happening in the Media industry. People's ability to download movies, songs, books for free is devaluing the time and wages of the creators. The media companies won't completely disappear - they'll just earn 10-20% as much money as they did before 1999.

It appears to me the software industry is heading along the same path, and just like the RIAA, Microsoft is fighting it tooth-and-nail because they don't want to see their income reduced.

Re:Pftt (5, Insightful)

Culture20 (968837) | more than 4 years ago | (#32534806)

Open Source is only 90% cheaper if your time is worth 10%.

Best joke ever.
If I had to rate difficulty of OS maintenance and setup, it would be:
Microsoft (Any), Most difficult
Solaris
Mac OS X
Linux (Any except gentoo), easiest

Re:Pftt (3, Funny)

commodore64_love (1445365) | more than 4 years ago | (#32534860)

Why do you rate Windows the worst and Linux the best? What makes Windows so horrible to maintain? All you have to do is pop-in a CD and install. After that the system usually has everything the user needs (web browser, Microsoft Office, etc).

And what makes Linux so easy? In my experience it's a pain in the ass - for example my Linux laptop refuses to execute flash websites (like disney.com or tv.com). And I can't get it to talk to my Netscape ISP.

Re:Pftt (-1, Troll)

Anonymous Coward | more than 4 years ago | (#32534940)

you must be pretty stupid

Re:Pftt (0)

Anonymous Coward | more than 4 years ago | (#32534818)

That must be why you need 10 windows admins in a company to 1 unix or 1 mainframe equivalent?

Re:Pftt (2, Interesting)

tthomas48 (180798) | more than 4 years ago | (#32534884)

In my office we have Windows, Mac, and Linux machines. Pretty much evenly split between the OSes. We hired a support person for Windows. So in this case, Windows is both more expensive and requires more support.

I don't know where you get your numbers.

Re:Pftt (1)

HyperQuantum (1032422) | more than 4 years ago | (#32535138)

No, you need to take the total cost of ownership (TCO) into account.

Open source has the advantage that you're not locked in to a single vendor. You can switch easily whenever some other vendor offers lower prices.

Re:Pftt (0)

Anonymous Coward | more than 4 years ago | (#32534588)

To most, the lack of support isn't worth the 90% off tag. People like having a number to call where they can talk to an outsourced employee and complain that their "Winders is broken."

Re:Pftt (4, Insightful)

PatHMV (701344) | more than 4 years ago | (#32534632)

Well, the idea behind open source companies is that the software is free, and the company pays for support. Thus, no licensing fees for the development, and ONLY the support costs associated with being able to call and talk to a support personnel. That's where the savings comes in to the end-user client.

Re:Pftt (5, Insightful)

mcvos (645701) | more than 4 years ago | (#32534704)

And the advantage of this is that customers who call with a problem actually get a useful answer. They're paying for that support, rather than for the license.

Re:Pftt (0)

Anonymous Coward | more than 4 years ago | (#32534796)

Generally speaking I get the feeling that when my company calls Redhat support they are running the same Google searches I am.

Re:Pftt (2, Interesting)

Anonymous Coward | more than 4 years ago | (#32535048)

Posting Anonymously for the obvious reasons... And we continue paying due to the *quality* of the support. The (mumble) millions paid annually to Redhat and Covalent is nothing compared to the (mumble mumble) millions paid to the other top ten largest software companies. It's not a fair comparison as the product categories are different, but the support from Redhat and Covalent is good and sometimes great, the support from the big guys is sometimes good and regularly worse than nothing because they waste our time.

Re:Pftt (5, Insightful)

commodore64_love (1445365) | more than 4 years ago | (#32534814)

>>>the software is free, and the company pays for support.

What if I don't need support? That's why Red Hat and other liberated software companies will probably never see 1 billion. Bottom Line: A lot of us are cheapasses. ;-)

Re:Pftt (2, Interesting)

LWATCDR (28044) | more than 4 years ago | (#32534946)

So there is less of an incentive to produce easy to use and bug free software? My company doesn't pay support for many of the programs we use. They just work and do what we need them to do.
Honestly this is a problem for FOSS development. In the long run I have to wonder if FOSS OSs only real chance in the consumer market is through hardware makers. By not having to pay for an OS and be dependent on an OS maker they can increase profits and control.

In the end I feel that there will always be both closed source programs and FOSS. Each will fill a need and I hope work well together.
The zealots that say that all software must be free I feel are at best out of touch.

Of course as far as Free as in Speech software goes I feel the real battle and enemy is NOT closed source software.
It is software patents.
Those must be stopped.

Re:Pftt (1)

olau (314197) | more than 4 years ago | (#32535090)

So there is less of an incentive to produce easy to use and bug free software?

Well, I think many pure support contracts are fixed-price, e.g. x $/month. So actually, it does make a lot of sense to cut down on the silly problems. I don't think you could sell it either, if it were crap - the open source world tends to be much more open, mistakes are slammed in public googleable forums.

Another thing is what goes under the hat "support". It's not just answering questions, it's also development of new features and integration, no different from the closed-source equivalent.

just remember: (1)

Anonymous Coward | more than 4 years ago | (#32534480)

the biggest linux failure of all was none other than va linux/va research/OSDN/sourceforge.net/geek.net. CAnt' wait to see what they rebrand themselves as next in an attempt to stay one step ahead of bankruptcy.

Government collusion (3, Insightful)

genrader (563784) | more than 4 years ago | (#32534490)

Many businesses that reach billions of dollars in revenue often rely on government contracts and monopoly protection--patent law being the biggest of these. Without government interference in the economy businesses would probably be less likely to hit "billionaire" status. I don't doubt that there would still be some, just not as many. In the open source world this is (to some extent) playing out.

Re:Government collusion (1)

icebraining (1313345) | more than 4 years ago | (#32534782)

Exactly: it's not a bug, it's a feature. It means a healthier market were everyone can compete fairly.

Re:Government collusion (3, Insightful)

DarrenBaker (322210) | more than 4 years ago | (#32535046)

Competition is thriving in the open-source market, hence the lack of massive market-cap non-specialised companies. FOSS is showing capitalism how it's done.

Um, IBM, Intel, Xerox (5, Insightful)

linzeal (197905) | more than 4 years ago | (#32534498)

There are almost too many to count when it comes to billion dollar companies involved in open source. They are the main motivator in new Linux kernel development and amongst 100's of other projects including Apache, Perl, MySQL etc you will find @email's from dozens of billion dollar companies in the dev-lists. O'Reilly himself squashed some of these rumors about open source [oreillynet.com] himself over 11 years ago now, so why discuss this? It is just going to turn into a flame war about licenses and corporate responsibility.

Re:Um, IBM, Intel, Xerox (4, Insightful)

NervousWreck (1399445) | more than 4 years ago | (#32534620)

Agreed. People assume open-source means twelve-year-olds in basements and "commies." Very few think about the fact that multi-billion dollar companies are involved.

Re:Um, IBM, Intel, Xerox (2, Informative)

BradleyAndersen (1195415) | more than 4 years ago | (#32534646)

I think the point here is that IBM, Intel, Xerox and the like did not start out as open source. Being involved in open source many years and many billions of dollars into running a company is not the same as starting out as open source, and leveraging that into a billion-dollar company.

Re:Um, IBM, Intel, Xerox (2, Informative)

Chris Mattern (191822) | more than 4 years ago | (#32535096)

I think the point here is that IBM, Intel, Xerox and the like did not start out as open source.

Actually, IBM pretty much did. It wasn't until the late 1970s that they started copyrighting their code and restricting distribution of the source.

Re:Um, IBM, Intel, Xerox (1)

quantumplacet (1195335) | more than 4 years ago | (#32534692)

The article is talking about companies that are exclusively open source. IBM, Intel and Xerox are all involved in open source products, but all of them make three of them make their money selling proprietary, closed source hardware.

Re:Um, IBM, Intel, Xerox (1)

linzeal (197905) | more than 4 years ago | (#32534826)

This is like asking why stores that only sell Organic food aren't billion dollar companies. The important part is there is Organic food and that billion dollar retail stores along with everyone else is willing to sell it to consumers and therefore purchase it from farmers, isn't it? Linux would be a far less robust and some would say elegant project if the likes of IBM and Intel were not so heavily involved.

Re:Um, IBM, Intel, Xerox (2, Insightful)

morgan_greywolf (835522) | more than 4 years ago | (#32535044)

The article is talking about companies that are exclusively open source. IBM, Intel and Xerox are all involved in open source products, but all of them make three of them make their money selling proprietary, closed source hardware.

Okay, well, in that case there aren't any companies that are exclusively open source. Even Red Hat itself sells closed-source products. Canonical has the closed-source Ubuntu single-sign on service [kabatology.com] . You can't have a billion-dollar open source-only company if there aren't any open source-only companies. QED. We can all stop posting now, right?

Re:Um, IBM, Intel, Xerox (2, Informative)

bernywork (57298) | more than 4 years ago | (#32534792)

Every company your talking about seems to have another business, hardware or otherwise which they derive profits from. Yes, IBM sells services for open source, they also have a HUGE mainframe business and.... actually... nope, I can't think of one industry they don't have a foot in from some angle. Intel is involved with open source, but then again, their biggest money spinner is x86 chips. Xerox makes photocopiers and printers.

Re:Um, IBM, Intel, Xerox (1)

linzeal (197905) | more than 4 years ago | (#32534926)

What would an open source company do, sell 1 billion dollars in software services, custom programming and support ? That is not going to happen.

It's the term Open Source Company (1)

Errol backfiring (1280012) | more than 4 years ago | (#32534872)

So, in short, open source projects are supported by many companies that do not purely exist for one open source product. I think the term "Open Source Company" is therefore to blame here. Even Microsoft contributed to the Linux kernel, but hardly anyone would call them an open source company.

Here are my thoughts (1, Insightful)

JamesP (688957) | more than 4 years ago | (#32534516)

- Open Source is (relatively) new
- Open Source is not tame. It's not easy to use (as even Windows tried to be - and sucked - at the beginning) Remember Windows NT?!

- Open Source shines when it's hidden. Infrastructure, mainly. Even though Oracle had lots of success (and money) there

Now for the business side

- It's hard to sell OSS. IMHO Red Hat did it the best, but see other companies. Novell got mixed results, the others, well...

Now for the OSS crowd

OSS people get a lot of things in sw, but what they don't get: usabiliy, focus on customer, what it means to be 'shippable'.

How many times you try to argue with an OSS developer that a bug is a bug, not a feature?!? Or that things must work and something is preventing it to work and the developer refuses to fix it?!

I'm not saying that Apache should get a next,next,next interface, but some things are ridiculous.

And guess what, MS does not know that either, that's why WinCE sux

Drunken response (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#32534678)

>- Open Source is (relatively) new
For cereal? GCC is 23 years old at this point. DJGPP (Dos port of GCC) is 21 years old. The Apache webserver came out in 1995. Perl came out years before in 1987. I'm sure i could go on.

>- Open Source is not tame. It's not easy to use (as even Windows tried to be - and sucked - at the beginning) Remember Windows NT?!
This is a crappy analogy. Some of the shit is definitely difficult (sendmail, weirder nagios configs). But if you can't figure out how to set up an basic Apache install, I'm sorry, you're kind of retarded. Anyhow, "easy to use" is not respective of quality.

>- It's hard to sell OSS. IMHO Red Hat did it the best, but see other companies. Novell got mixed results, the others, well...
You obviously have no idea what you're fucking talking about at this point.

Re:Drunken response (1)

JamesP (688957) | more than 4 years ago | (#32534898)

>- Open Source is (relatively) new

For cereal? GCC is 23 years old at this point. DJGPP (Dos port of GCC) is 21 years old. The Apache webserver came out in 1995. Perl came out years before in 1987. I'm sure i could go on.

What I meant is that "'selling' OSS is a new thing". As such, the business model is not still 100% set. Wow, I didn't know DJGPP was that old !

>- Open Source is not tame. It's not easy to use (as even Windows tried to be - and sucked - at the beginning) Remember Windows NT?!

This is a crappy analogy. Some of the shit is definitely difficult (sendmail, weirder nagios configs). But if you can't figure out how to set up an basic Apache install, I'm sorry, you're kind of retarded. Anyhow, "easy to use" is not respective of quality.

I don't mean Apache really, but yeah, sendmail, qmail, etc, etc. And even sometimes "too easy to use" is complicated, see IIS 6

>- It's hard to sell OSS. IMHO Red Hat did it the best, but see other companies. Novell got mixed results, the others, well...

You obviously have no idea what you're fucking talking about at this point.

Maybe, do you know people that work for RedHat, Mandriva and Novell as I do?! Do you know their customers, how they work, etc, etc?!

Huh? (5, Insightful)

PopeRatzo (965947) | more than 4 years ago | (#32534518)

Why no building dollar bicycle-pump manufacturers? Why no billion-dollar indie record labels? Why no billion-dollar oil companies that have not polluted? Why are there no billion-dollar hockey franchises?

Asking why there are no "billion-dollar" open source companies is kind of stupid. Considering how much of the very fabric of the Internet and the web are open source, I'd suggest that if "open source" disappeared tomorrow, a lot of "billion-dollar" companies wouldn't be worth anywhere near a billion dollars.

This story is the Slashdot equivalent of "If you're so smart, why ain't you rich?"

Re:Huh? (3, Insightful)

kent_eh (543303) | more than 4 years ago | (#32534824)

Asking why there are no "billion-dollar" open source companies is kind of stupid.

That's kinda my reaction too.
Why does success need to only be defined as "more profitier every quarter... to infinity".
Small and medium sized businesses are, and always have been, the core of every economy. They are where the creativity is. That's where most jobs are. They are more agile and able to react.
Those few billion dollar companies are almost always bureaucratic, bloated, predatory bullies, who ultimately cause more damage to the economic environment then any good they ever did. (see "big energy", "big pharma", "too big to fail", etc)

Re:Huh? (0)

Anonymous Coward | more than 4 years ago | (#32534862)

i like this ....."If you're so smart, why ain't you rich?"

just look google, facebook, etc......they're used open source.....and just imagine if there is no open source in this world......

Re:Huh? (1)

DrgnDancer (137700) | more than 4 years ago | (#32534992)

I think the point of the article is not to decry the lack of billion dollar Open Source companies, but rather to point out to Open Source companies that they are unlikely to ever be billion dollar companies. So stop trying to be, do what you do, do it well, and carve out your niche. Companies can kill themselves by aiming too high, as well as by aiming too low. Do your research, figure out exactly what you'll need to ship for a billion dollars in revenue. Is it realistic to expect to ship that? No? What about 500 million, is that realistic? etc.

They get bought out (5, Informative)

Anonymous Coward | more than 4 years ago | (#32534532)

A quick search on the Internet revealed that a lot of them get bought out.
http://royal.pingdom.com/2008/02/06/the-seven-largest-open-source-deals/ [pingdom.com]

Sun buys MySQL, $1 billion, 2008
Sun now has their hands on the world’s most widely used open source database.

Red Hat buys Cygnus Solutions, $675 million, 1999
Red Hat started the open source acquisition race early when they bought Cygnus Solutions, providers of open source software support.

Citrix buys XenSource, $500 million, 2007
Considering how hot virtualization is right now, we can see why Citrix bought XenSource, the company behind the Xen virtualization software.

Yahoo buys Zimbra, $350 million, 2007
Yahoo already have their own email services, and with Zimbra they got an integrated email, messaging and collaboration software.

Red Hat buys JBoss, $350 million, 2006
Red Hat strengthened their SOA offerings by buying the JBoss Java application server.

Novell buys SUSE, $210 million, 2003
Novell got their own Linux distribution by buying SUSE.

Nokia buys Trolltech, $153 million, 2008
Trolltech is the company behind the Qt GUI framework which is used by the popular Linux desktop environment KDE.

You make more money using open source than selling (4, Interesting)

number6x (626555) | more than 4 years ago | (#32534534)

Just ask Google.

Why should your profits go to Adobe, Microsoft, IBM, Oracle and all those other closed source companies? Look at the .com companies that survived the 'dot bomb' era. They used open source.

Using expensive proprietary solutions is a sure way to increase your expenses and decrease your profits.

How do you become an open source billionaire? Ask Sergey Brin and Larry Page.

Re:You make more money using open source than sell (2, Insightful)

Lunix Nutcase (1092239) | more than 4 years ago | (#32534596)

How do you become an open source billionaire? Ask Sergey Brin and Larry Page.

You mean create a hugely successful proprietary search engine and ads platform? Sure they may have leveraged open source in creating these proprietary products but they didn't make their money through selling open source products.

The targetted audience requires less support (0)

Anonymous Coward | more than 4 years ago | (#32534536)

Simple,

The target audience for open source software requires less support as they are to my opinion smarter, more resourcefull engineers than their commercial product colleagues.
Open source software offers more room for tinkering and plain old engineering so offering engineers the freedom and tools to use their brains to solve common problems.

Because of the Concept of Intellectual Property (4, Insightful)

eldavojohn (898314) | more than 4 years ago | (#32534546)

Copyright laws and software patents make traditional closed source business models too lucrative. And while copyright and patent infringement may still occur, it is a better model to chase in the eyes of investors because a company like Microsoft will offer them reports on how much money is lost to such things and claim that as potential profit or unrealized profit or put it on the balance sheet to make investor's eyes light up. How much "theft" (don't jump on me for using it, that's what Microsoft calls it) do you think Red Hat suffers from? Not a whole lot, I'd imagine as I believe the bulk of their profit comes from support and that support is kinda hard to steal.

Anyway, if copyright laws didn't exist for software? Well, you'd see companies like Microsoft fall apart and companies like Red Hat thrive. Because the business model would shift from protecting your source code through litigation to making it available for free since that would be the only way to effectively combat piracy. Right now, the system is so screwed up that even when the original Windows becomes public domain, no one is going to have the source code and if they do they're not going to release it. I almost wish the Library of Congress kept a proprietary source library if that didn't leave to government abuse and a multitude of problems with huge security concerns.

As a young idealist, I once thought that open source should be welcomed by all since there's an infinite amount of code that the populations will always need written. If they don't need an operating system, they need a web server. If they don't need web server software, they'll need the specific application on a per company basis. Ad infinitum. And therefore you shouldn't fight open source when you're generating revenue from such a general purpose and widely used tool. Unfortunately I came to understand copyright, marketing and how Microsoft keeps making bank on Windows despite it being -- in my opinion -- an inferior product. And so my logic was inherently flawed--especially in the eyes of stockholders and lawmakers. Such skewing of profits between open and closed source companies reveal this.

Re:Because of the Concept of Intellectual Property (1)

Garwulf (708651) | more than 4 years ago | (#32534988)

"Anyway, if copyright laws didn't exist for software? Well, you'd see companies like Microsoft fall apart and companies like Red Hat thrive. Because the business model would shift from protecting your source code through litigation to making it available for free since that would be the only way to effectively combat piracy."

You really don't understand what copyright is, do you? Copyright is a legal framework that defines how creators and distributors interact with one another. All that stuff about file sharing, that's maybe 5% of what copyright does. Copyright allows creators to set reasonable terms of how their creations are used, and have them enforced.

So, guess what? Open source exists and continues to exist because it is protected under copyright. It's copyright that allows open source creators to say "this must be used under an open source license," and have it stick. The public domain is defined by copyright - it's the flip side of it. If you remove copyright, you don't just have everything fall into the public domain - the public domain ceases to exist. What you get instead is a free-for-all where you keep what you can protect. You think DRM is bad now? Imagine what would happen if there were no legal limitations to it, because that's what you'd get without copyright. You think the open source model would become the standard business model for software? Sorry, but it would disappear - it's a lot more profitable to copy somebody's code, make it your own, and slap a bunch of protection on it to prevent somebody else using it than it is to share it - and without copyright, there's nothing to stop anybody from doing that.

So, I think you need to do a lot of research - and among other things, you need to learn the difference between patent law and copyright law, and understand the difference between theory and implementation (the latter of which is not always perfect, and sometimes quite bad, such as the DMCA).

Re:Because of the Concept of Intellectual Property (0)

Anonymous Coward | more than 4 years ago | (#32535070)

So, guess what? Open source exists and continues to exist because it is protected under copyright.

You might be technically correct. That's usually discerned to be "copyleft" vs "copyright".

So, I think you need to do a lot of research - and among other things, you need to learn the difference between patent law and copyright law ...

Another asshole author. Say it ain't so.

Other big recent players in the software market? (1)

Vellmont (569020) | more than 4 years ago | (#32534552)

Normally you might compare one business model with another on a somewhat equal basis. When comparing open source to closed source, doesn't it make more sense to compare the performance of the open source software company with that of the close source software company that started around the same time?

So can anyone name any large close source software companies that have started up rather recently that are billion dollar companies? I can't personally think of any. Can anyone else?

Nice.. (1)

jrowlingson (1003641) | more than 4 years ago | (#32534566)

"If, as is likely, that's generally true for open source companies, it means they will need to displace around $10 billion of proprietary business in order to achieve a billion-dollar turnover." No wonder IT is on the bottom end of the totem pole. I can't think of any other industry that works as hard as we do to devalue/put ourselves out of a job.

Think products not companies (1)

erik.martino (997000) | more than 4 years ago | (#32534600)

There are billion dollar products. I presume the value of the Linux OS, Mysql, Apache HTTP server are several billion dollars if we sum up the value of each installation. However no single company has the monopoly right to sell it, so it is spread around on many many companies where some of them takes part in the development, some not, but many of them are actively contributing by supporting other users in forums.

False Premise (2, Insightful)

yoshi_mon (172895) | more than 4 years ago | (#32534606)

Perhaps it's time for managers of open source startups to stop chasing the billion-dollar dream.

I love it when authors use a false premise to setup their stories. Of course every one wants to make it big but the idea that there is some mythical number that every open source CFO is reaching for is just stupid.

Further if they want to look for a company that uses the FOSS model and has billions: http://www.google.com/finance?q=NYSE%3AIBM [google.com]

Margins... (3, Insightful)

Bert64 (520050) | more than 4 years ago | (#32534608)

The issue is that proprietary software allows ridiculous profit margins (close to 100% since the software costs nothing to distribute and economies of scale are pretty much linear since the upfront costs remain the same regardless of volume)... Now no industry could possibly achieve such margins if there is any competition, so proprietary vendors stifle competition through lock-in..

Open source vendors are unable to rip their customers off by selling zero cost goods at ridiculous markups because if they did someone else could come along and offer the same code for a cheaper price, instead they must make their money selling services... Services have a constant ongoing cost to actually provide the service, and these costs increase as you provide service to more customers.

The proprietary software market is effectively a scam, which sooner or later will come to an end... Customers will wake up and realise just how badly they're being ripped off, but until then the fraudsters will make as much as they can out of it.

The services market on the other hand is far more reasonable and although competition may eventually result in consolidation and razor thin margins, there is a lower limit.

yeah... (1)

Pojut (1027544) | more than 4 years ago | (#32534636)

...my response to this is "Why should I care?" The very purpose and idea behind open-source flies in the face of profits. That's not to say these companies shouldn't be trying to make money, but the purpose behind open-source is to spread knowledge and capability...not to acquire wealth.

"It's in the fucking charter."

Billions! (1)

dandart (1274360) | more than 4 years ago | (#32534672)

I once bet my friend a million pounds that I'd become a billionaire before him.

Sorry, what were we talking about again?

Re:Billions! (1)

russotto (537200) | more than 4 years ago | (#32535094)

I once bet my friend a million pounds that I'd become a billionaire before him.

Wouldn't it be smarter to bet your friend a million pounds that he'd become a billionaire before you? That way, either way, you win -- if you become a billionaire first you need merely pay off a small bet; if he becomes a billionaire first, you become a millionaire.

Look what happens when you value them up (1)

jeffmeden (135043) | more than 4 years ago | (#32534686)

We gave VA Linux their shot... And look what happened. I'm not going to point blame but Eric S Raymond did happen to issue the most epic "who would have thought" letter to the world proclaiming how gifted he was, shortly before his share of the company dropped in value from some $40 Million to about $4 Million (and falling).

Open source simply isn't about the money, after all. Try to muddle it up with dollars and cents, and you will end up with Windows.

Ask the opposite and get the same answer (5, Insightful)

SpazmodeusG (1334705) | more than 4 years ago | (#32534694)

Try asking why are there no billion-dollar companies using 100% CLOSED source software?

The answer is simply because billion dollar companies dabble in a bit of everything. Oracle has a lot of open source products. It also has a lot of closed source products. Same with IBM, Microsoft, Google, Apple, etc etc. If you don't consider these billion dollar companies to be open source companies then you can't consider them to be a closed source companies either. They all dabble in a bit of both because they are all really big.

Re:Ask the opposite and get the same answer (0)

Anonymous Coward | more than 4 years ago | (#32534960)

No, the answer is because if somebody offers you something reasonably good for free, you take it rather than build a new version of it at your own cost. IBM et al were billion dollar companies (adjusting for inflation) before open source and they'd be billion dollar companies without open source -- open source is just a minor tweak to their overall proprietary software, service, or hardware-based profits.

It's a completely different answer from why there are no billion dollar open source companies.

Because $Bn's means exploitation (2, Interesting)

petes_PoV (912422) | more than 4 years ago | (#32534732)

You can make a few $Mil on the basis of your own hard and honest work. However to get to the next step requires the "entrepreneur" to start exploiting people, using coercion, marginally honest (I'm being polite here) tactics, restrictive contracts - in short no longer being a "nice person".

Once you get into the $Bns you become responsible for causing suffering, hardship, using litigation and loopholes, throwing your weight around, metaphorically "knifing" people in the back and being a nasty PoS. By then any of the attributes that attracted you to Open Source have withered and died.

do we need any more fauxking billionerrors? (0)

Anonymous Coward | more than 4 years ago | (#32534774)

aka; deceptive/gottiesque 'business practices', like monkeys on crack, etc... likely not. but we would likely be well served by being more open & honest & less greedy, in ALL of our dealings. so long fuddles?

the corepirate nazi illuminati is always hunting that patch of red on almost everyones' neck. if they cannot find yours (greed, fear ego etc...) then you can go starve. that's their platform now. they do pull A LOT of major strings.

never a better time for all of us to consult with/trust in our creators. the lights are coming up rapidly all over now. see you there?

greed, fear & ego (in any order) are unprecedented evile's primary weapons. those, along with deception & coercion, helps most of us remain (unwittingly?) dependent on its' life0cidal hired goons' agenda. most of our dwindling resources are being squandered on the 'wars', & continuation of the billionerrors stock markup FraUD/pyramid schemes. nobody ever mentions the real long term costs of those debacles in both life & any notion of prosperity for us, or our children. not to mention the abuse of the consciences of those of us who still have one, & the terminal damage to our atmosphere (see also: manufactured 'weather', hot etc...). see you on the other side of it? the lights are coming up all over now. the fairytail is winding down now. let your conscience be your guide. you can be more helpful than you might have imagined. we now have some choices. meanwhile; don't forget to get a little more oxygen on your brain, & look up in the sky from time to time, starting early in the day. there's lots going on up there.

"The current rate of extinction is around 10 to 100 times the usual background level, and has been elevated above the background level since the Pleistocene. The current extinction rate is more rapid than in any other extinction event in earth history, and 50% of species could be extinct by the end of this century. While the role of humans is unclear in the longer-term extinction pattern, it is clear that factors such as deforestation, habitat destruction, hunting, the introduction of non-native species, pollution and climate change have reduced biodiversity profoundly.' (wiki)

"I think the bottom line is, what kind of a world do you want to leave for your children," Andrew Smith, a professor in the Arizona State University School of Life Sciences, said in a telephone interview. "How impoverished we would be if we lost 25 percent of the world's mammals," said Smith, one of more than 100 co-authors of the report. "Within our lifetime hundreds of species could be lost as a result of our own actions, a frightening sign of what is happening to the ecosystems where they live," added Julia Marton-Lefevre, IUCN director general. "We must now set clear targets for the future to reverse this trend to ensure that our enduring legacy is not to wipe out many of our closest relatives."--

"The wealth of the universe is for me. Every thing is explicable and practical for me .... I am defeated all the time; yet to victory I am born." --emerson

no need to confuse 'religion' with being a spiritual being. our soul purpose here is to care for one another. failing that, we're simply passing through (excess baggage) being distracted/consumed by the guaranteed to fail illusionary trappings of man'kind'. & recently (about 10,000 years ago) it was determined that hoarding & excess by a few, resulted in negative consequences for all.

consult with/trust in your creators. providing more than enough of everything for everyone (without any distracting/spiritdead personal gain motives), whilst badtolling unprecedented evile, using an unlimited supply of newclear power, since/until forever. see you there?

"If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sin, and will heal their land." )one does not need not to agree whois in charge to grasp the notion that there may be some assistance available to us(

boeing, boeing, gone.

If you make billions... (1, Interesting)

Anonymous Coward | more than 4 years ago | (#32534776)

on as comparatively little work as many of those companies who actually make billions do, you're exploiting a monopoly or otherwise gaming the market. They're NOT doing approximately a fair amount of work with regards to what they're paid.

Because it's about cooperation.... (1)

cptdondo (59460) | more than 4 years ago | (#32534784)

There may not be any "billion dollar companies" but open source allows small companies to play the big leagues. No one can play with MS - they're too big, too powerful, and too locked up. But open source allows a small firm with a single developer to put out a "best of breed" linux based widget - because that developer can leverage the work of hundreds of thousands of developers.

So while our closed source competitors built stuff that looked like it was stuck in the 80s - 300 baud modems for communication? We had ethernet, wifi, and a web interface.

No, we weren't a billion dollar company, but we sure looked like one.

Easy (1)

SolitaryMan (538416) | more than 4 years ago | (#32534854)

If open source is such a success, why aren't there any billion-dollar turnover open source companies?

Easy. Because money is not the only measure of value and success. WTF is wrong with you people?

Re:Easy (1)

russotto (537200) | more than 4 years ago | (#32535152)

Easy. Because money is not the only measure of value and success. WTF is wrong with you people?

It's not ME. It's the mortgage company, the jet-rental company (travel without flying commercial is an indicator of success), the electronics companies (geek toys are indicators of success), the escort companies (being seen with attractive women is an indicator of success), the jewelry companies (another way of keeping attractive women around), the car companies, the book companies (a good personal library is a measure of success), even the organic food companies (if you're into that sort of thing). They all want money. Which seems to indicate that if I want to be successful, getting money is part of it.

That's a crock (1)

SwashbucklingCowboy (727629) | more than 4 years ago | (#32534878)

"getting Red Hat to $5 billion meant 'replacing $50 billion of revenue'"

Cow manure. Red Hat isn't one tenth the cost of proprietary software, not even close.

The real problems are:

1. It's hard to scale services.

2. You have to have the demand for the services.

3. In nearly all cases, proprietary solutions have first mover advantages.

IBM HP where are they now (1)

RichMan (8097) | more than 4 years ago | (#32534892)

http://www.cioupdate.com/news/article.php/1574431/Can-You-Make-Money-Selling-Linux--Try-35-Billion.htm

In 2002 HP claimed $2B in Linux revenue and IBM claimed $1.5B. I would expect that has ramped up considerably since then. I can't seem to find recent numbers perhaps they are embarrassed by the riches.

On the server hardware side, sales are booming. You have to think there are service contracts with those.
http://news.cnet.com/2100-1001-984010.html

The Reality of Open Source... (1)

Baldrson (78598) | more than 4 years ago | (#32534904)

There is a class of people who can take advantages of intellectual property rights and that class of people rarely includes programmers or even engineers. The few times it happens can be likened to the noises that casinos make whenever someone wins. That is the entire impetus behind open source.

Think about it.. (0)

Anonymous Coward | more than 4 years ago | (#32534906)

Open source is FREE.. And if someone were to put ads in it, people would just take them out..

Because.... (-1, Troll)

Anonymous Coward | more than 4 years ago | (#32534920)

FOSS isn't the digital messiah leading the world to a new Eden that its supporters like to think it is.

Knowing the price of everything (1)

jandersen (462034) | more than 4 years ago | (#32534968)

- and the value of nothing.

If open source is such a success, why aren't there any billion-dollar turnover open source companies?

It is not a question of if - open source is a resounding success; just look at how the GNU project has become the defining standard for much of UNIX, to the extent that companies like IBM, HP etc offer the GNU toolset on their proprietary systems. And GNU is only one part of open source - GNOME and KDE are other prime examples. And of course, there is Linux; need I say more?

Money isn't everything; it is certainly not the best measure of success.

Answer is simple (1)

rattaroaz (1491445) | more than 4 years ago | (#32534976)

One of the features of open source/software freedom, is to benefit the users, not the corporations. Red Hat often commented that they turned a multi-billion dollar industry into a multi-million dollar one. Why no billion dollar open source companies? Because users are cutting costs, competition is rising with more players, and there is less gouging going on. From a non-software corporation point of view, that's a good thing.

Because They're Not Monopolies (1)

Doc Ruby (173196) | more than 4 years ago | (#32534978)

The whole point of open source is sharing the assets. Which doesn't mean "free" (except when it's FOSS).

Red Hat isn't the only Linux corp, the way that Apple is the only Mac corp and Microsoft is the only Windows corp. Add together all the Linux OS corps, including the biggest, Red Hat, and you've got something that's bigger than, say, Sun (was), or any of the Unix corps before it.

Linux's open source means that the corporate model is different, fundamentally. The model doesn't capture every penny in a single corp the way it did with Microsoft. A lot of the monetary value is held by the customers, and by people all along a very shaded gradient all the way to kids downloading OS'es they don't even install, trading them like baseball cards.

All of which means that the market gets the most efficient use out of all the value. Which you'd think would be good for business, better than the monopolistic model that does create $5-$50 billion corps like Microsoft, except for the business of stock market speculation (that does practically nothing good for business except speculators and brokers). Meanwhile, OSS is also capable of growing corps as big and valuable to stock traders as Red Hat, which is also valuable to business and even its competitors.

Open source is a new model for business. Measuring it by the old model isn't going to make sense to a lot of people. Even though it can make a lot of dollars.

Sales and relationships and the IBM factor (2, Insightful)

Anonymous Coward | more than 4 years ago | (#32535130)

A few things that many geeks seem to not get:
Salesmen make the world go 'round. They are pounding the pavement every day. They are making relationships with CIOs every day. They have convinced those CIOs that the low-risk path is to buy name brand stuff. It's proven. Plus, if there's a disaster, the CIO can tell his board he bought the best stuff. That's the old IBM line: you never get fired for buying IBM.

CIOs and other management types like the whole sales process. They like the kind of people they have to mingle with. They like the idea of contracts, and terms and conditions, and so forth. It makes them feel like 'real' businessmen, and that they are worth something.

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