December 6, 2000

Open for business? Companies really can make money in Open Source

Author: JT Smith

-By Jack Bryar -
Open Source business -
Geez, can't anyone make money in Open Source? When
enthusiasts
like LinuxWorld's Nick Petreley begin to wonder, then you know there's
trouble ahead. But people are making money in Open Source,
investors are still wild about some Open Source companies, and Open
Source is winning some big markets.Petreley is the ultimate Linux booster; a true believer. But lately
he sounds worried. In
an article
in this week's InfoWorld, Petreley suggests he's
still confident there's money to be made in Open Source, but maybe
not
a lot of it, and possibly none at all in the software market.
Based on the stock prices of Caldera
and Red
Hat
and the recent churn inside the marketing departments at those
companies, it looks like their CEOs and the larger investment
community are coming to similar conclusions.

I won't say I told you so.

OK, perhaps selling free software is not exactly the path to fame
and fortune. But that's old news. What's new is the fact that there are
markets where Linux is doing just fine, thank you. There are places
where developers are successfully using Open Source products and
services to drive new business. It may not be exactly what Richard
Stallman
had in mind, but Open Source is starting to pay off for
those who pick the right markets and the right business models.

So what's making money? Who's crazy for Linux? And where are these
big opportunities?

Still crazy for Linux

Not everybody hates Linux. While the best-known U.S. Linux stocks are
tanking, investment companies are circling around competent system
integration and consulting houses with solid Linux and Open Source
credentials. One case in point; every year, the Wall Street Journal
polls European venture funds to ask which firms they wish they had
invested in (but didn't). Scoring near the top of the "Envy Poll" was a
French software consulting house called IdealX. The reason that VCs wish they
had invested in IdealX? The company's Open Source expertise. Is
that expertise all that much better than the expertise possessed by
many NewsForge
readers? Probably not, but it's a model that investors want.

Opportunities abound.

Contract development houses and software consultancies are
going to make money in the Open Source marketplace. So are network
security firms that have used Linux or BSD Unix to create nearly crash-proof
firewalls and Web security systems. Firms like Axent Technology made a
profit this year. But there are several other markets where the Open
Source development model is going to truly change everything. For
example ...

East Asia's where you want to go

Neither Microsoft nor any of its competitors (when it had
some) ever did a terribly good job at servicing countries that use
ideograms rather than alphabets. By contrast, TurboLinux has not only
helped encourage product development, but it has all the right backers
(Compaq, Dell, Fujitsu, Hitachi, IBM, Intel, NEC, and Toshiba) where
that counts for a lot.

In China, firms like Bluepoint Linux have applied similar strategies
to help them win contracts, most notably with China Netcom, who is
building a 7,000-mile gigabit backbone across the country. These
companies will not lose money.

The East Asian market for Personal Digital Assistants is
particularly
open to Open Source. Over the last year or so, several would-be Linux
vendors jumped into the market with cool prototypes, most of which didn't ship. But now mainstream East Asian hardware firms are getting
into the market. For example, Taiwan's Acer is marketing a cool new PDA
with a Chinese language interface, based on Linux. There's a
huge market there.

News about news

One of the markets that looks extremely promising for Open
Source is the news business itself.

One of the fastest developing parts of the news business is
"corporate current awareness." Companies want to bring focused,
external
business news to their decision-makers from a variety of sources, and
connect it to internal documents and business data.

It's not easy. Such an effort requires that vendors work
cooperatively to develop a common platform for text, image and live
transmissions that can be archived, tagged, secured, and sorted
according to the needs of their customers' IT managers and system
integrators. That virtually mandates an Open Source environment.

Recently Reuters, and the business news IT firm WAVO announced what
they called the "NewsML toolkit," a simple interface that can be
customized and integrated by non-specialists. How did they do it? They
declared NewsML to be a standard and made
the toolkit Open Source,
licensed under version 2.1 of the GNU
Lesser General Public License. They announced that the toolkit could
be incorporated into commercial software packages of their competitors
as long as modifications or improvements are released back to the
public.

TIBCO Software is another
platform developer many companies use to transmit news and information
internally, particularly in information-crazy trading floor environments.
TIBCO recently announced that it was going to deliver a key component
of
its next generation of technology, a many point-to-many point
multicasting software, called PGM (Pragmatic General Multicast) as Open Source code. PGM will help enable
the simultaneous but differentiated real-time transmission of
multimedia
news and information from many sources to many recipients without
clogging bandwidth or taxing administrators.

There's lot's to be done in this field, and it can be done
profitably.

Cash in on cash registers

Web based shopping may be king someday, but right now good old
bricks and mortar enterprises still ring up the bulk of sales. One of the
most neglected parts of the average retail establishment is the "point-of-sale system" (what you and I call cash registers). The
average
register in the United States is over five years old and still runs MS DOS or an
even
more primitive system. The main reason is cost -- an average chain
retailer may spend as much as $100,000 per store on
registers. Plus, Microsoft Windows scares most retailers. Unlike office
workers who tolerate a system crash every few days, retail systems have
to be bulletproof.

Recently, IBM and a few others have begun to re-enter this long
neglected market, in force, with systems based on Linux.
Do you think this isn't a big market? There are millions of registers
out there. The market is still in its early stages. Sam Goody,
MusicLand, Burlington Coat Factory, and soon Home Depot will be
among the first pioneers taking delivery on Linux-based registers. But
Linux based systems could easily dominate the market in the next few
years. As a consequence, point of sale systems could become the largest
revenue generator of any system based on an Open Source platform.

Impressive? Maybe. But next week I'll tell you about an even bigger
market. If it takes off the way I think it will, Open Source will
become central
to an existing market that already dwarfs the
computer market today
, and will probably grow faster over the next
couple of years.

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