Open Source business conference: The buck stops here


Author: JT Smith

By Wayne Earl
Executives, programmers, and technical visionaries, most of whom have tasted Open Source, converged last week on San Francisco to ask one important question: How do we make money from this?

Rethinking Business in Light of Open Source, a conference put together by OSDN and BRIE (Berkley Roundtable of the International Economy), was a meeting of the minds between the programmers who create Open Source, and the business people who admire (and at times, fear) their innovative spirit. (NewsForge is part of OSDN, and VA Linux, referenced later in this article.)

It’s common for an Open Source enthusiast in Silicon Valley who attends many conferences to encounter mostly technical people who actively develop the software that makes the community thrive. But at the OSDN/BRIE conference, many of the attendees clearly had a key to the executive washroom.

Here, questions were more likely to be about market share, intellectual property control, and branding than about the technical details of this or that bit of code. At the end of the day, attendees walked away with a better understanding of Open Source, and also a better understanding of how companies can leverage it into profit-making ventures, while at the same time contributing back to the community that created it.

Opening keynote

The opening keynote was by Dr. Douglas C. Engelbart, a computer visionary who is in part responsible for the invention of the mouse, the GUI, and a little something known today as the hyperlink. During his keynote, Booting Collective IQ via Open Source Development (A Bootstrapping Strategy), he proposed a system known as the Open Hyperdocument System (OHS), a knowledge repository that would allow for an increase in what Engelbart termed the “collective IQ.”

Engelbart said he’s had one goal his entire career: “As much as possible, to boost mankind’s collective capability for coping with complex, urgent problems.” He believes that the Internet will evolve into OHS, through the use of Open Source software and openly-available communication protocols. Engelbart’s organization, The Bootstrap Institute is working toward making that happen.

Collaboration and cooperation in Open Source

The first of the conference’s three panels featured a number of Open Source developers. Panel members included Jeremy Allison, VA Linux engineer and co-lead of the Samba team; Brian Behlendorf, founding member of The Apache Project and CTO of CollabNet; Eugene Eric Kim, a consultant; and Russell Nelson, president of Crynwr Software and Open Source Initiative board member.

The panel began with moderator John T. Hall, senior vice president of marketing for VA Linux, giving the attendees some statistics on several Open Source programs. “Linux is the fastest growing operating system out there. Open Source is thought to be the key to this success,” Hall said. He told business attendees that Apache is being run on 60% of all webservers, and Sendmail running on 80% of all mail servers. While these statistics are taken for granted in the Open Source world, many at the conference seemed surprised at the widespread use of Open Source software.

Allison asserted that projects succeed because they are scratching the developer’s own itch. “Companies most successful at Open Source seem to be the ones who don’t try to impose restrictions or control over it,” he said. “Adding tight-fisted control kills the magic when source code is available.”

And why does Open Source development work? Manifestos aside, “Open Source works because people want to collaborate,” Kim said.

Added Allison: “The World Wide Web came out of high-energy physics; pure scientists who wanted to share both text and graphical information. These type of people don’t care who they work for; they want to share knowledge. People will go to desperate lengths to collaborate.”

When asked about the importance of the Internet to Open Source development, Kim said that although such development has been happening for 50 years, “the Internet has allowed people to collaborate and share code almost instantly.” Continuing with this thread, Behlendorf added, “Things wouldn’t be this big without the Internet. The Internet makes it easy to email people you don’t know. Setting up a project on the Internet is very low cost.”

Another question: How do companies involved with Open Source become profitable? Allison answered: “Software is not a product, it’s a service. We encourage people to set up service businesses.”

Behlendorf told the crowd there are two places to think about value. “Articulating defensible business value still exists in the Open Source community. What is your defensible area? One, the ability to attract engineers, for customization and extension; and two, for deployment and upgrade.”

At this point, a man in the audience stood up and aid, “The CEO of a company doesn’t care about how it works; he doesn’t have time to get involved in that level of detail. With open software, you are not tied to the whims of a proprietary software house. With closed source, you are completely locked in. That’s what makes sense for a CEO. You tell him that, and he can control his company.”

When asked how businesses contribute back to the Open Source community while capitalizing on the results, Allison said, “Taking free software and using it in other products is a very easy way to make money. The only way to get influence with the development is to participate — fund the engineering process.”

Intellectual Property and Policy

The second panel of the conference dealt with a subject often debated on Slashdot and other discussion sites, intellectual property. This panel included Philippe Aigrain, head of sector, Software Technologies, European Commission DG INFSO/E2, IST programme; Mitchell Baker, chief lizard wrangler,; Robin Gross, staff attorney in the fair use and intellectual property area for Electronic Frontier Foundation; and Danese Cooper, attorney with Sun Microsystems). The panel was moderated by David E. Colton, vice president for strategic initiatives and council for the industry group ITAA.

The issue of licensing is almost a religious one in the Open Source community. It is common for developers to refuse to contribute to a project simply on the basis of license. While developers in the community argue over which license is the right thing, businesses realize the licensing debate debate can cost them money.

Panelists acknowledged there is a great deal of tension between the business community and Open Source developers on this issue. “Some of the greatest threats to Civil Liberties are the attempts to control intellectual property,” Gross said. “Open Source can be a tool to help protect these civil liberties.”

The panel members talked about just how important licensing is to both business and the Open Source community. Speaking about Mozilla and the development of its license, Baker said, “The day-to-day issues are much more community focused: community building, community understanding, and core building in terms of using the license … our community is based on copyright law and licensing.”

Cooper agreed. “The license is just a framework; the community is built around the license.”

Businesses who sponsor development with Open Source licenses face a number of risks in the licensing arena, said panelists. “The most obvious risk is that you don’t know the origin of the code contributed,” Baker said.

The panelists discussed in particular why the General Public License seems to make businesses nervous. In addition to it not being seriously tested in court, “the definitions of the license are not entirely crisp, making defense difficult,” Baker said. Panelists also discussed the GPL’s “viral” component, forcing all code
compiled with GPL’d code to be GPL’d. Because the GPL doesn’t allow for a gradual opening of code, businesses then have to decide either place their entire project under the GPL, or none of it. “You might want to make the decision to open your software gradually, not all at once,” Baker said of concerns over the GPL.

Some of the panelists said they were concerned with business manipulation for control of Open Source code. “In the interest of getting corporate donations, Open Source foundations have not investigated the source of their donations,” Cooper said.

The panelists’ general consensus was that intellectual property law is not going to get any friendlier to the Open Source community in the foreseeable future. “I have no hopes that Congress will fix copyright now,” Gross said. “Social structures are needed for this.” When asked about the proliferation of bogus patents, Baker added, “I don’t see much change in patent laws, which cause problems with Open Source. Perhaps cataloging prior art will help.”

Panelists expressed some hope after a recent legal development concerning the Napster case. “The Napster decision stated that those who control the intellectual property are liable. It’s hard to determine who is liable if developed in an Open Source way,” Gross said.

Business Models

The third and final panel of the conference dealt with business models that incorporate Open Source as a way of making a profit. This panel included Eric Allman, CTO and co-founder of Sendmail Inc.; Larry Augustin, founder and CEO, VA Linux Systems; Mike Balma, director of marketing for Linux Systems Operation at Hewlett-Packard; and David Henkel-Wallace, co-founder of Cygnus and founder and CEO of Zembu. The panel was moderated by Niels Christian Nielsen, co-founder, CEO and president of Catenas Inc.

This panel, made up of men driving companies bridging business and Open Source, offered some strong opinions on how to accomplish that feat.

“Companies only care about one thing — they care about money,” Allman said. “Customers do not buy things that they can get for free. With Sendmail Inc., they are buying expertise; they are buying additional value.”

Augustin said there are three ways companies can build a business using Open Source. “You can build systems. You can build media; conferences, instruction manuals, books — you’re selling expertise. Or you can provide professional services. You don’t have the [intellectual property] rights to the software, but you do have the expertise … No one here is selling Open Source. We’re selling tools, appliances. Open Source is something to use to find a solution to a problem.”

These businessmen acknowledged their debt to the Open Source community. “In order to be good in utilizing Open Source, you need to be able to contribute back to it,” said Nielsen. Companies accomplish this by hiring Open Source programmers, and providing resources that the community can take advantage of for free. “Contrary to popular opinion,” Augustin added, “a lot of people contributing to Open Source are paid today.”

And why do they leverage Open Source in their businesses? “Open Source is an economically more efficient way to develop most software,” said Augustin. It’s how development was done in the dawn of the computer age. “Open Source is a return to what was done in the first place. This is not a new idea,” Allman said.

Closing keynote

The closing keynote was given by Ghazi Benothman of Deutsche Bank Alex. Brown. He closed by painting a picture of the IT landscape today, and how he believes that Open Source will figure into the future. “IT today shows much progress, but great chaos. Complexity has exploded, but IT customers remain bewildered,” Benothman said.

“The promise of Open Source is to shift the balance of power from entrenched IT vendors back to its customers,” Benothman added. Because Open Source software is easily customizable, “Open Source allows for customers to focus on their business logic, not on the implementation.”

But Benothman lamented the current state of Open Source business. “Open Source today is a great technological motivator, with great market share penetration, but lousy investment returns.” The analyst believes this is just a reflection of the current landscape in IT; as Open Source solutions become more accepted in the business arena, this will change. “Open Source communities can build the framework. Support businesses build the business logic on top of it … if you can get the customer to tell you what they want, they will buy into your products.”

So how do we move toward this success? According to Benothman, “Hunker down; focus on fulfilling your customer’s IT needs. Don’t be distracted by your competitors … your competitors are not the other Open Source companies, but closed-source proprietary companies. Chip at the barriers; educate and collaborate.”

Benothman believes that “happy days” are ahead. “Linux, in particular, is pervading IT, and the competition is taking notice.”

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