Open Source And Money

There seems to be some activity this week around earnings through open source. First there is Hugh Macleod’s question about finding billionaires in open source. There were some replies, but the one that hit the nail is Jeff Atwood’s

The lack of open source software billionaires is by design. It’s part of the intent of open source software — to balance the scales by devaluing the obscene profit margins that exist in the commercial software business. Duplicating software is about as close to legally printing money as a company can get; profit margins regularly exceed 80 percent.

The real money isn’t in the software. It’s in the service you build with that software.

Nicholas Carr ponders over Dirk Riehle’s analysis about benefit for the programmer in open source. Dirk Riehle concludes that the monetary benefits to a programmer of an open source product are diminishing. As the code gets opened to others, the competition amongst the programmers increase, making them more dispensible than before.

In my humble opinion, one big way open source is different from the proprietary method is that it is beneficial to all the involved parties – the customer, the integrator and yes, the developer. However, there is a difference in the paradigm, which Jeff Atwood grasps the best in saying that the real money is in the service that is built with the software, not the software itself. Why is this fair? Because the customer gets ROI not from the code, but by its application. Its application to the his/her requirements and problems to create a solution. Any developer who can apply or show the application will earn. As for the developer who got in to scratch a personal itch, it is never about money. The returns are expected in scratching the itch itself.

I see a reflection of the because effect in this. These are thoughts just out of personal experience, so feel free say your thoughts.

Discussion [Participate or Link]

  1. Nate Cavanaugh said:

    obscene profit margins that exist in the commercial software business.

    Could someone please tell me what exactly “obscene” profit margins are? How much profit is “too much”, and what standard are we using to judge, AND why should we use THAT standard?

  2. Abhijit Nadgouda said:

    Nate, good question! For any business no amount of profit is obscene. I guess, it only turns obscene when the product does not provide the expected ROI to the user. The software, by itself, does not provide the benefit, its application does.

    Why should we consider this is because it helps us, the software peope, focus better on the customer. It has also helped us identify what is software is beneficial.

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Abhijit Nadgouda
iface Consulting
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