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Date:      Mon, 13 Jul 1998 09:50:12 -0700
From:      "Jack Velte" <jackv@pacbell.net>
To:        <freebsd-advocacy@FreeBSD.ORG>
Subject:   InfoWorld article on open source
Message-ID:  <01bdae7e$4dda33e0$1901aace@jackv.pacbell.net>

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June 8, 1998 (Vol. 20, Issue 23)
Free money model

Open source software can make business sense
By Lynda Radosevich and Blaise Zerega
It's not an intuitive concept, but free software is becoming a hot new realm
for making money.

Now dubbed Open Source Software (OSS) by the community that knows it best,
free software -- also called freeware -- means that a program is available
in an uncompiled form so that anyone can tinker with the code, adapt it to
their own needs, and offer their enhancements to the keeper of the code for
incorporation into the next release.

Some proponents believe that the budding development and business model for
free software signals the beginning of a new trend in how corporations and
Internet Service Providers will purchase software licenses and services.

"In the medium-to-long run, unless [commercial developers] can adapt their
business model to incorporate open-source development, they're doomed.
They'll be outcompeted on reliability and features, plain and simple," says
Eric Raymond, author of "The Cathedral and the Bazaar," a popular essay that
influenced Netscape's decision to open its browser source code.

Raymond, who will present his theories at the Usenix Annual Technical
Conference in New Orleans next week (June 15 to June 19), says that
commercial software companies practice a cathedral style of development in
which centrally planned groups quietly work in isolation until they've
completed a finished product. Open source developers, particularly the Linux
community, use a bazaar method in which a worldwide corps of developers
contribute via the Internet to develop software that gets released early,
and often. Oddly, the free-wheeling bazaar style can result in more robust
software, Raymond says.

"Traditional software quality assurance is notoriously bad at squeezing out
bugs. The bazaar mode isn't perfect at this, but it is clearly and
dramatically better," Raymond says.

GRATIS IT'S NOT. Money comes into play when commercial companies add value t
o open source software by enhancing, testing, distributing, and supporting
it. The vendors provide accountability, so customers have someone to call
when things go wrong.

Red Hat Software, for instance, distributes shrink-wrapped versions of
Linux, publishes books, develops open source tools, and offers technical
support. The model appears to be working. Bob Young, president of Red Hat
expects the 3-year old company to earn revenues of $10 million this year and
to ship about 400,000 copies of Linux, ranging from $50 to near $1,000 for a
supported version.

Customers can also get copies of Red Hat Linux free from Web sites or
freeware CDs, but "when it comes to software, customers want the official
version for mission-critical applications instead of the free one, even if
they're the same version," Young says.

Sendmail is taking a more hybrid approach. Sendmail is the open source
mail-routing program that transports roughly 80 percent of the Internet's
traffic. In November 1997, lead Sendmail developer Eric Allman and partner
Greg Olson formed Sendmail to deliver a commercial version of open program.
They raised $1 million in the first round of financing and expect to easily
raise more than $6 million in a second round this summer.

"I have to pinch myself every day. I've been through five startups, and it
doesn't usually go like this," says Greg Olson, president and CEO of
Sendmail, in Emeryville, Calif.

Allman and Olson realized that as the bulk of Internet usage switched from
academic to commercial, the needs of systems administrators were changing.
If someone didn't provide commercial users with such features as easy
systems administration tools, Sendmail could be eclipsed by proprietary
software from Microsoft and Lotus already in use in companies' internal
networks.

At the same time, Sendmail will continue to develop a free, open source
version of Sendmail, minus the ease-of-use tools that the academic community
would scoff at anyway.

COMMERCIAL CONTRIBUTIONS. Corel is taking an even more commercial approach
to OSS. The company plans to release this summer WordPerfect 8 for Linux,
and it will develop a full suite of business applications for Linux. Corel
will charge for its proprietary business applications -- the Linux version
of WordPerfect 8 is expected to sell for a price of $99. But its Corel
Computer subsidiary offers a Linux version of its NetWinder workstations,
and Corel is returning to the Linux development community source code that
was developed for the NetWinder, such as a Java port and a port to the
StrongArm chip, says Michael Cowpland, president and CEO of Corel, in
Ottawa.

"We really encourage the idea of the free and open operating system, but we
also encourage the idea of Linux being a very good commercial platform for
software developers such as ourselves to port to and end up with a very
economical and attractive accommodation," Cowpland says. "Also, there is an
estimated 7 million Linux users already growing at an estimated 100 percent
per year. So this is, in fact, the fastest growing operating system out
there."

Even with such support, the open source business model faces several
challenges. Convincing corporate executives of the viability of open source
remains an obstacle for many IT managers.

Larry Augustin, president of VA Research, a Mountain View, Calif., seller of
Linux workstations, says that some customers request his company omit the
word "Linux" from invoices to avoid attracting unwanted attention from
management.

"We see that it's still not acceptable at the upper levels of MIS to use
something like Linux, but the engineers who need to get work done use it
anyway," Augustin says.

However, resistance is melting.

"While we didn't trust [Linux] initially for our main systems, we found that
it was so good at doing so many things that it made no sense not to use it,"
says James Delahanty, senior systems analyst at Gulf Interstate Engineering,
in Houston.

A senior manager at The Boeing Company, in Seattle, says that Boeing, like
many other companies, is waiting to see if major vendors begin porting to
open source platforms.

"We would use [Linux] if we could get versions of Oracle that run on it,"
the manager says. Boeing has a small Linux installation, while Apache and
Netscape are used widely.

Jim Allchin, senior vice president of Microsoft's personal business and
systems group, in Redmond, Wash., says the open source development model is
missing a vital marketing component.

"What marketing is supposed to do is take customer input and drive it into
products. If you just build what engineering says, you may not get the right
product," Allchin says.

But proponents say the success of Linux, Apache, Perl and other open source
software defies such skeptics.

"On the whole, we've found that not having a phalanx of idiots in expensive
suits between us and our customers helps us stay closer to their real needs.
Instead, we get our customer input via the Internet and direct peer-to-peer
communication of day-to-day bugs, problems and opportunities," Raymond says.

Controversies aside, some analysts say they expect the open source business
model to take off soon.

"The key to it is that the code is out there, it's free, and companies can
add value and charge for it with the benefits on ongoing development and
without incurring the development costs, says David Vellante, an analyst at
International Data Corp., in Framingham, Mass. "These guys are going to come
out of the woodwork over the next nine to eighteen months."

InfoWorld Senior Editor Lynda Radosevich can be reached at
lynda_radosevich@infoworld.com. InfoWorld Senior Writer Blaise Zerega can be
reached at blaise_zerega@infoworld.com.


Copyright (c) 1998 InfoWorld Media Group Inc.




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