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Businesses Open Source Red Hat Software The Almighty Buck Linux

Why No Billion-Dollar Open Source Companies? 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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Why No Billion-Dollar Open Source Companies?

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  • They get bought out (Score:5, Informative)

    by Anonymous Coward on Friday June 11, 2010 @09:37AM (#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.

  • by BradleyAndersen ( 1195415 ) on Friday June 11, 2010 @09:46AM (#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.
  • by bernywork ( 57298 ) <bstapleton@@@gmail...com> on Friday June 11, 2010 @09:57AM (#32534792) Journal

    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.

  • by Lunix Nutcase ( 1092239 ) on Friday June 11, 2010 @10:02AM (#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.

  • by GigsVT ( 208848 ) on Friday June 11, 2010 @10:03AM (#32534888) Journal

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

  • by Chris Mattern ( 191822 ) on Friday June 11, 2010 @10:19AM (#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:Pftt (Score:2, Informative)

    by pitdingo ( 649676 ) on Friday June 11, 2010 @10:28AM (#32535212)
    So you compare installing an OS to running a plugin? I can take a Ubuntu cd and install it faster and with fewer steps than Windows 7. Just did it last weekend. I not only have more software, but better software by default. I do not need to install anti-virus, intrusion detection, anti-spyware software, etc... So yes, installing Ubuntu Linux is easier than Windows 7. My windows desktop refuses to play WoW crashing the second it launches. Guess i need a "driver" or something. And it wont connect to my Router beacause i need to install some "network" driver or something for my motherboard. Funny how the Ubuntu has no such issue with the networking.
  • Re:Pftt (Score:4, Informative)

    by grumbel ( 592662 ) <grumbel+slashdot@gmail.com> on Friday June 11, 2010 @10:48AM (#32535480) Homepage

    All you have to do is pop-in a CD and install.

    Followed by a few hours of search for the newest drivers and another few hours of search for the apps you want to use and another few hours to get all your games patched up to the current revision. Getting Windows to work from scratch takes ages, especially when you use anything that a is a bit non-mainstream.

    Now given, Linux avoids the game patching problem mostly by not having games, but getting all the apps you want to run is a hell of a lot easier when you can just do "apt-get install " instead of googling around.

  • Re:Pftt (Score:5, Informative)

    by b4dc0d3r ( 1268512 ) on Friday June 11, 2010 @10:49AM (#32535496)

    Very large companies need to have a disaster recovery plan in place, and contacts to call when downtime is costing money. Especially outsourcing or service providers. If you run linux in this environment, "my team knows linux" is not going to cut it. You want to be able to place the blame on the "vendor" as opposed to being responsible yourself. So you don't modify the code, and you buy the support package.

    Red Hat should be very profitable, given that, except Microsoft makes sweetheart deals with the big companies to keep them using microsoft tools. I have a full MSDN subscription, which would cost me piles of money but most likely costs my employer very little per head. I can download and use and develop with anything I want, for free. It only costs money because the production servers have to be fully licensed and legit.

    Microsoft is everywhere, so they can afford to give away freebies, charge for just the production installs, and still make boatloads of cash. If you take a look at the revenue compared to actual software usage, I wouldn't be surprised to find that Microsoft is giving away as much or more software than Red Hat. Direct end-user sales are just the icing on the cake - someone paying full price for Windows is very rare, it's usually OEM cost, which is approximately 10% of the cost. So Red Hat's numbers are probably not far off Microsoft's numbers, it's just reported as software sales vs. support costs. And even that difference is a technicality - Microsoft still charges for support depending on what you need and where you got the software.

    Fundamentally, it's the same business model. Give lots of software away and make up for the sales losses with support charges - but with OEMs in the middle it's not transparent to the end users. Only the businesses see how the model truly works.

  • by hitmark ( 640295 ) on Friday June 11, 2010 @11:09AM (#32535828) Journal

    i wonder tho, until the 1970s, could anyone build a IBM compatible product without being lawyer stomped?

    no need to worry about copyright, if the only hardware it can run on is a IBM.

  • Re:Pftt (Score:3, Informative)

    by Skuld-Chan ( 302449 ) on Friday June 11, 2010 @11:27AM (#32536074)

    Windows is difficult to install? Do you drag your knuckles along the ground too? Its the only one on that list that actually goes out to a 3rd party driver repository to find drivers for my computer to make things work properly. Failing that it pops up notifications with links where I can get device drivers for my scanner or webcam or whatever.

    Sorry but there are Linux installers out there still that don't work on my display adapter (Ubuntu on my Shuttle PC - works on the VGA port, but not the HDMI port...), can't figure out what kind of keyboard you have and most make zero effort to figure out if your scanner, network adapter or 3D video card are functioning at all. Windows 7 installed seamlessly on the same machine.

    Solaris - I'll give that it works pretty well for actually getting it on the machine. Never mind when you have it installed and NOTHING WORKS properly without installing a lot of hotfixes/patches etc etc. Seriously - I think we should be beyond the problem that when I hit the backspace key - it should back up over the text I typed. Last I checked - that doesn't work out of the box in Solaris 10 in all apps. Heaven help you if you want to install Solaris X86 on anything but the exact specified hardware - I admit I haven't done that in ages, but last time it was a real pita.

    Mac OSX Leopard wouldn't install on my G4 Powerbook - it claimed that I didn't meet the requirements (I more than did). The Apple tech told me I probably had 3rd party memory in the machine (which I did!) and it wouldn't install because of that. I has to use an openfirmware hack to make it install at all... That's bull-crap.

    I run a bunch of labs at a local community college however - 200 misc dell Optiplex machines. Some are over 5+ years old (Optiplex 520). Windows 7 installed and runs like a top on every single one of them without me tweaking anything and they all support Aero - and Microsoft's image toolkit made it relatively easy to customize the installer.

  • I'm Pleased... (Score:3, Informative)

    by pandrijeczko ( 588093 ) on Friday June 11, 2010 @11:47AM (#32536346)

    ...because in this 21st century world of ours where just about everything is driven by money, it's great to see a huge, world-wide collaborative project confusing the hell out of accountants and marketing types who simply cannot grasp the simple concept that *sometimes* things happen just because enough people *want* to making it happen, rather than being paid to make it happen.

    And what's even better about the whole Open Source movement is that it benefits *everyone*. Nowadays, there's no justification for software piracy just because commercial software is overpriced in some parts of the world because now there are truly free alternatives that can, in most cases, give enough functionality - for example, about 10% of MS Office users use enough of its functionality to not be able to use an alternative package, but for the remaining 90% OpenOffice.org provides more than enough functionality.

    Even if you don't use or support Open Source, there's no denying that its presence means that commercial software publishers now have a benchmark that they need to be better than, and that, in turn, can only mean better quality software all-round.

  • Re:Pftt (Score:3, Informative)

    by quantumplacet ( 1195335 ) on Friday June 11, 2010 @12:22PM (#32536886)

    meme /mim/ Show Spelled[meem] Show IPA
    a cultural item that is transmitted by repetition in a manner analogous to the biological transmission of genes.

    I think it means exactly what I think it means.

God helps them that themselves. -- Benjamin Franklin, "Poor Richard's Almanac"