Then the internet came onto the scene. Like the music industry, the software industry had been as much about promotion and distribution as production, if not moreso. Suddenly, software could be promoted and distributed at almost no cost, and the carefully-built system of salesmen, distributors, Value Added Resellers, and the like had been bypassed almost overnight. Luckily for them, the software industry had experienced quite a bit of consolidation and vendor lock-in by then, so the average business and home user was somewhat tied into the old system of Windows/Mac PCs running packaged software sold through old-style sales networks and retail stores. But even in the early days of the internet, cracks were already starting to show.
The problem was, the bread and butter of the software industry, medium-to-large businesses, had been increasingly resentful of being the targets of the software industry's relentless profit maximization. Businesses are in the business of making money. And they make money by keeping revenues high and expenses low. By the 1990s, businesses were spending a staggeringly large amount of money on software, and due in large part to the managerial class' emphasis of "features that sell" over "software that works well," a large part of that investment was being wasted in ambitious software projects that ultimately failed. They were getting locked-in to vendors' platforms and run on a costly forced upgrade cycle. Why did they do it? Because the alternative was writing and maintaining their own software in-house. Now, many, many firms did just that. But it was a headache and a risk. A Fortune 500 company can not take the risk that its lead programmer gets hit by a bus and nobody left alive understands how to keep its accounting system running. So many firms were locked into commercial software that they were not happy with.
So by the mid 90s, the fruits of this largely academic collaboration were starting to leak out over the internet: xBSD, Apache, Linux, Sendmail, BIND, Perl, MySQL, and many others. And it wasn't just other academics and software hackers who were picking them up. It was corporations, large and small. The bedrock customers of the software industry. Was it idealism that brought open source software in? Partially, perhaps. Most open source software initially entered these firms under the radar: a Linux/Samba file server here, a FreeBSD/Apache web server there, built on old PCs from the junk room, usually. But when managers found out they'd been happily using free software for months, and in doing so had saved thousands of dollars, it got their attention. The IT managers and engineers at these firms liked that they didn't have to go hat in had begging for funds to buy new software, and sometimes it saved them a lot of time that they would have spent reinventing the wheel. Sometimes, open source software made them look like heroes. Middle managers liked that they could roll out new software-heavy projects without having to beg the CFO for money. It made them look like heroes too. Upper management liked that they now had the leverage they needed to turn the screws on the software vendors who had been screwing them for so long.
Now a lot of this was bad news for the software industry. Any business that wakes up to find a strong new competitor in its market is unhappy. The owner of a main street five and dime who drives by a vacant lot outside of town and sees a "Coming soon: Wal-Mart" sign is a heck of a lot more threatened than Microsoft or Oracle is by Linux or MySQL. But there are some companies that have already been mortally wounded or even killed off by the availability of open source software in their niche, and others that are facing decreased prospects. If open source software continues in its ascent, the software industry will undoubtedly be transformed, and we might see a big drop in the kinds of profits that software companies have enjoyed over the past few decades.