Home > Open Source > Ambrosia Software CEO: Open Source Software Economics Ambrosia Software CEO: Open Source Software Economics Eugenia Loli 2003-10-29 Open Source 27 Comments The CEO of the legendary Mac software house Ambrosia Software wrote an article about the economics of Open Source and how does it fit to the market. About The Author Eugenia Loli Ex-programmer, ex-editor in chief at OSNews.com, now a visual artist/filmmaker. Follow me on Twitter @EugeniaLoli 27 Comments 2003-10-30 12:17 am The article starts off well; it is fairly complete and gives a good overview. Then it devolves into crond-esque “Do you expect musicians to give their works away for free???” and very little about economics (a fairly unfounded claim that OSS inhouse development projects cost more notwithstanding). His idea of OSS desktop consistency and usability is pretty much circa 2000. Also, Mozilla is ‘Netscape-derived’ in the same sense that IE 6 is ‘IE 5-derived’. And StarOffice/Openoffice is not some anemic ripoff, as the ‘wannabee’ implies–it is a fairly professional office suite. 2003-10-30 12:27 am People don’t want to work without benefit… yada. Seen this argument a thousand times. I agree with Greg, the article starts off pretty well and then devolves. He is also approaching the argument like so many others before him – as a commercial application developer. He does not look at the other end of the application developer spectrum – the in-house software developer. A great number of companies keep developers on hand to develop internal applications and this is a place where open source software really shines. Development costs are instantly lowered when all it takes to develop an application is to make a few changes or develop from an already tested codebase. My company does this all of the time – and we have developers whose job it is to customize and maintain OSS. 2003-10-30 12:47 am Why does this always have to be an either/or sort of argument? Isn’t there room for both open/closed software development? I can see the economic benefits for in-house software developers and building customized solutions, but when you have a need for a large-scale kind of app like a web browser or graphics app (not exacly those two categories, but on the same caliber), if nobody is willing/able to build one for free, then who’s going to pay for it? Some apps can be done rather quickly, but others are very expensive to make and take a long time to develop – this is where I see a problem with open source .. I mean, it doesn’t make much sense to build an app like that, and then give it to someone who can then do whatever they want with it, unless you’re going to charge that one person through the nose. I haven’t tried OpenOffice 1.1 yet, but last I tried 1.03, it sucked pretty bad. 2003-10-30 12:50 am I think OSS is minimizing the ‘deadweight loss’, i.e. minimizing social welface loss, created by monopolist such as M$. Monopolist creates huge barrier of entry into the market by for example collusion, predatory, tying. OSS is an entrant to the industry making the incumbant firm/monopolist the lower the price. The entry is theoretically free as in ‘contestable market’ (e.g. airline industry). New entry creates a duopoly market. You may uses different theory to explain the interaction in duopoly market, but the end result is ‘lower deadweight loss’. regards, lion_fui 2003-10-30 1:13 am it devolves because these closed source software companys are sweating bullets knowing that Opensource is actually working. there is room for both OpenSource and ClosedSource on Linux, if these closed source company want to make money then they better start making some really impressive software that makes Linux users want to install it on their computers, like right now i am not really satisfied with either Gnome or KDE so i do a custom install or Redhat-9 then i get xfce4 and install just enough of it to get a desktop & icon panel (not perfict but it works for me) now if one of these closed source software companys made a really really super clean and light desktop environment for Linux that had all the features of a top notch desktop– easily customizable menus & desktop icons that are easily added or removed, file manager and the rest of the whole can of worms, then only asked a reasonable price for it say 10 or 20 american dollars it would surely sell providing it has a better look & feel and features that Gnome & KDE don’t have or the same but better… these closed source software companys better get on the ball and start making Linux & OpenSource work for them and quit fighting the evolution of the desktop computer… just my $0.02 HappyTrails :^) 2003-10-30 1:42 am Then it devolves into crond-esque “Do you expect musicians to give their works away for free???” Yes, I expect them to make music because they enjoy making music. And I expect the rest of us to stop being so selfish and give our artists all the tools and supplies they need to live a full and healthy lifestyle making their music, writing their software, books, poems, painting, making movies, gardening, playing, enjoying what it is to be alive! I expect adults to act like adults and work together to take care of eachother instead of fight over their dollars like that money somehow makes life better. It does! Its not the money, fool, its the music. Its the art that makes life worth living. Money was just an old way of motivating people to work. Today we have TV, so we don’t even need this money shit anymore. OSS is proving this to you, not only theoreticly but economicly. Now image what we could do if we could shut up about money long enough to allow our scientists and engineers to automate everything with the robotic technology we have available right here, right now, today. And you hate it, don’t you. You Goddamn capitalists will never learn, I swear. 2003-10-30 1:48 am IBM is doing it… Redhat is doing it… SuSE is doing it… Mandrake is doing it (sortof)… Sun Microsystems say they are going to do it too… there are others, need i go fetch em??? 2003-10-30 1:49 am Money was just an old way of motivating people to work. Today we have TV, so we don’t even need this money shit anymore. In that case, if you really feel that way, then why don’t you send me all of yours? News flash – some people write / make music / code / whatever for a hobby. Some do it for a living. The ones who do it for a living expect to get paid, cuz being idealistic don’t put food on the table. 2003-10-30 1:50 am It seems all he is doing is trying to bash OSS, because he didnt have any constructive criticism. 2003-10-30 1:55 am hmmm, you seem to have completely misunderstood my statement. I was merely referring to a habit of one of our frequent posters, crond. He hates open source; the Do You Expect line is one of his favorite arguments. I was imitating him and saying that the author of this article uses similar appeals to emotion rather than reason. I agree with you more than disagree. That having been said, your abuse and hostility are totally uncalled for. Please use civilized language. 2003-10-30 2:03 am But, in the end it is clear that his true intention is to mislead people into thinking the article is not particularly biased either way, but in reality he is very much against OSS. Furthermore, he has some very stupid arguements. “Even being utterly free, this software isn’t taking the world by storm: if people won’t take what you’re giving away for free, it’s pretty clear it isn’t up to par. ” Where have I heard this crap before? People just don’t often have an incentive to switch (for example IE -> Mozilla based browser) they already use few features in the software they have and they don’t even imagine that there could be more or how they could be more productive. I know many people who never knew there were other browsers than IE,s ome went as far as to think IE itself was the internet. Another reason is that OSS does not always interoperate with commercial because of closed standards. Furthermore, people do what works, commercial software has proven itself, why would they be unconventional, some amy think. Another big reason is that companies standardize on some softwarre and build their entire infrastructure on it and also demand that their employees use it. There is also the case of learning a new program. MOST IMPORTANTLY people tend to think that if something is given away free it must be crappy, this is one fo the reasons StarOffice is now being charged for. Infact this very reason is why the author said something so ignorant as “Even being utterly free, this software isn’t taking the world by storm: if people won’t take what you’re giving away for free, it’s pretty clear it isn’t up to par. “. He is playing on our predjudices to further his agenda. These are just a few roadblocks, which will soon be removed. Anyhow, just because something is free and it is not the most popular is not necesserilly a good indicator of its quality, 2003-10-30 2:14 am <<But, in the end it is clear that his true intention is to mislead people into thinking the article is not particularly biased either way, but in reality he is very much against OSS.>> he forgot other people have brains too… – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – <<I know many people who never knew there were other browsers than IE,s ome went as far as to think IE>> i used to be one of these clueless people and used IE in Win98, till i got tired of being clueless and wanted to know more about computers and what made them run and what other alternatives there are to Windows, so i started reading and reading and reading all i could find on the internet, bought my first copy of Linux as a Redhat-7.1 flavor 3 years ago and havent looked back, tryed many other flavors of Linux but i keep going back to my first, i am glad there is a choice out there, where would we be without one, (stuck with that blasted M$-WinDoze)… 2003-10-30 2:24 am would stop posting things like this. Reasonable arguments are a waste here – despite the “Agreements” that you all are supposed to have read about “flames” and anti-Microsoft bias. As the author succintly puts it, this is the latest in the long line of overhyped “movements” – it will fade just like the free love hype of the ’60s. The winners will swallow the losers, because that is the way of the world (meaning, as the author correctly says, the way of Money). No one will have to pull anyone kicking and screaming, because the hype will die when the bad business models play themselves out. Predictions are as easy as Econ 101 – but history is lost on most in this new “global village”. And to think, business was to be “changed forever” only 5 years ago (the last big “can’t miss” movement). Take a look around, IBM (that’s right *IBM*) is *the* company doing Linux. Just as *IBM* didn’t die, all those VB coders can sleep well tonight. 2003-10-30 2:24 am I think that the need for OSS/Free software is indirectly proportional to the number and acceptance of open *standards*. Ex., when you’ve got the open OpenGL standard, everyone can write their own proprietary OpenGL libs and compete and make money. TCP/IP: competing yet closed source network stacks. The C++ language: competing yet closed compilers. And so on. As long as there are companies like M$ trying to get away with “lock-in”, there will be open source Free software solutions implementing the *open* standards to compete with — and eventually prevail over — them. 2003-10-30 2:25 am You are absolutely right. The reason capitalists like a competitive market so much is that it optimizes the output given the input resources. Now, the software industry in the US today does not follow the ideal capitalist model. It is monopolistic. In a monopolistic system, there is a discrepency between what could be produced in a competitive situation, and what it is in the monopoly’s best interest to produce. This potential is lost both to society and to the monopoly, and represents an inefficient state of the economy. The reason the software industry is afraid of open source is that it brings their market back towards a purely competitive one. A competitive market is a cut-throat environment where lots of sellers provide the same product, and at a price only as high as buyers will pay. The average case for a competitive market involves corporations only making a nominal profit, with bigger profits coming only through continued innovation — not leveraging of past successes. Its like a never-ending foot race, as opposed to the carriage ride monopolists are enjoying today. 2003-10-30 2:37 am I agree with the beginning of this article, but it kind of fell apart with some of the arguments. Consider: The idea that the core Apache team are all paid by enterprise. Yes they are, but it started off as open source (coming from the NSCA server originally IIRC), and these guys were so good they ended up being paid to work on it. Great for them, and yes, the income will help them develop it quicker than if they had to do it in their spare time only, but it was started as OSS. You’ll see the same thing in Samba I believe. And software not being up to par if no uptake? Little OSS comes with support contracts, and this is a very important aspect for business. They want someones @rse on the line and zero-cost software, despite actually having good levels of support, is not seen as orthodox good business. And again, the old chestnut of having to hand edit config files to do anything basic comes up again. I am really tired of this one… 2003-10-30 3:20 am To add (more economics), Patent and copyrights may have somehow created and protecting the monopolist. Yet, FTC/DOJ or any other antitrust org. failed to punish monopoly and stop it. Could it be they have forgetten how to use Herfindahl-Hirschman Index, or other indices. Where is Sherman, Clayton, FTC Acts? Since these tools (FTC, HHI, Sherman Act) doesn’t really works, the best choice the society have is OSS – a strong yet quite invisible competitor. Monopoly have difficulty to use economic tools (e.g. marketing, duopoly interation) to launch counter attack. The author questioned the survival of OSS – that’s my conclusion abt this article. I couldn’t find any economic theory to support how OSS an an entity in the industry have survived this long and attained its glory. May be because OSS doesn’t have cost (free time), similiar to contestable market. Or there may be some form gov’t support to return the ‘deadweight lost’ or social welfare to the society. 2003-10-30 3:54 am This is a good start as far as investigating OSS from an economic standpoint. There is also ESR’s work but that is rather one-sided. I like how the author categorizes by sponsorship type/motivation – the “enterprise OSS” bin could probably be further divided, for example based on whether the sponsoring firm hoped to capitalize on the interest generated in the community (Mozilla, Helios, Quake), or whether it was primarily motivated by increased interoperability, efficiency, etc. (Apache). Maybe these could be called “marketing-driven OSS” and “enterprise/community OSS” or something. 2003-10-30 4:33 am Taking facts out of context and using them to further support the idea you are trying to concieve. For example as a few people mentioned the Apache project. From his essay it seems that Apache first had paid workers and than some OSS volunteers came and that without the paid employees Apache would be nothing. It is really the other way around. He does make some good points toward the end though, choice is both Linux’s greatest strenghth and downside. 2003-10-30 5:23 am You cannot turn back the clocks and that is precisely what this article purports to do. By providing pseudo-economics arguments, the author fails to understand economies of scale. If I provide a translation for kword’s documentation and I am in return provided a full operating system, I would say that that is pretty decent compensation. If the economic argument could alone account for open source, we would have not gotten as far as we have. There was little economic incentive when Linux got started and yet people worked on it for many years. The fact that Apple has managed to wrap around a pretty interface around a Unix system neither detracts nor adds to current open source efforts. Unlike Apple, open source developers can afford to make mistakes and learn from them or learn from each other’s mistakes. Finally, both on the issue of in-house or government sponsored development, this guy misses the boat completely. He does not understand that people want ownership of their data and code, something that can only be provided by open source. And over time, it gets increasingly less expensive for goverments to benefit from each other’s development efforts than to remain at the mercy of one large proprietary vendor. Of course, when you set out to prove that open source does not make economic sense, you have to go through some fairly painful contortions of our creative history. As if Charles S. Pierce, Wittgenstein or Cervantes had been driven to write out of economic interest. This guy does not understand that some people are bursting with creativity and they need to write music or poetry like the need to breathe. Of course, it is a lot more comfortable to turn all of our cultural output into measurable units of production. Thus, the young kids reading his article are led to believe that if they feel like singing their songs at the subway or giving away their code, well, that they are suckers, rather than taking part in the very natural impulse to share. Finally, as technology evolves, scarcity will be a thing of the past. In fact, scarcity remains because the status quo does not have the political willingness to deal with famine and major health problems that afflict the developing world, but these issues are certainly resolvable. 2003-10-30 1:54 pm At least, the author has given a decent try to understand OSS, and to collect the facts. It is much better then number of “analysts” that try to pull the analysis out of the hat, with little or no experience in using OSS. One mistake is that Opens Source is around for 15 years or more. The new quality is ability to mobilize a great number of developers through Internet, using CVS or similar tool. It was not possible 15 years ago. Theese developers do not have to invent the code, they can donate something they already have. It is true that OSS does not exist outside economic laws. OSS is typicaly capitalistic phenomena. When market is saturated with high profit margin products, someone finds the way to make living on lower margins. It happened many thousands times in our history, and it will inevitably continue on in the future. Software companies should take that into account, otherwise they are going to die. DG 2003-10-30 3:09 pm By that logic OSS is the economic equivalent of product-dumping. 2003-10-30 3:30 pm Now image what we could do if we could shut up about money long enough to allow our scientists and engineers to automate everything with the robotic technology we have available right here, right now, today. Who is going to float the bill to make this happen ? 2003-10-30 4:56 pm The Free Software Foundation, maintainers of the GNU Project, do not consider themselves one-and-the-same with open-source software. Stallman will verbally slap you and then correct you if you refer to the FSF software as open source, and not Free Software. You can argue about this, but the GNU logo used to diplay this article in the news list might not be appropriate. As for the article itself, it is the typical analysis of both open-source and free software that is made by people who only think in terms of money. If people stop getting paid for their artwork, for their code, for their architectural designs, it does not mean these things will stop happening. It seems quite possible that they will continue to happen, and will be of higher quality as only people who are genuinely interested in the subjects will continue to spend time in them. Artists do not create art for money – I would submit to you that Art expressly created for money is not art at all. Instead, we have an archaic system in place to help feed artists by selling their wares. I for one will continue coding until I can’t type – and if I get paid to do it, great, but that is not why I do it. I would think that others will continue to code because they enjoy it, or want to contribute to the world in a meaningful way, or hopefully both. Copyright is a pointless and archaic way of “motivating” people who are already motivated, in this day and age at least. If I create something that can benefit all of humanity, you can bet I won’t be *selling* it. By that logic, Jesus would have charged hard cash to take away our sins (and I am no Christian). It IS true that those of us who speak this way and are generally anti-capitalist have trouble putting our “money” where our mouths are – we live in the system, and we still have to play by certain rules. But does that mean that we cannot hope and dream for a better system that makes more sense to come along at some point? We could stop dreaming, but I doubt anyone would want to admit that this is as good as it gets. And while we’re dreaming, we could also be working to further our dream – maybe on the side, or maybe we are smart enough to find a way to fit our work towards that dream into the current system and live off of it. But don’t take my argument as saying that closed-source, or non-free software is of lesser immediate quality than free software. No, Mr. Welch’s company can attest easily that non-free software can be of very high quality. Unfortunately, it is of dubious moral nature, because it doesn’t really contribute to the open and free future of our society, only the here-and-now. And I don’t mean the future of our society in chronological terms – I mean in terms of moral and social progression, which is of a mental nature and could take 1 year or 2000. Either way, I fear that Mr. Welch must have long ago lost his motivation to code if it takes money to motivate him. 2003-10-30 10:47 pm From an economics model, why would Andrew Welch spend a sizable portion of his time analyzing Open Source Software? What benefit does he derive? Chances are, he’s just sick and tired of explaining to fanboys why Ambrosia’s legendary games aren’t Open Source. “Because I can still sell them,” he says, “I will sell them and my employees will still eat.” While a valid argument for what he is arguing, it is coloring his broader analysis. Writing off educational coders in the OSS movement? The UC system has been a major contributor to open source software, and it is a perfect license under which to cover educational software developed at public institutions. If you can’t sell it, it isn’t good? You can’t sell VI, but it has been around for many years and is considered an integral part of computing. Be had some of the best hardware and software in the industry, yet it was scrapped for parts… even after it was free. Sadly, Andrew doesn’t seem to have time to venture into areas such as state-sponsored OSS development, reward models for large companies who may pay significantly less to add a necessary feature to an OSS project rather than to license a Microsoft solution, and OSS as an entry-route for new programmers. What about total solutions companies funding OSS development to further their interests? These people sell nothing BUT the additional upgrades and support contracts, leaving the economic model in an interesting position. Sadly, we will never know what these avenues bring, as Andrew’s letter was written to address his economic needs and not higher intellectual curiosity. I don’t blame him for that, I merely point it out to those people who are looking for a deeper analysis of their pet movement. Just an honest coder defending his need to eat. 2003-10-30 11:53 pm One of the important catagories missed in the essay is “resume’ OSS”; that is, software released open source in the hopes of improving desirablity of the developer(s) in the market. Certainly many developers involved in open source software, including Linus Torvalds, have used the name recognition and reputation gained by releasing their work to improve their income substantially. In a sense, this type of work is equivalent the to the old guild system, and the work by a journeyman artisan or craftsman to create a “master piece” by which master’s status is granted. In both cases such work is generally unpaid directly, but results in a much higher market value for those involved. 2003-10-31 12:07 am The author has contributed an interesting way of looking at the phenomenom (segmentation by sponsorship) – he didn’t claim it was a comprehensive or unbiased analysis. And he wasn’t trying to enumerate the benefits of OSS, which can be found in other people’s writings. BTW the UC system indeed made major contributions to OSS, but it’s also behind the Eolas lawsuit claiming a blanket patent on browser plug-in technology: http://lists.w3.org/Archives/Public/public-web-plugins/2003Aug/0093… This is off-topic, and I don’t fault them for having filed a patent claim, but that’s a pretty disgusting lawsuit IMO.