October 15th, 2008
Open source and the bottom line
Matt Aslett has a great “hair on fire” commentary at 451 Group that frankly demands a response. (I found this cute guy at a Shiatsu site in England last winter.)
When seen purely from the point of view of software companies open source is a disaster. ”Freedom of speech won’t feed my children,” writes Matt, and he’s absolutely right.
But markets have two sides, the seller being just one. There is also the side of the user or buyer to consider. Open source gives them the whip hand in this relationship, for the first time.
That’s change buyers can believe in.
Open source compresses margins, and suppliers have to get creative to even grab those. But software companies had spent decades capturing all the economic benefits of technological change. This is payback.
The tools we use for writing software have improved dramatically. Greater computing power means we build from a much higher plane of abstraction than ever before.
I can see it in my darling wife’s career. She started 25 years ago writing Assembly Language code. Now she uses C++ and Java, XML and SQL. She edits GUIs. And the toughest job at her company is specifying what the software needs to do.
Along the way her title has changed. She started out as a programmer. Then she became an engineer. Then an architect. Now she’s a developer. (What’s next, goddess? Just here at home, dear.)
While tools and hardware have improved, the Internet has made distribution free. Open source has nearly eliminated marketing costs. You can collaborate with Indian and Chinese programmers in real time.
With productivity soaring and distribution costs near zero, what happened to the pricing of proprietary software? All that value was captured by the vendors, who became incredibly wealthy in the process.
Well, bottom rail on top now. Customers are no longer passive. They can choose to make or buy improvements. They know what everything costs.
Who benefits? The market benefits. Every company that uses software sees costs transparently and can measure value for themselves.
The global economy benefits, gaining efficiencies from the mass adoption of powerful tools. Ordinary people benefit, as more are able to enter the global market.
Software companies don’t benefit as much. They see their margins compressed, their customers getting as smart as they are. In hard times they get fired by those customers.
It has been a hard decade for software billionaires and the next decade will be just as hard. Because the open source genie is not going back into the lamp.
But net-net, the world is much better for it. The bottom line is in the eye of the beholder.
Dana Blankenhorn has been a business journalist for 30 years, a tech freelancer since 1983. You can follow Dana on Twitter. See his full profile and disclosure of his industry affiliations.
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| 10/16/08
