Red Hat’s limited greed

I guess the theme du jour is the motivating power of greed. It was going to be du jour but I didn’t get time to post before leaving.

Long overdue, I’m busy working on my presentation for the conference next Monday in Copenhagen. In trying to explain openness to fellow academics, I’m interested in the “open” strategies that really aren’t — or, perhaps to be more fair, are only partly open.

Red Hat is one of the examples that comes to mind, since their per-CPU license fee looks a lot like Microsoft’s. This is oft-remarked among open source users occasionally gets noticed, although apparently not that often in print.

One example where it was is when Sun CO Jonathan Schwartz referred to Red Hat as “"a proprietary Linux distribution.” He’s not the most objective commentator, but Ian Murdock (the Ian of Debian Linux) agreed. And perhaps the comment was provoked by (never bashful) Red Hat CTO Michael Tiemann criticizing “Java apartheid” — which would be fighting words around here.

Criticism from the community side was published in January by Ubuntu Project founder Mark Shuttleworth, who wrote:

As free software becomes more successful and more pervasive there will be an increasing desire on the part of companies to make it more proprietary. We’ve already seen that with Red Hat and Novell, which essentially offer free software on proprietary terms - their “really free” editions are not certified, carry no support and receive no systematic security patching. In other words - they’re beta or test versions. If you want the best that free software can deliver, a rock solid, widely certified, secure platform, from either of those companies then you have to pay, and you pay the same price whether you are Goldman Sachs or a startup in Rio de Janeiro.

Of course, firms have to make a profit and I’m the first to praise such motivations. I just think some of the claims of openness in the industry are disingenuous — in a few cases, it's no more than a marketing slogan (like the late lamented “OpenVMS”).

BTW, if you want to know what Red Hat’s business model is, Matt Asay spells it out, based on a Red Hat presentation. To my mind, he draws only a nuanced distinction to the proprietary source model:

The model requires constant innovation. This is not good if you're trying to milk a product for monopoly rents ("Monopoly" here referring to the limited monopolies afforded through copyrights and patents).

My problem with this claim of Red Hat innovation is that any software company finds it easy to innovate when it’s young. The key is whether it can continue to provide incremental improvements, valued by customers, long after the core features have been implemented.

In my first job out of college, back in 1979 or 1980, my supervisor (our office had only one “boss”) Glenn D. Johnson said something to the effect that all operating systems stop at 8. With each major release, the cost of upward compatibility becomes worse and worse until eventually the delay between releases becomes infinite. He was thinking of IBM’s MVS (later abandoned), but it also matches my experience. Mac OS ended with 9.2.2, but it skipped directly from 1.x to 4.x. Also, Apple renumbered 7.7 to 8.0 to trigger the Copland clause (and kill cloners). So that means Mac OS had 6 or 7 major releases, not 9.

Technorati Tags: business models, Linux, Red Hat

What’s open about Open Source?

At a conference in January, Michael Tiemann got mad at me for one slide suggesting open source was antithetical to profits. In trying to flip 14 slides in 12 minutes on a complex topic, I was grossly oversimplifying, and I grudgingly conceded that my point (that many FSF-types don’t want money made off of software) could be misinterpreted, although I don’t think that’s true of the written version.

Friday I was catching up on other blogs and found Matt Asay’s entry about his own participation in (and endorsement of) the Red Hat Exchange. Now I get Tiemann’s point.

The Red Hat business model has always been about creating switching costs — getting buyers to adopt and find “sticky” the Red Hat implementation rather than embracing a truly open (and thus commoditized) open standard. Red Hat Exchange they have added vertical integration as well: a one-stop shopping for support for a wide range of open source packages. This seems to be in competition with IBM, which might seem strange since in 1999 IBM put them on the map. OTOH, Microsoft and Intel didn’t pay a price for ingratitude, either.

In our research on Linux adoption, Jason Dedrick & I found that Red Hat buyers ascribed an option value (in the sense of a stock option) to the possibility of getting an alternate supplier for Linux — something they obviously didn’t have with Windows. But if this is an option that is never exercised — or from a practical standpoint, can’t be exercised due to “stickiness” around the service offering — how is Red Hat’s business model different from Microsoft’s? Other than they only have to pay for roughly 13% of their R&D instead of 100%?

I’m surprised that the Microsoft-like property of Red Hat wasn’t mentioned by Matt — who competed with Red Hat when he worked for Novell (until he bailed), and who’s thought more about open source business than anyone I know in industry. Certainly the possibility of Red Hat as the next Microsoft is oft-reported news — in 1999, several times in 2002 (at NewsForge, eWeek & ZDNET) and earlier this week — as well as Red Hat’s stated ambition. Larry Ellison doesn’t think it will happen, but then Larry’s not God.

Is Red Hat one of a kind, or leading the way for a whole wave of not-very-open “open source” business models? Open standards (when they worked) were about low switching costs, and thus about choice. Is “open source” destined to become just a marketing slogan, akin to OpenVMS?

Technorati Tags: business models, Linux, open source, Red Hat