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How Will Companies Ever Make Money Off Open-Source?

"The Subscription Model Is a Necessary Trend for Open Source Deployers," Says Simon Phipps

Tim Bray and I hosted a discussion at JavaOne 2004 on the realities of open source development for subscribers to Sun's Inner Circle Newsletter - mainly CIO/CTO types from some of Sun's best customers, plus a few stragglers (an IBM employee or two for example). It was a small, select, friendly but alert audience, a pleasure to meet and an honor to present to.

A guest asked a question that often crops up; 'Sun is giving so much source-code to open source (Project Looking Glass and Solaris the most recent announcements), how will it ever monetize these donations - how can you make money if you keep giving stuff away?' It's a good question. At its heart lies a misunderstanding about the nature of open source software, and once that's cleared up everything falls into place much more easily. The paradox - profiting from what is given away - is actually one many of us participate in every day in another area of our lives.

Open Source Development in Overview

Open source software development is best defined using the phrase coined by Professor Yochai Benkler - "commons-based peer production". Open source development uses a pool of software assets that is held in common by a community - termed a 'commons' by Professor Lawrence Lessig - which is enhanced and expanded over time. The community is comprised of peer experts of all kinds, each with a status reflecting only their abilities - age, previous achievements elsewhere, employer or external factors such as race or politics should be irrelevant. The community is focussed on production of software - "code talks, talk doesn't code".

Then for each aspect there is a facilitator.

  • The Commons is facilitated by a license that grants the rights that the community needs to function. The license will offer unrestricted access to the source code that comprises the commons, unrestrained by either payment requirements (gratis) or usage restrictions (libre).
  • The peer nature of the community is facilitated by the governance model of the community. This is often overlooked but it's just as important as the license. Good governance will for example result in the power to permanently change the contents of the commons (the power to 'commit' changes, exercised by a 'committer') being held only by those the community respects as best qualified.

    The key to quality thus lies in governance. Bill Joy pointed out that no-one can hire all the smart people; open source development gathers them together and recognises the smartest as committers. The quality of good open source software comes not from many hands being involved but from the best being given the keys to the commons.

  • The production of software from the commons is facilitated both by the license and the governance.

Deployer Freedoms

It's worth noting that the focus of an open source community is development - none of the freedoms required of a software deployer (such as strict compatibility with externally-defined standards, essential if the freedom to switch to a different software solution is to be preserved) are explicit objectives. All the time that open source software has been the preserve of developer-deployers there's been no issue, but as it becomes more widely used by deployers with no interest in development, the need for new ways to provide deployers with their necessary freedoms will grow.

What freedoms do deployers need? They're actually rather traditional:

  • Function that meets actual business needs
  • Freedom to change supplier, so that prices can always be negotiated
  • Freedom to choose new software solutions as business needs evolve
  • Control of the data, by implication control of the format it's stored in
  • Protection from liabilities associated with the development of the software

Software derived from an open source community may or may not meet these requirements. For many companies, there has been an initial rush based on the abilities of skilled and visionary employees to obtain software gratis from open source communities but increasingly CIOs are realizing this doesn't secure all the freedoms they need for long-term business. They're turning to commercial suppliers to act as their intermediaries with the open source communities - "they join the community so we don't have to."

Just Like The Newspapers

The model Sun is developing for giving customers the benefits they need using open source is illustrated well by Sun's Java Desktop System (JDS). JDS comprises many software elements drawn from a wide range of open source communities. To understand what's happening, let's consider the newspaper industry.

Newspapers haven't been killed off by the Internet (at least, not yet!). The reason for this is that when we buy a newspaper, we're not buying the news. These days the news is free (gratis) - we can go online and read newsfeeds from organizations like Reuters or the Associated Press, or original reporting from an organization like the BBC. When I buy a newspaper like 'USA Today' or 'The Independent', I am actually buying an editorial style. The editor-in-chief for the newspaper sets the outlook, and then the editors and other staff select the news stories, phrase the reports, position them in the publication and perform the lay-out in support of that editorial outlook. If I go online to get the news, I have to do the work of selecting and filtering the news, and I may not always be aware of the biases of the source I am using. To get an aggregation of the news I want delivered in a style that helps me and with biases I understand, I subscribe to a newspaper.

JDS is just like this. Almost all the elements that comprise it - the Mozilla browser, the Evolution mail and calendar client, the StarOffice document productivity suite, the underlying GNU/Linux operating system they depend on, the Gnome desktop environment they use and much more - come from open source communities. You could go get all those parts yourself - they are all available gratis. But then you'd have to integrate them yourself, support them yourself, accept joint liability for their use of ideas yourself.

Instead, Sun acts like the editor-in-chief of the JDS 'publication.' Staff select the software components to include and exclude, work to integrate them, constribute to each of the open source communities to improve their compatibility and completeness. Sun packages and delivers the final publication, offers support and updates, fixes security exposures, offers indemnity and generally joins the communities so you don't have to.

You don't buy the software from Sun - instead you subscribe to the editorial outlook. Sun's editorial view is to deliver high function, ease of use, data format and networking compatibility, low migration cost, re-use of existing hardware, escape from Windows viruses and security risks and minimal retraining. If that's an editorial outlook that fits your corporate needs, you'd do well to subscribe.

To take the analogy further, you're not just subscribing to a publication that's tightly bound together between stitched hard-covers. JDS is more like a publication delivered in a ring-binder on punched paper. You're free to insert extra pages - add software like Wine to allow existing Windows applications to run, for example. You're free to remove pages you don't need. You're free to substitute pages where you have another preference (maybe you'd rather use the new Firefox browser?)

Resolving the Paradox

Perhaps it's clearer now why Sun donates software to open source communities. It's not a matter of 'giving away'. Instead, Sun is joining with the other smart folks out there and contributing to the commons of many communities to create and enhance the pool of software from which 'publications' such as JDS are then derived. Sun has always believed that business success comes not from eliminating competitors or always 'coming first' but from creating marketplaces in which Sun and others can all succeed - "a rising tide lifts all boats."

There will be other 'publications' you could choose - you could even assemble your own if you wish. But the right editorial outlook at the right subscription price will allow Sun to monetize its software investment more effectively than a closed sale of a sealed product ever could in our new, massively connected society.

More Stories By Simon Phipps

Simon Phipps, Sun's Chief Open Source Officer, is a technology futurist and a well-known computer industry insider. At various times he has programmed mainframes, Windows and on the Web and was previously involved in OSI standards in the 80s, in the earliest commercial collaborative conferencing software in the early 90s, in introducing Java and XML to IBM, and most recently with Sun's launching Sun's blogging site, blogs.sun.com. He lives in the UK, is based at Sun's Menlo Park campus in California and can be contacted via http://www.webmink.net.

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Most Recent Comments
Pierre-Yves Gibello 08/31/04 12:54:34 PM EDT

French translation of this article on http://gibello.com/publi/transl/articles/linuxworld_270804_sun_os.html

Any comments are welcome, before I eventually make this URL more public for french readers.

clarifier 08/29/04 03:01:15 AM EDT

I was just corrected on the definition of "non-exclusive" in a license, and I am wrong in my assumption.

Can't delete my post, so I'm admitting my mistake.

clarifier 08/28/04 06:58:04 PM EDT

Ahh, but the GPL is not a "non exclusive" license - the exclusivity of it is that you must agree to abide by it's rules. This excludes those who wish to not pass on the work they have benefited from, charge fess and or licenses, etc.

As such, your point is moot.

cybervegan 08/28/04 06:01:24 PM EDT

We will see. IBM (and hundreds of other F/OSS companies) wouldn't be betting the farm on it if it was that unclear - they have very smart lawyers whose bread and butter is Licenses and Contracts, so if they don't understand it better than you (unless you are a lawyer), they're in the wrong job.

I won't be posting any more replies to this thread as you're obviously just trolling.

regards,
-cybervegan

daniel wallace 08/28/04 03:40:58 PM EDT

> The GPL, however, is a license (most definately NOT a
contract) ...

OK I admit it's a LICENSE...

Here's what the Federal Appellate Courts hold about your
LICENSE:

"Generally, a 'copyright owner who grants a nonexclusive
license to use his copyrighted material waives his right to
sue the licensee for copyright infringement' and can sue
only for breach of contract." Id. at 1121 (quoting Graham v.
James, 144 F.3d 229, 236 (2d Cir. 1998) (citing Peer Int'l
Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1338-39 (9th
Cir. 1990)). Thus, a licensee's breach of a covenant
independent of the license grant does not support a claim
for copyright infringement. See Effects Associates, Inc. v.
Cohen, 908 F.2d 555, 559 (9th Cir. 1990); Graham v. James,
144 F.3d at 236; Fantastic Fakes, Inc. v. Pickwick Int'l,
Inc., 661 F.2d 479 (5th Cir. 1981). However, a licensee does
infringe the licensor's copyright if it exceeds the scope of
the license. S.O.S., Inc. v.. Payday, Inc., 886 F.2d 1081,
1087 (9th Cir. 1989).

See the "Generally, a 'copyright owner who grants a
nonexclusive license to use his copyrighted material waives
his right to sue the licensee for copyright infringement'
and can SUE ONLY FOR BREACH OF CONTRACT." ?

Presumably someone wishes the GPL to be enforcable... so its
either a "contract" or you don't get to sue for enforcement
of the GPL. If you sue under contract law and find the
contracting party has exceeded his terms of scope, then
and ONLY then may you proceed to enforcement under 17 USC
sec 501 for copyright infringement.

Perhaps you should contact the Second, Fifth and Ninth
United States Circuit Court of Appeals and inform them of
your findings to the contrary so they may correct themselves
concerning this incompatibilty with GPL philosophy...

Daniel Wallace

cybervegan 08/28/04 02:41:19 PM EDT

>Unfortunately this license description is prohibited by
>law in most Federal Circuits. Without agreement to
>"payment requirements" or some other term qualitativly
>different from the rights granted in sec. 106 of Title
>17 (Copyright Act) your license is preempted under sec.
>301 due to the lack of an "extra element". Without an
>"extra element" different from "usage restrictions" the
>courts view these licenses as "schemes" to circumvent
>the Copyright Statutes

If it's the GPL you are referring to, then you are totally mistaken. The GPL depends copyright law, but does not alter or circumvent it in any way. Copyright law says that without written permission from the copyright owner, you have no rights to duplicate or otherwise reproduce a copyrighted work (apart from the notion of 'fair use') or to produce derivative works of it. Copyright is not an 'applied for' right (like patents) - it is automatic , and immediately granted upon the fixing of a work in tangible form (i.e. you can't copyright thoughts, only an 'impression' of them).

GPL software is copyrighted just like any other work. You have no rights under standard copyright law to copy it or form derivatives. The GPL, however, is a license (most definately NOT a contract) and grants you additional rights providing that you accept its terms - these additional rights include those of copying and deriving new works. As long as you accept the terms, and do not breach any of its conditions, you are entitled to exercise the additional rights that it grants you. You must, however, release any copies or derivatives under the same license terms, so that no-one is ever able to remove the existing rights of others to a GPL'ed work. In this way, it operates similarly to any other license agreement or EULA - without which you would have no right to use any licensed software. If copyright law worked the way you suggest, then no-one would ever be able to use any copyrighted material for any reason whatsoever - clearly not what the law is intended to mean.

Because it is a LICENSE, there is no requirement for payment. Unlike a contract, nothing needs to be signed, and nothing needs to be exchanged. Also, there is no expectation on the part of the LICENSOR for any consideration in respect of the LICENSE. The license also only comes into operation at the point at which you "distribute" a copy or derivative, meaning that you can keep as many personal copies or make personal derivatives as you like, but once you distribute, you have an obligation to provide the source-code upon request. It really is that simple - and so say the courts, too, both internationally and in the US.

There is nothing illegal or unenforceable about the GPL.

Hope that helps.

-cybervegan

Alex Theodore 08/28/04 01:45:40 PM EDT

I don''t think Sun has a lot to loose by going to the subscription based software model. When were they really making lots of money from selling Solaris? Buying Solaris was sort of a give me when purchasing one of their big boxes. I mean who really runs Sparc Linux on a Sun Fire?

For the past few years they have basically been giving away Solaris ($99 CD media kit)? Then Sun moved to a free downloads of Solaris on their website. Where Sun has been making fists full of money (in my opinion) is the support fees. Having a Sun Spectrum Silver (or better) support account entitles you a RTU for Solaris on your supported systems, contract/public updates, etc.. So in essence this is pretty much the same thing as a JDS subscription. I guess the difference lies that now you can poke around in the source, and the community can contribute fixes/features.

So I guess I don''t see all they hype.. seems like the same stuff, just repackaged... perhaps I don''t get it.

daniel wallace 08/28/04 08:30:00 AM EDT

>The Commons is facilitated by a license that grants the
>rights that the community needs to function. The license
>will offer unrestricted access to the source code that >comprises the commons, unrestrained by either payment >requirements (gratis) or usage restrictions (libre).

Unfortunately this license description is prohibited by
law in most Federal Circuits. Without agreement to
"payment requirements" or some other term qualitativly
different from the rights granted in sec. 106 of Title
17 (Copyright Act) your license is preempted under sec.
301 due to the lack of an "extra element". Without an
"extra element" different from "usage restrictions" the
courts view these licenses as "schemes" to circumvent
the Copyright Statutes.

Daniel Wallace

been there, done that 08/27/04 02:36:26 PM EDT

This is not an original idea - even in the software world.

Microsoft for many years has already sold countless subscriptions to their MSDN.

Of course the OS is, itself, a subscription with ''issues'' every 2-3 years..

95, 98, 2000, etc..

Rajesh Jayaprakash 08/27/04 12:01:31 PM EDT

Somehow, I am not convinced. It''s all very well to talk of a subscription-based business model, but I don''t think Sun can hope to gain a lot of revenue from something like the Java Desktop System (BTW, I consider Sun''s using ''Java'' in a product that has nothing to with Java pretty despicable, but hey, it''s their trademark). There are plenty of distros that already offer the goodies in the JDS [*]. May be I am missing something here, but I fail to see what differentiates Sun from other such vendors (other than the fact that Sun can call it the ''Java'' Desktop System).

Re: "Sun''s editorial view is to deliver high function, ease of use, data format and networking compatibility, low migration cost, re-use of existing hardware, escape from Windows viruses and security risks and minimal retraining." Nope, nothing unique here. If you remove Sun''s name from the above sentence and replace it with, say, Red Hat''s, nobody would notice.

cybervegan 08/27/04 11:33:04 AM EDT

Why has SUN been so inconsistent about its F/OSS alignment? It appears very "now we we will, now we won''t" at times.

Furthermore, why is the GPL nature of SUN JDS so stealthily hidden on the distribution CD? Why is the language used in the License so vague? Anyone buying this product would assume that they don''t have a right to the source code *or* to copy the software. Most of the operating system is GNU licensed, and a small proportion is SUN owned, so we understand that those bits we can''t copy, but why does SUN have to mislead people in this way, or has this changed?

SUN may have given us OpenOffice, and for that we''re thankful (the measure of how thankful is the continued development and improvement of it). At one point, I thought SUN had actually "got it" about F/OSS. I recently downloaded the SUN Java Runtime Environment, and read the License. Talk about invasive.

Pamela Jones of Groklaw.net said of the SUN Java Desktop: "There are so many restrictions that the license requires a booklet of amendments listing all the other things you can''t do under this or that special circumstance. The wording, he says, is unusually complex, and he suggests you have your legal eagles look the license over before you even consider making a buying recommendation on it. "

Makes you wonder. The F/OSS community will not praise SUN for such plundering - it seems that SUN is disregarding the very community it is taking from to produce the Java Desktop.

What a shame.

-cybervegan

MyDreamComeTrue 08/27/04 07:06:16 AM EDT

So, after Solaris from Sun is open-sourced, all we need now is for MSFT to open up the file formats for Word documents so that programs like OpenOffice can correctly decode the formatting and we''ll all be waltzing toward the new promised land

Mr Simon Phipps, we like the sound of this!!