Open Source Software Made Developers Cool. Now It Can Make Them Rich By Daniel Roth Email 03.24.08 | 6:00 PM
http://www.wired.com/techbiz/it/magazine/16-04/bz_opensource Last spring, marketer and blogger Hugh MacLeod posted a question on his site: If open source is such a phenomenon, where are all the open source billionaires? His audience wasn't amused. Open source software relies on a community of volunteer developers who tinker on, write for, or amend a program, then give it away free. MacLeod's site filled up with complaints that even to look for billionaires violated the spirit of the open source movement. "There have to be rewards," one commenter wrote, "but they don't have to be financial." Another simply recommended that MacLeod "shut the fuck up," adding: "You don't know what you're talking about." But not every open-sourcer has proven so averse to filthy lucre. A number of open source companies have recently attracted investments and merger interest: Whether they like it or not and let's face it, they probably do more and more open source creators are striking it rich. In 2007, some 30 open source software companies were purchased for more than $1 billion double the number of sales in 2005, according to consulting firm 451 Group. And 2008 is proving to be even more frenetic. In January alone, Sun Microsystems announced the purchase of open source pioneer MySQL for $1 billion; open source development players Covalent and SpringSource merged; and Nokia agreed to pay $153 million for the open source mobile-software maker Trolltech. On Wall Street, bankers are rooting around for a good open source company to take public. "People call us all the time," says John Lilly, CEO of Mozilla, which oversees the open source Firefox browser and Thunderbird mail application. "We're a valuable thing." On his Silicon Alley Insider site, defrocked Wall Street analyst Henry Blodgett recently estimated that the for-profit arm of Mozilla was worth between $1.5 billion and $4 billion. Lilly says the estimate is about right but that Mozilla is staying private. "As long as we can pay the bills, we can take a long view of the world that we couldn't if we had shareholders and quarterly reporting." Which is not to say that open source companies can't hold their own in the business world. The software is penetrating realms that few thought it ever would. It's being used to create trading platforms for hedge funds which are notoriously insistent on proprietary systems and Wal-Mart is deploying an open source-based system for its workers to track their health care records. The cost savings come from not having to hire engineers to write code in-house or pay costly per-seat licensing fees. "I think the software-license business model is archaic," says Kevin Harvey, a venture capitalist at Benchmark Capital, which recently cashed in on its investments in MySQL and the open source mail-client firm Zimbra, which Yahoo picked up in late 2007 for $350 million. "I wouldn't fund a company with that model, and I don't think anyone else would, either." How can you build a business by giving away the store? The money comes from selling add-ons, service contracts, and hardware to go with the software. But that model works only if you master a couple of basics. Open source software makers have to win enough users that even the small percentage of customers who pay will generate a torrent of dollars. (Mozilla gets most of its money from Google, which pays to be the browser's default search provider something Google is willing to do because Firefox has so many users.) More important, software makers depend on the goodwill of outside developers, whom they rely on to keep updating their products. So the new open source billionaires might want to think twice about going 767 for 767 with the Google guys. For the coder drones, accustomed to being paid in warm feelings, such displays might make them take their coding skills elsewhere. --------- Wired 2008 Business Trends: Sure, there's bad news out there, what with the panicky Fed and people whispering the R-word. But somehow, the wired world continues to churn out smart, useful, occasionally game-changing ideas. >From the rise in instant manufacturing to the growth of open-source business models, these trends show that innovation can bloom even in a grim economic climate. Here's a look at nine trends driving business in 2008 (from Wired 1: Open Source Tycoons http://www.wired.com/techbiz/it/magazine/16-04/bz_opensource 2: Social Networks Grow Up http://www.wired.com/techbiz/it/magazine/16-04/bz_socialnetworks 3: Green on the Outside http://www.wired.com/techbiz/it/magazine/16-04/bz_green 4: Invisible Internet http://www.wired.com/techbiz/it/magazine/16-04/bz_internet 5: Rise of the Instapreneur http://www.wired.com/techbiz/it/magazine/16-04/bz_instapreneur 6: Building a Better Banner http://www.wired.com/techbiz/it/magazine/16-04/bz_microsoft_yahoo 7: Invented in China http://www.wired.com/techbiz/it/magazine/16-04/bz_china 8: VCs Look for a New Life http://www.wired.com/techbiz/it/magazine/16-04/bz_lonelyvc 9: The Human Touch http://www.wired.com/techbiz/it/magazine/16-04/bz_curator Evil/Genius: How Apple Got Everything Right By Doing Everything Wrong http://www.wired.com/techbiz/it/magazine/16-04/bz_apple Vote!: The Most Effective Self-Promoters of All Time http://www.wired.com/techbiz/it/magazine/16-04/bz_selfpromotion
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