Subject: proprietary -- a truism
From: Russell Nelson <nelson@crynwr.com>
Date: 12 Apr 1999 01:44:12 -0000

[ This should be obvious, but I feel like writing about it. Yes, Tim,
  I know I have two chapters that need editing, and more to write for
  the end of this month, but a guy needs a break, eh?  -russ ]
[ Stig, feel free to put this into your Open Source book, but be sure
  to credit the whole mailing list.  I wouldn't understand free
  software half as well without the contributions of everyone on the
  list, um, who's contributed that is.  -russ ]

I think it's almost a truism that a free software business has to keep 
something proprietary.  Unless you keep something proprietary, you
have nothing to sell.  You wouldn't be in business, then, you'd be a
non-profit foundation.

Proprietary things:
 1) Reputation.
 2) People's time.
 3) Physical copies.
 4) Some of your software.
 5) Documentation.
 6) Datasets.
 7) Hardware.

1) You can sell your reputation.  To an extent, that is what Redhat
does when it sells boxed copies.  Since you get the same CD's from
CheapBytes, why else would someone pay extra for the Redhat copy?
Support?  That's #2.  The pretty box, that's #3.  The manual?  That's
#5.  They don't add up to the full price.  Everybody who sells branded 
anything uses this model.

2) You can sell people's time.  This can be hand-holding, or doing the 
job for them, or designing a system for them using your software.  It
can be a custom version of the software.  This is the Cygnus model.

3) You can sell physical copies of the software.  Anybody who ships
free software uses this model.  It's the CheapBytes model, the Redhat
model, the s.u.s.e model, the Cantaforda Lab model.  Even though the
customer could download it, there are distinct advantages to having a
manufacturer-provided version.  For one, any tainting happened at
their end, whereas a downloaded version (particularly from a mirror)
may have been hacked.  For another, unless you download everything,
you might go back for something more, or the source, and not find it
there.

4) You could keep some of your software back, or retain some rights to
the software.  For example, if you use the GPL, then you retain the
right to issue a version under a different copyright which might not
require source distribution.  Or if you use the Aladdin APSL, you can
license the software for commercial distribution (other than what it
usually allows).  Or if you use the BitMover BitKeeper license, you
retain the right to use the software (and obviously have a use license
that requires free software developers to publish their changes, which
they'd do anyway, but which proprietary developers won't).

5) You could sell documentation.  This is the O'Reilly model for
publishers, or the Pegasus Mail model for software developers.

6) You could sell extra data.  This is the Id Software model.  For
years they have given away their software, and the first episode of
Quake.  They sell a slightly enhanced version of the software, as well 
as two more episodes.

7) You could sell hardware that is needed by the software.  This makes 
most sense when the software is a driver, but it could be application
software as well.  For example, you could write a Linux GIS
(Geographic Information Systems) application which relied on talking
to a GPS device.  Maybe there's a driver in-between, but that doesn't
matter much.


You could object to all of these by saying that they only work because 
of imperfect markets, because there is friction in the marketplace.
Well, then, object to Pennzoil, Quaker State, Mobil, Jiffy Lube, Minit 
Lube, and everyone else who ameliorates friction in automobiles.
Transaction costs are a part of the real world, and much money goes to 
people who can use them to help people.  Of course, much money also
goes to people who can overcome transaction costs as well.

-- 
-russ nelson <rn-sig@crynwr.com>  http://crynwr.com/~nelson
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