Subject: Software business(es) (Was Re: EY invests in ...)
From: John McDermott <jjm@jkintl.com>
Date: Thu, 16 Sep 1999 16:03:32 -0600


Sorry this rambles a bit...

Russell Nelson wrote:
> 
> Stephen J. Turnbull writes:
>  > What's _different_ about software?
> 
> Low up-front capital investment -- you can get a very usable computer
> for less than the cost of a junker car.  Low training costs -- anyone
> with the gumption can try to learn how to program.  No government
> interference -- anyone can write programs, but very few can experiment
> with drugs.  Extremely wide problem domain -- any procedure which can
> be thought of can be turned into an algorithm.  Give the appropriate
> programming language, sensors and controls to a farmer, and he'll be
> inventing patentable algorithms in a few days.

...And low marginal cost of distribution.  The cost of 100 downloads vs
90 downloads is virtually nil.  Yes, large numbers of downloads do
create the need for more powerful servers, but as you point out,
hardware is inexpensive (and the software to do the distribution is
free...).

> 
> But hmmm... if it's that easy, why aren't there more free software
> businesses?  :)

[Just for discussion.  Smiley noted.]
Perhaps precisely because it *is* easy to get into the business.  This
creates the fear on the part of non-free businesses that "anyone" can
take free code and make a business of it.  Fortunately, creating
software does take one potentially expensive (or at least valuable)
commodity: time.

Buying hardware is little risk.  Spending lots of time getting a free
software project off the ground and keeping it running can have risk in
terms of time unless the project is such that it snowballs into
something "big".  Look at all the projects that are listed as "stalled"
on their websites of where the version has been 0.whatever (with the
same whatever) for two years.  Sure not all were businesses, but if they
had been, they'd be dead.

I would like to offer that one reason there are not more free software
businesses is that free software is such a free market that it can be or
can look to be hard to stay in it profitably.  That is why software
patents look so attractive to some businesses: they restrict entry into
a market by their very nature.

Making money on "software collateral" such as documentation, consulting,
training and other things (like selling the latest-and-greatest version,
etc.) is a new business model for many companies (aren't we glad nobody
has tried to patent any of the free software business models! ) and
there is great intertia against such new ideas.  Perhaps because there
are few case studies.  [Book idea: Successful Free Software Businesses:
Case Studies]

Personally, I do training using free software and about free software. 
I find that taining companies find it hard to believe that anyone would
pay money to learn about something that is free.  Perhaps they think of
free software as "little tools and toys" or like some of the shareware
of the early '90s.  Even with the popularity of Linux, there is great
resistance by some companies to using it in training.  (One reason is
they percieve that their clients may think they're being "cheap".)  I
see lots of Word and M$ Office training courses, but I have not seen any
popular Star Office courses.  Sure, it has somewhat limited deployment,
but that is only part of the reason.

I do think that the success of the Red Hat IPO will help other
businesses think about becoming free software businesses, but even the
IPO seems to have little helped businesses consider even *using* free
software, let alone producing it.

--john

> 
> --
> -russ nelson <nelson@crynwr.com>  http://russnelson.com
> Crynwr sells support for free software  | PGPok | Government schools are so
> 521 Pleasant Valley Rd. | +1 315 268 1925 voice | bad that any rank amateur
> Potsdam, NY 13676-3213  | +1 315 268 9201 FAX   | can outdo them. Homeschool!

-- 
John McDermott jjm@jkintl.com
Writer and Computer Consultant
J-K International, Ltd.
+1 505/377-6293 - V
+1 505/377-6313 - F