Subject: Re: offering pre-purchases
From: Thomas Lord <>
Date: Mon, 08 Oct 2007 16:07:14 -0700

simo wrote:

> Corporations from time to time like to invest money in this way, but
> they usually also like to do that with non-profit organizations as that
> has implications Tax-wise.

The famous ones, such as Mozilla Foundation and OSDL, are there
to house and to create a membership consortium around well-established
open source projects.   That is, the patrons are making sure that
incremental/evolutionary development continues, and that the patrons
are getting to sit around a table and talk about their concerns with
the developers.    NPOs impose a lot of overhead and transaction
costs -- it's worth it in cases like Mozilla and the kernel because
there are so many stakeholders and the stakes are so high.  (Does
Red Hat care if the person maintaining "ls" works for Novell?
Probably not so much.   Would Red Hat care if Novell had
exclusive control over the main kernel lines?  Yeah, that'd be
unstable.   OSDL helps foreclose those kinds of games.)

So, pre-purchases are similar in some ways.   Customers (or
patrons, if you prefer) are, in much the same way, gathering to
form a consortium.   They get to inform future development.
This is a less formal gathering.  There aren't meetings (unless
it turns out we want some), voting, charters, etc.   This
is an exploratory gathering -- to discover whether, true to
the claims of the seller, there are product opportunities being
exposed/created by this line of research.

Pre-purchases are different from NPO patronage in two important
ways:   First,  the funding *need* is smaller.   That is, the next steps in
the projects I'm selecting for pre-purchases are only modestly
expensive: it is work I can do myself if I have enough revenue
to cover my family needs.   Perhaps the projects will grow,
slightly, before I'm done with them but, generally, I would find
it hard to spend an OSDL-size budget on these projects, anytime soon.

Second, the funding *incentive* is smaller.  Because less depends upon
my projects in the present (e.g., I'm not holding up the next release
of RHEL), stability of funding is less important to my customers.
OSDL, one  presumes, spends some of their patronage provisioning redundant
web hosting and formulating continuity of operations plans for
various scenarios.  I don't have those kinds of costs to pass on to

An NPO structure would, therefore, add unneeded overhead
and impose awkward legal barriers.   Whatever customers saved
on their taxes, they would surely be losing to those additional costs.

> While it is certainly a good thing to be able to help the accounting
> system of a corporation, the problem here is that you are basically just
> asking them to trust you
> Managers have hard time to justify an expense in such cases.
> It can be a somewhat easier if you are making some promise about the
> outcome but making such promises is usually very tricky and risky.

No, customers need to trust themselves.

One should buy a pre-purchase if, in one's own judgement, there
is something to be learned from the announced starting point -- something
to be gained by further exploration.

At the conclusion of the event -- when a future release is announced
to satisfy the pre-purchase contract -- the customer ought to ask
a series of questions:

1. Did I learn anything worth knowing?

2.  Is there more to learn from this new starting point?

3. How can I apply what I have learned?