Subject: Re: street performer protocol
From: "Stephen J. Turnbull" <turnbull@sk.tsukuba.ac.jp>
Date: Sun, 21 May 2000 18:22:38 +0900 (JST)

>>>>> "Crispin" == Crispin Cowan <crispin@wirex.com> writes:

    Crispin> "Stephen J. Turnbull" wrote:
    >> The analogy is that Crispin is claiming that the Red Hat and
    >> other Linux distribution successes are innovation (in software)
    >> driven,

    Crispin> Where did I say that?

You denied that they were "software supermarkets" in a distribution
industry and that their development efforts were crucial to their
success.  You continue to do so:

    >> and thus the stock market rewards them for investing in
    >> development.  But investors could sour on them just as fast as
    >> they did on biotech---how is Red Hat going to finance its
    >> development programs then?  Maybe a couple of firms can do it
    >> on their current revenue, but I bet (based on the analogous
    >> history) that most of them are paying developers out of venture
    >> capital, and when the venture capital dries up,

    Crispin> If you read the history of Red Hat, you discover that it
    Crispin> was almost entirely funded by revenue until late 1998 or
    Crispin> early 1999.

Huh?  They published their books?  Where can I get hold of those?

    Crispin> Now reverse the situation: if capital for Linux startups
    Crispin> dries up and blows away, who will survive?  The companies
    Crispin> with the biggest revenue streams.  Relatively new me-to
    Crispin> Linux startups that have neither technology nor revenue
    Crispin> (because they invested the capital in marketing) will
    Crispin> collapse.

Then why did you bring up the "hundred Linux distribution startups
that don't have to reinvent the wheel" if 99 of them are going to
collapse?  This is good for customers, no doubt, but it's not an
attractive business model.


    >> they'll have to cut costs.  The first thing that will have to
    >> go, when the bean counters take over, is basic development,
    >> because that doesn't directly move product and generate
    >> revenues.

    Crispin> How do you figure that?  Basic development is what makes
    Crispin> a given Linux product better than the next one.  A Linux
    Crispin> vendor can't sit still on technology, or they get
    Crispin> bypassed and forgotten.  This is what happened to
    Crispin> Slackware and *BSD :-)

Both of which still exist in their niches, as far as I know.

    >> This will lead to consolidation in the industry; I don't think
    >> that there will be more than two or three profitable (on the
    >> scale necessary to finance the kinds of development programs
    >> the major distributions run) Linux distributions after say
    >> three years.

    Crispin> Just about every industry except corner stores
    Crispin> consolidates, and even the corner stores are
    Crispin> consolidating into francise brands like 7-11.  Of course
    Crispin> the Linux market will consolidate.

Again, this is the conventional wisdom; it doesn't explain how those
100 startups are supposed to prosper.  Or are they all academics with
tenure on sabbatical, so they don't care?

    >> And even they will be hard-pressed to keep up in many of the
    >> new fields: embedded OSes, clustering, etc.

    Crispin> I completely disagree.  Open source system ventors will
    Crispin> find it easy (verging on trivial) to crush closed-source
    Crispin> competitors in these emerging markets, precisely because
    Crispin> they do not have to invest $millions in re-inventing the
    Crispin> wheel yet again.

Ah, ever the optimist!  "Crush"??!?  It is quite possible to imagine a
large industry of small specialists  (eg, Sleepycat) selling each
other software components, all of which are better, enough so, than
the corresponding free versions to generate enough revenue to support
their develpoment---precisely because they are proprietary.  (Not to
accuse Sleepycat of being not an FSB, but rather to point out a sector
where such specialization seems to be profitable for an FSB, which
could be vulnerable to competition from proprietary entrants.)

This is the threat to FSBs, not large do-everything behemoths
reinventing the wheel multiple times.

    >> These will be the province of specialists (often ex-members of
    >> big distribution development groups who are sick of the
    >> budgetary limitations and intergroup competition for support
    >> characteristic of maturing organizations).

    Crispin> Possibly, but that contradicts the trend towards
    Crispin> consolidation.  Specialization is a small-company
    Crispin> response to encroaching consolidation.

We have perhaps heard of "core competence"?  Even GE claims to have a
core competence; the "automatic conglomerate synergy" has gone the way
of snake oil.  In a big world it's possible to be a very big and
profitable  specialist.

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