Subject: Re: I wonder if Craig Mundie reads this list
From: Brian Behlendorf <brian@collab.net>
Date: Tue, 5 Mar 2002 16:53:40 -0800 (PST)

On Mon, 4 Mar 2002, Tom Lord wrote:
> His fallacies:
>
> 1. The presumption that "ancillary manufacturing or services"
>    necessarily can not earn the profits that are possible with
>    proprietary licensing.  (We on the list all seem to agree that
>    that's true for the services being sold today, but don't all
>    agree about the possibility of new kinds of service that overcome
>    that limitation.)

Speaking in absolutes in either direction isn't useful.  Looking at case
studies is better, and trying to get quantitative is best.  There are very
few companies who i) spend significantly on the production of new open
source software, ii) release only open source software, and iii) are
profitable.  We know of a few, but they make up a statistically
insignificant amount of the cashflow of the IT industry.  It would be
unfair of Mundie to call it impossible to create such a company - we have
existance proofs - but to call it "almost impossible" might not be a
stretch.  It's also almost impossible to win a gold medal in the Olympics,
and it takes rare talent, but people still try to do it.

> 2. The presumption that investors, not customers, ultimately pay for
>    R&D (exploitation of stock market bubbles not-withstanding).
>    Service based, rather than investment based funding models for R&D
>    are potentially more efficient and more effective.

Control of a company by its investors is exercised by the board of
directors.  Money spent on R&D is money that is not distributed as profits
to shareholders, except when that R&D is funded as time-and-materials to
the customer (which usually means, unless you craft it right, that the
customer owns the copyright).  While Cygnus did/does have a successful
business by charging hardware vendors to port the GNU compiler suite to
their platform, it's not clear to me that funding-ahead-of-development can
be a model to fund development of most or even much of the software that
needs building.  Let me show you the battle scars from that crusade, btw.

> 3. His presumption that increasing use of publicly licensed software
>    necessarily results in lower overall IT spending.  It might also
>    result in similar levels of spending that yield higher quality
>    results and faster progress.

Bob Young was once quoted (Bob, sorry if I got this wrong, or you were
misquoted originally): "I don't want to expand the Linux market to the
size of the whole operating systems market.  I want to shrink the whole
operating systems market to the size of the Linux market."  The comparison
may have been between RH and MS, or some other combo - I can't remember.

I think we can't tell what effect it will have.  The only trend I've seen
is companies who are being forced to make cuts looking for ways to cut
that retains key employees and reduces outsourcing or capital
expenditures.  So, a solution that means that existing staff is put to
productive use is preferred over one that costs the same (realizing the
real costs of headcount) but is more "traditional".  I think that trend
more than any other has been the driver for the even more widespread
adoption of open source in the enterprise.  People are sick of spending
$500K on a big Solaris box & software when $30K of x86 gear & some Linux
expertise can do the same, even if it means increasing a headcount or
two to get the same result (or more typically these days, being able to
avoid laying off one or two people).   It certainly means less IT money
going to vendors, though.  I just don't know the statistical significance.

	Brian