Subject: Re: economic efficiency of free software
From: DV Henkel-Wallace <>
Date: Mon, 9 Feb 2004 11:59:28 -0800

On 09 Feb, 2004, at 08:32, L Jean Camp wrote:

> I have come to believe the problem with open source is that not enough 
> companies release their own custom code and thereby obtain value from 
> others using and working on it. Ensuring returns to the producer from 
> releasing the code can solve that problem, and there are licensing 
> that do that. So, imho, education and time are the solutions too this 
> problem.
> [...]
> I think the problem of economics of free software is not simply in the 
> market - it is in the firms. The intra-firm transfer and creation of 
> software is broken and that is why it has been outsourced (at very 
> high profit margins) to MS.  Fixing the intra-firm problem is as 
> important as fixing the inter-firm open market problem. So a solution 
> that could work within an organization could in theory also work 
> outside the organization. There is no way that GE and IBM and PwC 
> could not have cooperatively develop an office suite for what they pay 
> Microsoft. It is the inability of the big guys to coordinate both 
> internally and externally that is the current barrier to open code.

This is a very important -- perhaps _the_ very important point of FS 
(parallels Tim's point).

Education isn't the solution to inter-company sharing.  That sharing is 
_expensive._  Cygnus (and now the various GCC companies) compete(d) in 
part on their cost of integrating their changes into the mainline, and 
their ability to promise that their changes would make it in.  Red Hat 
does the same by hiring kernel maintainers.  This is the extension of 
their customers worrying about this issue.[*]

With proprietary software the single supplier by definition is its own 
main line.

I think the Innovator's Dilemma shows how GE, IBM, and PwC could 
actually develop an office suite for less than Microsoft charges _in 
the long term._  They can't do it for the incremental cost.  But I also 
don't see how they can do it without running afoul of the antitrust 

> [...]
> I realize that alot of you guys are in the trenches and may not want 
> to hear this but I will say it anyway - open code is changing the 
> market. Open code is working in the market.  It is just taking time.

Yes, but most of the value is, as it should be, captured by the end 
user.  Does enough remain to fund the FS suppliers?  I think that still 
remains to be seen.


[*] By the way I don't think anybody has ever successfully competed by 
saying "whatever I write will get in."  It involves 1> only committing 
to do work that's suitable for inclusion and 2> writing it in such a 
way that it's acceptable for inclusion.