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The Old Economy is subsidizing the New Economy of open source

Open source is a losing business strategy when selling to the web world.

Jonathan Schwartz has compiled a set of hugely interesting and significant data from a recent Sun gathering of CIOs from Old Economy companies and CTOs from New Economy online companies. The net net? If you're trying to sell software to the New Economy, you will fail.

  • The cost of people and change dominated the CIO room - not capital assets or power.
  • The cost of storage and bandwidth dominated the room filled with web companies.
  • Not a single company in the CTO room paid for software....
  • In contrast, not a single company in the CIO room allowed free software without a commercial support contract. Not one. Validating the notion that for more mature/diverse companies, the cost of downtime dwarfs the cost of a support contract.
  • The CTO's in the web companies wanted innovation at an accelerating pace.
  • The CIO's (broadly) wanted innovation to slow down long enough for them to manage and exploit it.

It's clear that a strategy of selling to the web companies is going to fail, unless you're peddling storage and bandwidth, i.e., "physical" assets that can't be replicated in software. Such companies have developers coming out of the wazoo, and more development hubris than sense, at times ("We can out-develop anyone - why would we buy software?").

As companies grow up, of course, they begin to understand that time may mean more than absolute control over every line of code. That's when they become customers of open-source software, rather than just users and developers thereof.

I've long criticized the Web 2.0 world for not giving back more freely to the open-source software communities from which they derive such immense benefit. "Cash or code," I (and others) argue. But maybe this was wrong. Maybe it should simply be, "Code." This is why the Affero GPL (as Fabrizio has argued), the Open Source License 3.0, and other "web-savvy" open-source licenses are so critical. They make open source a two-way street again.

Perhaps the open-source world should just "write off" the loss of contributed code from the web world and focus on extracting cash from the Old Economy. Perhaps. But given the value of the code that Amazon, Google, Digg, etc. are writing, and given that they're all essentially open-source pirates of various shades and hues, why not expect them to contribute back?

Code from the New Economy. Cash from the Old Economy. Seems like a fair way to distribute wealth to me....