> Your version of Linux is essentially the same as mine. If you try to charge too much of a premium, I will undercut you on price, [...]. Open source companies tend to operate at lower gross margins. That doesn't mean that open source can never work as a business model. However, no matter what anybody says, if two companies have the same risks and operational costs, the low-margin company is a lot harder to manage than the high-margin company.
I get the impression that the author is somewhat stuck into the common thinking of software only as a product. The statement above is true if you try to sell licenses. However, there are lots of more clever Open Source business models out there.
For instance, you could treat software as an infrastructure like a street or a computer network. You get paid on improving parts of it and/or providing services around it.
Of course, software is neither a product that is first designed and then mass-produced in factories, nor is it a street on which regular roadworks are necessary. However, treating it as the latter seems to be more suitable for Open Source software.
There seems to be a misunderstanding. I wasn't talking about software as a service, I was talking about service around software (e.g. guarantee that it works, provide a hotline for all kinds of issues, which might include fixing bugs etc).
In constrast, SaaS is usually quite the contrary of Open Source. You do not only pay per license, but for usage time and/or the amount of data. You don't see the source, you can't make any modification, you don't have any direct access to the machine, and you are (usually) stuck to a single vendor. All of this could be fixed, of course, but as of now, the economy model around SaaS is more an aggravation of the proprietary model, and nowhere similar to Open Source business models.
Right, and then you end up in the situation he described 3 paragraphs earlier:
"In contrast, custom software development or consulting has a lower margin, because programmer time is included as cost of revenues. For every hour of time we charge, we have to pay an hour's wage to the developer who performed the work."
So still in a low gross margin position, where the only way to scale the business is to sell more programmer-hours.
This is true for the custom development, but an Open Source business model is usually more. For instance, selling quality guarantees and providing hotlines can scale much better. That way, you invest a fixed amount of work in thorough testing, and sell this on every support contract. Also, investing programmer-hours in fixing bugs ensures you won't have to hire more hotline people to tell customers how to work around those bugs.
That's just wishful thinking. Who sells 'quality guarantees'? It's always packaged as 'support', which boils down to support personnel man hours. So still pay for worked hours.
If you fix bugs you need to contribute back to the trunk, at which point anybody can use them without paying for the dev time. Paying devs to work on such a project is useful mostly as a marketing tactic, and to develop in-house expertise on the tech.
Let's face it, all open source business models boil down to repackaged and rephrased consultancy work, which scales by making more paid hours. It's as simple as that.
> Your version of Linux is essentially the same as mine. If you try to charge too much of a premium, I will undercut you on price, [...]. Open source companies tend to operate at lower gross margins. That doesn't mean that open source can never work as a business model. However, no matter what anybody says, if two companies have the same risks and operational costs, the low-margin company is a lot harder to manage than the high-margin company.
I get the impression that the author is somewhat stuck into the common thinking of software only as a product. The statement above is true if you try to sell licenses. However, there are lots of more clever Open Source business models out there.
For instance, you could treat software as an infrastructure like a street or a computer network. You get paid on improving parts of it and/or providing services around it.
Of course, software is neither a product that is first designed and then mass-produced in factories, nor is it a street on which regular roadworks are necessary. However, treating it as the latter seems to be more suitable for Open Source software.