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Computer Hardware & Software
The Open Source Heretic
Daniel Lyons, 05.26.05, 6:00 AM ET
Since 1993, *Larry McVoy* has been one of the closest allies to *Linus
Torvalds*, creator of the open source Linux operating system.
Yet after all these years, McVoy has come to believe that the open source
business model, which is all the rage these days among computer makers like
*Hewlett-Packard* (nyse:
HPQ<http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=HPQ>-
news
<http://www.forbes.com/markets/company_news.jhtml?ticker=HPQ> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=HPQ>)
and *IBM* (nyse:
IBM<http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=IBM>-
news
<http://www.forbes.com/markets/company_news.jhtml?ticker=IBM> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=IBM>),
cannot generate enough money to support the development of truly innovative
software programs.
"Open source as a business model, in isolation, is pretty much
unsustainable," says McVoy, founder and chief executive of *BitMover*, a San
Francisco-based company that makes a software-development tool for Linux
called BitKeeper.
McVoy understands open source as well as anyone on the planet. Though his
product, BitKeeper, is not an open source program, from 2002 until 2005,
McVoy let open source programmers use it for free. But as of July, McVoy will
stop the
give-away<http://www.forbes.com/2005/05/26/hyperlink%20to%20http://www.forbes.com/business/2005/05/25/cz_dl_0525linux.html>,
saying it has been costing him nearly $500,000 per year to support Torvalds
and his programmers.
Open source advocates have pushed McVoy to "open source" his product--that
is, to publish the program's source code, or basic instructions, and let the
world use it for free. But McVoy says it is simply not possible for an
innovative software company to sustain itself using an open source business
model.
"We believe if we open sourced our product, we would be out of business in
six months," McVoy says. "The bottom line is you have to build a financially
sound company with a well-trained staff. And those staffers like their
salaries. If everything is free, how can I make enough money to keep
building that product for you and supporting you?"
The term "open source" refers to software that is distributed with its
source code so that anyone can read or copy that code. Most commercial
programs, like those made by *Microsoft* (nasdaq:
MSFT<http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=MSFT>-
news
<http://www.forbes.com/markets/company_news.jhtml?ticker=MSFT> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=MSFT>),
keep their source code secret.
Open source products typically are distributed free, since it's pretty much
impossible to charge money for something that anyone can copy.
So how do you make money with open source code? Some companies, like *Red
Hat* (nasdaq:
RHAT<http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=RHAT>-
news
<http://www.forbes.com/markets/company_news.jhtml?ticker=RHAT> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=RHAT>),
distribute Linux for free and then make money selling service contracts to
users.
"One problem with the services model is that it is based on the idea that
you are giving customers crap--because if you give them software that works,
what is the point of service?" McVoy says. "The other problem is that the
services model doesn't generate enough revenue to support the creation of
the next generation of innovative products. Red Hat has been around for a
long time--for a decade now. Yet try to name one significant thing--one
innovative product--that has come out of Red Hat."
To be sure, a few open source companies are successfully generating revenue
and even (possibly) profits. But none of them generates enough money to do
anything really innovative, says McVoy, 43, an industry veteran who has
developed operating system software at *Sun Microsystems* (nasdaq:
SUNW<http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=SUNW>-
news
<http://www.forbes.com/markets/company_news.jhtml?ticker=SUNW> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=SUNW>),
*Silicon Graphics* (nyse:
SGI<http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=SGI>-
news
<http://www.forbes.com/markets/company_news.jhtml?ticker=SGI> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=SGI>)
and *Google* (nasdaq:
GOOG<http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=GOOG>-
news
<http://www.forbes.com/markets/company_news.jhtml?ticker=GOOG> - people
<http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=GOOG>).
"The open source guys can scrape together enough resources to reverse
engineer stuff. That's easy. It's way cheaper to reverse engineer something
than to create something new. But if the world goes to 100% open source,
innovation goes to zero. The open source guys hate it when I say this, but
it's true."
Torvalds disagrees with McVoy about the sustainability of open source.
"Open source actually builds on a base that works even without any
commercial interest [which] is almost always secondary," he says. "The
so-called 'big boys' come along only after the project has proven itself to
be better than what those same big boys tried to do on their own. So don't
fall into the trap of thinking that open source is dependent on the
commercial interests. That's nice gravy, but it is gravy."
But McVoy says open source advocates fail to recognize that building new
software requires lots of trial and error, which means investing lots of
money. Software companies won't make those investments unless they can earn
a return by selling programs rather than giving them away.
"It costs a huge amount of money to develop a single innovative software
product. You have to have a business model that will let you recoup those
costs. These arguments are exceedingly unpopular. Everyone wants everything
to be free. They say, 'You're an evil corporate guy, and you don't get it.'
But I'm not evil. I'm well-known in the open source community. But none of
them can show me how to build a software-development house and fund it off
open source revenue. My claim is it can't be done."
And though open source software may be "free," sometimes you get what you
pay for, McVoy says. "Open source software is like handing you a doctor's
bag and the architectural plans for a hospital and saying, 'Hey dude, if you
have a heart attack, here are all the tools you need--and it's free,'" McVoy
says. "I'd rather pay someone to take care of me."
McVoy argues that the open source phenomenon may appear to be sustainable
but actually is being propped up by hardware makers who view open source
code as a loss leader--something that will entice customers to buy their
boxes.
"Nobody wants to admit that most of the money funding open source
development, maybe 80% to 90%, is coming from companies that are not open
source companies themselves. What happens when these sponsors go away and
there is not enough money floating around? Where is innovation going to come
from? Is the government going to fund it? This stuff is expensive."
Even the popular Linux operating system would suffer if hardware makers
stopped their sugar-daddy support for its development--putting their own
programmers to work on Linux, and sending payments to the Open Source
Development Labs, the non-profit organization that employs Torvalds and some
of his key lieutenants.
"If hardware companies stopped funding development, I think it would
dramatically damage the pace at which Linux is being developed. It would be
pretty darn close to a nuclear bomb going off," McVoy says.
McVoy says he believes the software industry will reach some kind of balance
between open source and traditional software companies. Open source
companies will make commodity knockoffs and eke out tiny profits, while
traditional "closed source" companies will develop innovative products and
earn fatter profits.
Heretical as this may seem, McVoy wants to be on the side that innovates *
and* makes money.
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