Re: CRIME Computers vulnerable at Oregon department

From: Greg Jorgensen (gregj@private)
Date: Tue Sep 24 2002 - 19:36:26 PDT

  • Next message: Shaun Savage: "Re: CRIME better computing for oregon using open source"

    On Tuesday, September 24, 2002, at 05:51  PM, T. Kenji Sugahara wrote:
    
    > Greg:  "The open source community is unlikely to produce massive and 
    > specialized software systems such as what the IRS or FAA or State of 
    > Oregon need."
    >
    > But would companies that were historically non-open source produce 
    > open source material to obtain a contract?
    
    I don't see why not, if they could make money and have some way to 
    protect their IP. I don't think software developers are against open 
    source, they are just not familiar with it. But in a market-driven 
    capitalist economy based on profit, getting everyone to give their 
    development time and IP away is, to me, unreasonable.
    
    I'm straying pretty far off topic, but since some earlier posts on this 
    subject seem to imply that simply trading Windows for Linux will solve 
    the problems in government agencies, I'm trying to expand the 
    discussion. The software of interest at government agencies and big 
    companies is not the commodity stuff, it's the real expensive stuff 
    that has very small vertical markets.
    
    I can think of three ways software products make money. Maybe there are 
    more:
    
    1. Commodity products, sold as-is or bundled with hardware. Examples: 
    Windows, MS Word, Red Hat Linux.
    
    2. Base products customized for the customer and enhanced with add-on 
    modules and/or custom programming. Examples: Oracle Financials, SAP, 
    PeopleSoft.
    
    3. Customer contracts for development of software specific to their 
    needs.
    
    In the first two cases the developer owns the software and probably 
    wants to protect their IP (which represents a significant investment 
    and a source of future revenue). Keeping the source closed in one way 
    to protect IP. Copyrights, licenses, NDAs, contracts, and even public 
    opinion are another. The market may impose big barriers to entry for 
    competing products (like the customer base Oracle and Windows enjoy) 
    and that barrier may mean open sourcing would have little real effect 
    on sales (one could argue that MS Windows is in that category).
    
    In the third case the end user owns the software and the IP (unless 
    they gave that away to the developers). The end user may intend to 
    protect their IP so they can resell their application. They may believe 
    the source code contains trade secrets.
    
    Imagine what happens if everyone is forced to open their source, either 
    by mandate or market pressure. Whoever financed the development now has 
    to protect their IP without the simplest defense of not letting anyone 
    else see it. The value of the software drops but the development costs 
    don't. Developers don't have as much incentive to take chances on 
    commodity products or customizable packages, because they risk 
    competing with other companies who didn't have to spend anything on 
    development. If copyright laws could be enforced accurately and 
    efficiently that would be some protection, but as it is now a copyright 
    case is too slow, too expensive, and in the case of complicated 
    software, too hard to prove.
    
    End users with money would continue to pay for custom development, but 
    even if they didn't care about competitors they would still worry about 
    trade secrets or business practices embedded in their source code.
    
    Open source advocates propose various alternatives, but the business 
    models so far seem to come down to (a) volume sales during the short 
    competitive advantage window, i.e. the hype surrounding new releases, 
    and (b) selling services to end-users. These are both viable models but 
    not likely to produce an Oracle or Microsoft (not that those are 
    companies to emulate). My point is that open source companies will 
    always be nickel-and-dime compared to closed source companies because 
    the open sources don't have IP or a significant competitive advantage. 
    Service companies are necessarily limited by people and time, and 
    unless you are EDS charging General Motors $10K to change a firewall 
    rule you can't make a lot of money selling services to people who paid 
    $300 for their PC and $50 for the software (that they could download 
    for free).
    
    I'm trying to make my points based on business rather than politics. I 
    don't have anything against open source, but as a business model I 
    think it has some big problems.
    
    Sorry for going so far out into the weeds.
    
    --
    Greg Jorgensen
    PDXperts LLC, Portland, Oregon, USA
    



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