Pass out the Cigars

As I write this, Red Hat has just gone into the black with a small profit of $300,000 on total revenue of $24.3 million. That makes Red Hat, by my count, the first Linux company to actually make money. The secret to their success? Red Hat Advanced Server (RHAS).

by Steven J. Vaughan-Nichols

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As I write this, Red Hat has just gone into the black with a small profit of $300,000 on total revenue of $24.3 million. That makes Red Hat, by my count, the first Linux company to actually make money. The secret to their success? Red Hat Advanced Server (RHAS).

Meanwhile, the UnitedLinux companies — Conectiva, SCO, SuSE, and Turbolinux — have placed their bets for profitability on UnitedLinux, their competitor to RHAS, Windows 2000 Server, Solaris, and others.

Not to be outdone, Mandrake just released Mandrake Multiple Network Firewall (MNF) with a dual licensing scheme that requires its commercial users to pay $1,999 for the firewall and use a more restrictive license, the “MNF Commercial License Agreement,” that’s reminiscent of the BSD license.

So what do RHAS, UnitedLinux, and MNF have in common? While they’re all open source, some commercial uses are restricted to paying customers. To me, what this says is that the old idea of open source business, the notion that “We can make money from service and support,” is finally, officially dead.

Pass me a shovel so I can heap some more dirt on it.

I used to believe in that same notion, but I got better. I saw company after company, with good, bright people and solid business plans based on the service idea, like Linuxcare, struggle to survive at best, and more often than not, die slow, hard deaths. Then, I finally got a clue: open source business plans that depend on service alone fail. Period. End of statement.

So, what we have instead, in the case of RHAS and UnitedLinux, are business plans that depend not only on service but also on subscription fees to keep the companies afloat. So far, for Red Hat at least, the plan seems to be working. Mandrake, with its one-time fee, seems to be heading down the well-trodden road of conventional commercial software.

At the same time, we’ve all seen that major hardware and software OEM partnerships have become essential for open source companies to make real money. Where would Red Hat be without its buddies Oracle and Dell persuading their corporate customers to give RHAS a try? Red Hat would not only be wearing red hats, they’d be in the red, too. And, frankly, I doubt that the market would be forgiving enough to let them survive for long into 2003. Similarly, the UnitedLinux companies are hoping that IBM and HP will keep them afloat. I’m betting that they’re right.

This subscription model may sound odd if all you’ve known is PC software, but it’s quite rote in the world of business software. It’s also, to some open source fans, absolutely the most horrible news they’ve ever heard.

My response to them? Get over it. I’m sick and tired of people who go on the attack every time someone comes out with a way to make money from open source. Even Richard M. Stallman, when he’s talking about free software, isn’t talking about “free” as in zero cost. He’s talking about the intellectual freedom to use and share code with the entire community, not free as in “free lunch.”

(Now, Stallman probably will have trouble with Mandrake’s approach. Gael Duval, a Mandrake vice president, talks about Mandrake’s commercial license being similar to TrollTech’s Q Public License (QPL). But, that’s a license to which Stallman and the rest of the free software community already takes exception.)

What’s happening now though with Red Hat and the UnitedLinux companies isn’t about software licensing. It’s about taking open source software and adding value to it so that companies are willing to pay real money for it. Sure, part of their subscription plans are still service and support, but it’s also the whole big business infrastructure that, for years, some open source zealots have seen as being as much as part of the problem as proprietary software in the first place. You’ve seen it for years with comments like, “Red Hat is becoming the next Microsoft.” Right. And, Matthew Szulik is Bill Gates. I don’t think so.

No, what’s happening now is that open source businesses, especially the Linux ones, are maturing into traditional companies. The code may still be open source, but the idea of a business revolution as well as a software revolution — something that many people have thought amounted to the same thing — is done.

Long live the once new, but now old, open source development model, and long live the new, but old business models that will propel it to commercial success.



Steven J. Vaughan-Nichols is a long-time Unix guru and technology writer. He can be reached at sjvn@vna1.com.

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