OSBC Report: Jim Whitehurst and the "fundamental good" of open source
(Credit: Matt Asay)Last year's Open Source Business Conference (OSBC) was opened up by Red Hat's then CEO, Matthew Szulik. This year we're hearing from Red Hat's new CEO, Jim Whitehurst. Jim is very different from Matthew, but there are some similarities.
Two components of the power of the open-source model that I didn't originally recognize:
- Public policy value of open source, especially outside the US.
- You don't have any barrier or property or scarcity, which makes it tough to make money. But from the customer's point of view, this means that you're having to earn your renewal every single day of the contract.
On the first point:
Outside the United States, open source is...actually seen from a public-policy perspective as a fundamental good.
It's not just about low-cost software. From a public policy perspective, sending back billions and billions of dollars in intellectual property taxes to the US is not a good thing. Yes, Red Hat is based in the US, but we don't sell bits. We sell subscriptions to services, and those are local.
On the second point:
As a career path, Red Hat hires into its support organization. If you're good enough, you become a developer. We've been rated number one in value four years in a row, but that's because we put such a premium on customer support.
The flipside of this is that it makes it really, really hard to make money in open source. At Red Hat, we cast a pretty wide shadow: We have thousands of customers and 80 percent (plus) share of the commercial Linux market. Yet my IT budget at Delta is bigger than the total revenues of Red Hat.
That said, there are only two public software companies with greater than 20 percent revenue growth and margins: Red Hat and VMware. We have been able to deliver superior financial performance than any of our proprietary competition has.
But all is not rosy in Camelot. As Jim indicated, "Red Hat does a lousy job of bringing our customers into the open-source community." Jim noted that most software is developed for use, not for sale, which means that enterprises reinvent the software wheel on a daily basis.
Jim wants to see more software co-developed with customers, rather than exclusively by corporations and others already within open-source development communities. He indicated that Red Hat will take a central role in promoting open-source development within the enterprise ranks.
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3) nit-picking aside, the use of the term IPR "tax" is the real howler! ---
the correct economic concept viz IPR is _rent_ not _tax_
* taxes are extracted by coercion by the state in order to redistribute wealth from one group to another (irrespective of what specific good they for which are applied - that is not a libertarian or even a conservative dig).
* rents are paid for an input factor of production (which are the precondition of adding-value) and they are offered freely (in an open marketplace).
software fees are not a tax that the owner pays to a third-party, not adding any value: software fees are a rent paid to a second-party for work done, embodied in the form of intangible property.
it is self-serving - in the cheapest way possible - for redhat as a FOSS vendor to encourage the depredations of regimes that already abuse the rights of their citizens (political as well as economic) simply because it puts cash in the till for that FOSS vendor --- it is no more right for an oppressive regime to steal from foreigners than it is for these regimes to steal from their own citizens!
yes, i recognize that there is an interesting philosophical question about whether an idea can be patented (the distinction about "expression of an idea" business is a bit of a canard) -- i have deep sympathy with the 'anti-monsanto' feeling that too much of the Commons is being privatized (genes, animals, human traits ... ideas - where does it stop?) ... there is a natural attraction to the principle that the laws of physics or mathematics (or biology) are inherently free because they are public facts about the world, so they cant be privately owned as property.
yes, i do see that point (part of the 'information wants to be free' argument) .... but the instructions issued to a computer are not like like a mathematical proof or a genetic code: computer instructions are one possible combination amongst several (sometimes many) other possible worlds .... worlds which someone has paid good money & spent considerable time exploring & building up.
if the market values the the resulting intellectual property created by that effort (and the risk it took to make that effort) then the fee paid to the creator of the software is a RENT not a TAX.
of course, if a company abuses the power it has in the marketplace then it deserves to be punished but that it is not the same idea as derogating - a priori - the legitimacy of intellectual property in the first place!
personally i have long thought that the (Bush) DOJ's craven settlement with the cyber-bandit -Microsoft - could have been improved if all of Redmond's existing intellectual property (patents AND source code) accumulated up to that date were to have been impounded & then released as FOSS! .... the attraction of this remedy is that microsoft would not have been able to profit any longer from its (illicitly achieved) incumbency; instead redmond would have been forced to fend for itself based soley on the economic value of its future efforts (eg Vista - and we all know how that is going!).
Yes, in this special (punitive) context, the FOSS 'anti-tax' approach would have been an effective re-calibration of microsoft's abusive market power (along with a substantial cash fine & breaking up the Leviathan into three separate companies).
But no, as a general rule, FOSS (vendors) are out to lunch when they try to curry favour with oppressive regimes that are happy to deny the metaphysical possibility that one aspect of abstraction deserves protection (ie intellectual property) .... but yet these regimes are the first ones to invoke the sanctity of another (bogus) abstraction when it (also) suits their interests -- eg insults to the leader or the state or other pretexts that are used to suppress human dignity.
it is one thing for redhat to have a principled position about the virtues of the Commons ... however it is an entirely different matter for them to have a supine position about the systematic 'double-think' (ie taxes vs rents) employed by despotic regimes that have no more sincere interest in seeing 'information being free' than they do in seeing their own people being free!!!
however, considering that other western companies (yahoo, google, cisco etc) also seem to be indifferent to either the (dis)truth or to (mis)justice of these villains --indeed, they actively help these regimes to oppress their people (notice how no one remembers today all the famous compaines -- german (Krupp, BASF, Hoecht/Aventis, Bayer, Seimens, Agfa and Daimler-Benz etc) and american (ibm, ford) - that colluded with the Nazi's! -- then it is not surprising that redhat would find itself in the company of other (capitol C) Collaborators.
[cf: http://www.archives.gov/research/holocaust/bibliographies/labor-camps.html
In this sense, redhat as a FOSS company is no different that a proprietary IPR company: they will go with whatever sells - even if it involves denying the truth about taxes & rents.
if redhat wants to do business with despotic regimes then they at least publicly disabuse the notion that FOSS is somehow helping these regimes to legitimately avoid an unfair form of cyber-colonialism - viz the 'tax' on IP.
Rehat should stick to FOSS metaphysics ('information wants to be free').
It is the former not the latter position that is truly anti-American!
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