The rise of the open-source billionaire

Bernard Golden almost certainly hits it spot on when he suggests that we won't have any open-source billionaires, per se, but rather billionaires built on the foundation of open source. He doesn't come out and say it, but I suspect he has Google, Digg, and others like this in mind - companies that depend fundamentally on open source, yet aren't open-source companies, per se.

Because the cost of software has plummeted, new companies are being formed that take advantage of open source to create new offerings -- and these new companies will build enormous fortunes on the back of open source. I refer to this phenomena as "the migration of margin."

The enormous margin previously enjoyed by software is going to move to the new products and services made possible by open source software. If you want to see the billionaires of open source, you'll have to look elsewhere. In the next week or two, I'm going to discuss a few of these companies, ones that have leveraged open source to develop products and services that wouldn't be possible in a proprietary software world.

Now, I personally believe that we'll also see a few billionaires who build their businesses directly from selling open-source solutions (Matthew Szulik, given another few years with Red Hat, likely would have qualified). But as the whole point of open source is to cut the gross inefficiencies of the proprietary model and return more value to customers, Bernard is right: More money will be made offering services that sit atop open source than directly from open source.

This is what makes MySQL interesting as a hosted offering, as Dries Buytaert and I discussed recently and which he nicely describes on his blog. It's what makes all that one could do on Red Hat/Fedora, SUSE, and Ubuntu fascinating, rather than as standalone businesses in and of themselves.

It's what makes Google, Google.

For Google, the underlying open source is made to be almost incidental (though they and others like PayPal are quick to point out that they could not do what they do without open source). But I suspect we'll see projects like MySQL directly monetize and promote the value of the open source powering their service offerings.

Support is not the answer to the billions. We may get one or two billionaires from that model, but it won't scale to many billionaires. But services implicitly and explicitly running on open source?

Billions and billions, as Mr. Sagan might say.