Products, services, and open source

Open source provides for a more competitive software market, but does it also provide enough revenue to its advocates?

On the elevator Wednesday, I overheard (OK, I was snooping) two businessmen talking about a career change one of them had recently made:

I got out of the services world because I wanted to be able to touch my product. I figured it would be easier to compete if I could point to my product and tell a prospective customer, "See, this is why it's better."

The only problem with the product world is that my competitors can also see/touch my product, and copy it. I've discovered the product world is perhaps even harder to compete in than the services world.

I should have told him, "Try open source." In open source "products" and "services" are conflated. They're effectively the same thing in a subscription model, which results in all the brutal competition my elevator companion describes, and perhaps amplifies it.

This, of course, benefits customers, as Michael Tiemann, a vice president at Red Hat, expertly points out. Does it also benefit vendors?

I think so. Red Hat is nearing $1 billion in revenue, and I don't think it's anomalous. I suspect, rather, that Red Hat is a harbinger of the software industry to come, one that provides greater efficiency, more customer benefit, and lower prices.

We just need to keep perfecting the business models to enable that future. I think we're halfway there.


Follow me on Twitter @mjasay.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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