On May 3 I spoke at the New York University Stern School of Business about Microsoft's position regarding source-code licensing. I wanted to articulate some of the benefits and drawbacks of the various ways commercial software companies could share their source code. I described Microsoft's shared-source philosophy, a balanced approach that enables commercial companies to share source code with their customers and partners while preserving the intellectual property rights that support a strong software business. I also articulated some ways in which shared source differs from open source.
The "balance" that Mundie talks about is rather one-sided: You can agree to share sources with Microsoft, but only Microsoft shares the benefits of any changes or suggestions people make.
The reactions to my statements have been many and varied. I wanted an active debate about intellectual property and the software industry, and I certainly got one. But this is more than just an academic debate. The commercial software industry is a significant driver of our global economy. It employs 1.35 million people and produces $175 billion in worldwide revenue annually (sources: BSA, IDC).
Red Hat employs more than 700 people and estimates it will deliver $140 million in revenue this fiscal year. Such figures make us one of the 250 largest software companies in the world.
The business model for commercial software has a proven track record and is a key engine of economic growth for many countries. It has boosted productivity and efficiency in almost every sector of the economy, as businesses and individuals have enjoyed the wealth of tools, information and other activities made possible in the PC era.
Indeed. Free and open-source software has been a major technology enabler in many markets where Microsoft's lock-in policies are either unwanted or uneconomical. Numerous developing countries (whose economic growth rates dwarf those of the United States, Europe and Japan) have found that only open-source software, such as Linux, is compatible with their efficient growth models. The fact that Linux is the fastest-growing operating system in virtually all market segments, from enterprise to embedded, further demonstrates that Red Hat is helping to fuel the engine of growth in the post-PC era.
Companies have the choice of protecting or relinquishing the intellectual property resulting from their research and development consistent with their particular customer and business needs. As the U.S. Department of Commerce stated in a report titled "International Science and Technology": "Innovation relies on a partnership between the public and private sectors in which the government invests in long-range science and technology and in mechanisms to promote private-sector risk-taking and investment."
Of course one can expect any government department to be prepared to justify its reasons for existence. Statistically, the government's track record in promoting risk-taking has been unmeasurable. Most successful risk-takers are self-motivated, and their success is a function of how little, not how much, the government is involved.
We believe that one of these mechanisms is intellectual property rights. Without intellectual property protection, neither innovation nor a healthy commercial software industry is sustainable. The last 50 years of public- and private-sector collaboration has demonstrated that when intellectual property rights are protected, innovators are rewarded for their efforts. Furthermore, technology is advanced guaranteeing economic growth and a cycle of future collaboration, investment and innovation.
The last 500 years of scientific discovery and publication are the real foundation of economic growth and the cycle of collaboration, investment, and innovation. The last 50 years merely follow the 450 that preceded them.
In my speech, I did not question the right of the open-source software model to compete in the marketplace. The issue at hand is choice; companies and individuals should be able to choose either model, and we support this right. I did call out what I believe is a real problem in the licensing model that many open-source software products employ: the General Public License. The GPL turns our existing concepts of intellectual property rights on their heads.
Some of the tension I see between the GPL and strong business models is by design, and some of it is caused simply because there remains a high level of legal uncertainty around the GPL--uncertainty that translates into business risk.
Yes, the GPL is revolutionary. Look at all the great achievements of the revolutionaries who stood against the establishment to give us stronger, more powerful truths. Some of these truths led science in new direction. Some of these truths led to radical reevaluation of the notions of property, freedom and even truth itself. The fact that the GPL stands against a model that has made one or many companies profitable means or refutes nothing. The fact that the GPL permits a greater rate of innovation, with greater efficiency in terms of scarce resources, means everything.
In my opinion, the GPL is intended to build a strong software community at the expense of a strong commercial software business model. That's why Linus Torvalds said last week that "Linux is never really going to be a rich sell."
That's like arguing that a democracy builds a strong society at the expense of the rich. It's just not true: The stronger the society, the richer everybody gets. This is why democratic capitalism works so much better, in the long run, than fascist or dictatorial capitalism (or any other economic model).
This isn't to say that some companies won't find a business plan that can make money releasing products under the GPL. We have yet to see such companies emerge, but perhaps some will. Recent history tells us, however, that finding a business model that works is difficult. According to ZDNet News, "Ransom Love, CEO of Caldera Systems...said he thinks Microsoft was right in its claim that the GPL doesn't make much business sense."
If Microsoft hasn't seen such a company, they haven't looked very hard. Red Hat has been public for seven quarters, and we've met or exceeded analyst expectations every single one. In fact, in each of the past two quarters, Microsoft has announced misses the day we announced success. So, who's really on top of their business and their business plan? As for Ransom, I can only say that it's a poor carpenter who blames his tools.
What is at issue with the GPL? In a nutshell, it debases the currency of the ideas and labor that transform great ideas into great products.
Just as the abolition of slavery debased the currency of private property? As software becomes more and more a part of our life, the foundation of our communication, and a representation of our personal identities, shouldn't we, the people, be the ones who have the freedom and control over the software (and not the other way around)?
Alfred North Whitehead, the renowned British philosopher, logician and mathematician, observed: "It is a great mistake to think that the bare scientific idea is the required invention, so that it has only to be picked up and used. An intense period of imaginative design lies between. One element in the new method is just the discovery of how to set about bridging the gap between the scientific ideas and the ultimate product. It is a process of disciplined attack upon one difficulty after another."
Indeed, and the GPL empowers everybody to participate and to contribute freely, safe in the knowledge that their contributions will not be appropriated and sold to, rented to, or worse, denied them in the future.
In other words, a critical flow of information and experimental data follows every major scientific discovery and results in the verification, refutation or refinement of the new idea or theory. To facilitate this process, neither copyright nor patent protections are available for abstract ideas or theories. This is as it should be.
Agreed. But what is software, if not abstract--especially software that can run on many types of devices, including devices that have not yet even been designed yet? Portable software is very much an abstract expression, one that can be protected by copyright, but should never be covered by patents.
Legendary inventors such as Alexander Graham Bell, Thomas Edison and Henry Ford (who held thousands of patents between them) succeeded precisely because they were able to use funding, management and market insight to deliver their innovations as unique, practical and useful products. Arguably, the creativity and inventiveness needed to deliver their products was comparable to that needed for the underlying theory or discovery that made their business possible in the first place.
This is no different than what we do in the open-source community, or at Red Hat, for that matter.
When comparing the commercial software model to the open-source software model, look carefully at the business plans and licensing structures that form their foundations. This comparison leads to the conclusion that the commercial software model alone has the capacity for sustaining real economic growth. Intellectual capital has always been, and will remain, the core asset of the software industry, and of almost every other industry. Preserving that capital--and investing in its constant renewal--benefits everyone.
Agreed, but we believe that we can deliver superior value with an open-source model, and that people will pay for that superior proposition in preference to an inferior one. That we choose to protect our product with the GPL speaks to our evolution as a modern software company. That Microsoft continues to resist, against history and against reason, speaks to theirs.