2/28/2004

Open Source != Capitalism? OSS = Socialism? NO way. Everyone who participates in Open Source Software (OSS) gets a payoff. From the original project leader to the final end-user, everyone at each point in the process very definitely gets something out of it.

Most OSS developers get involved when they are young, with low living expenses and lots of time. Many are students. As they move through the phases of life, time gets scarce and livelihood becomes as issue.

What do people get out of participating in OSS projects?

Many observers seem to miss the fact that these programmers can make a small investment early in life, and reap a lifetime ‘reputation annuity’. Anyone in the READ.ME of an OSS project stays there FOR LIFE. This amounts to a credible, worldwide calling card. Any programmer who participated in any aspect of the Linux project has a kind of worldwide reputation. So, here is the payoff for many programmers who seem to “work for nothing” on OSS projects. See Eric Raymond’s Homeesteading the Noosphere. Raymond was pretty close is describing the ‘altruistic’ motivations of open-source programmers.

A successful OSS project targeting a mature horizontal goes through distinct phases. These are outlined below. Who “gets paid” and “in what currency” follows…keep in mind I am NOT talking about ALL OSS projects. I am talking about ONLY the OSS projects that target mature horizontals like Linux, JBOSS, OpenOffice, etc.

All the phases are interesting, and it is the ‘Commercialization’ phase that gets the most interesting.

Here are the phases:

Conception:
Here, the OSS project leader gets the potential payoff. Most OSS-savvy programmers know it is risky to start a new project. Why? Because if it is not successful, the OSS reputation of the leader responsible for the project is tarnished. Still, some do go for it. The “reputation payoff” is huge for the leaders of successful large-scale OSS projects that target mature horizontals.

We all know who Linus Torvalds is, and most of us have never participated in an OSS project. Torvalds can work anywhere for a lot of money doing work he loves.

Gestation:
In this phase, the project lead and the early programmers are making an investment. The project lead marshals the team, set up the project, etc. The payoffs include technical experience, experience doing collaborative development, and the POTENTIAL of being in early, on something huge.

Birth:
Characteristics of this phase include word-of-mouth additional programmers for the project, visibility in the open source community, and the establishment of project rhythm and procedures for releases, bug tracking, adding developers, etc. The same payoffs for programmers (in the same currencies) apply here as in the Gestation phase. However, this marks a moment in time when programmers will take notice. Why? Because every experience OSS developer knows that jumping on what looks like a soon-to-be-successful project is a great play. For very little risk, they gain a lot. What do they gain?

First, they gain a semi-guarantee of success in pursuing the ‘reputation annuity’. If the project fails, they are not leading, and they do not lose any reputation value. They make a small, speculative investment. Since the project is well along, the risk of project failure is getting slimmer by the day. As the project gains momentum, the payoff comes into view. Therefore, programmers that enter the project at this phase are making a very low risk kind of play.

Second, programmers get a potentially HUGE payoff if the project takes off. Anyone who worked on JBOSS, for example, does not need a resume. They can simply point to the JBOSS project’s README as proof-positive they have alpha-geek status. For programmers, entering during this phase is low-risk, high-potential-reward.

For the project lead, this phase marks the end of any risk of failure. The project is a go and the leader is a clear winner.

Early Adoption:
This phase is characterized by the appearance of the first actual users of the software. Initially the developers themselves, users from everywhere actually begin to arrive in some quantity. These are technophiles and early-adoptive kind of users who actually like new stuff, or what the software can do. These early users like gadgets, like technology, and like being first. They get “paid” by satisfying these and other motivations to give the software a try.

Public Awareness:
This phase is characterized by ‘getting on the radar’ of the press, traditional for-profit software companies, legitimate (mainstream) end users, and industry analysts.

The press always needs a story. For-profit firms must watch for competitive threats and get a payoff when they see it. Mainstream users like a good price-performing value, and some vendor independence. And industry analysts who observe and report and predict on something real get the reputation payoff of being right.

At this point, the chances of getting involved in programming the project get slimmer and slimmer, because in this phase, it is now ‘cool’ to be involved in the development. Most of the good spots are taken. Programmers entering at this phase are simply happy to be getting on board.

Commercialization:
During commercialization, 3^rd party companies see value in the OSS project. What value, you ask? Simple. They see an opportunity to “commoditize compliments” to their core business.

The process is simple: when you have something to sell, you want to make all complimentary products free, or nearly free. If you sell autos, you want tires to be free or nearly free. Why? Because a scarce supply of tires hurts your auto sales, and a plentiful supply of tires helps your auto sales.

This is exactly what Henry Ford did with tires. This is exactly what IBM is doing with Linux. IBM wants to sell hardware and everything else related to it. Linux compliments IBM hardware.

IBM is in the Linux business. IBM is in the business of commoditizing compliments.

One implication of this is: OSS programming jobs will gravitate towards the firms that are commoditizing OSS software as a compliment to their core businesses.

If you are a OSS programmer that wants to get paid for it, read that previous sentence again.

Many OSS zealots believe that when end-user corporations begin to donate programmer time and code to OSS projects, OSS will have “arrived”.

Reality check: this is just not going to happen. And guess what? OSS will be successful anyway. Those firms with the big payoff (like IBM) will make very sure of that.

Others without the opportunity to commoditize the compliments of an existing business also get on board during this phase. The payoff for this type of participant is high-margin direct revenue. Technical training organizations fit into this category of late-stage OSS participants.

Pre-Dominance:
In this last phase, the OSS project gets the full benefit of all the 3^rd parties that get a commercial payoff. This is where we are just getting to now (Feb 2004) with Linux.

Software market share wars start slowly and build to a 60-40 battle. The two combatants tilt back and forth over the 60-40 line in a tug-of-war. Eventually, one combatant emerges. This is typical and happended in spreadsheets, operating systems, word processors, presentation graphics, etc. The pre-Dominance phase is characterized by the start of this 60-40 battle, and the end of it.

All the participants that entered the game during the Commercialization stage get paid off during the pre-Dominance phase. They consolidate there first-mover advantage and slam the door on new entrants.

Dominance:
It’s over. The OSS project has 60% or more market share for a long period of time. Dominance is anti-climatic and the sheer momentum carries the day. Everyone that needed a payoff got one well in advance of the Dominance stage.

SUMMARY

Regarding OSS, appearances can be deceiving. At each step in the process, a successful OSS project targeting a large horizontal market may look confusing. Observers describe how they are puzzled by the motivations of various participants, and often these observers cannot understand why the participants are involved, because they do not “get paid.” The reality is, everyone gets paid in indirect forms of compensation.

For the OSS programmers, the reality is they get a lifetime reputation annuity for a very low, one-time cost. The smartest of these programmers jump on a high-potential OSS project and they typically do so early in life. Then they get out, and one with their self-interested lives. Certainly there are some middle-aged OSS developers, but for the most part they are rare.

Programmers get indirect compensation in the form of a lifetime reputation annuity. It is no accident that one of the biggest taboos in the open source community is removing a persons name for the READ.ME that lists all the contributors.

Project leads get the most because they risk the most. Starting and ending a failed OSS project actually diminishes respect and reputation on the OSS community. Because OSS project leaders take this large risk, they get- and deserve- the lion’s share of respect and reputation rewards over their lifetimes.

Existing businesses that see OSS software as a compliment to their existing product and service offerings get huge payoffs. They make more sales on existing products and services. These firms are the eventual locus of real honest-to-goodness, for-pay OSS programming jobs.

Open source software just looks like socialism.

But in truth, the reality is: open source is actually capitalism, in drag.