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Innovation Loses If Open Source Wins

Innovation Loses If Open Source Wins

What this exercise creates is the assumption that open-source software kills software innovation because it effectively, over time, kills the funding for it. Much of the innovation we have today comes from proprietary companies.

By Rob Enderle
11/17/03 7:50 AM PT

As I write this, I'm getting ready to leave for Comdex, where I'll moderate a panel on the importance of Microssoft's .NET framework. On the panel will be a bunch of folks representing Oracle, Apache and Microsoft.

To help me keep the peace among participants who rarely agree with each other, Laura DiDio from the Yankee Group will be providing the analyst perspective so I can just mediate -- I mean moderate. It starts at 11:30 a.m. on Wednesday, November 19th. If you're there, stop by. I'm expecting it to be rather lively.

Speaking of lively, one of the things I have to do on a regular basis is what-if analysis. In this kind of analysis, you make the assumption that something that is possible actually happens, you describe the future world that results, and then you develop a strategy to deal with that outcome. It's actually quite a bit of fun.

Recently, I had the chance to do this with the assumption that Microsoft had failed and the world had embraced open-source software.

What If Open Source Won?

In that world, which I profiled around the 2010 timeframe, revenues and jobs had long ago left North America and much of Western Europe. Software jobs and positions largely had moved to the Third World because of lower labor rates in emerging nations.

R&D dollars for software projects had mostly evaporated, and innovation was occurring -- much as it does in the white-goods markets -- over very long periods of time and primarily in hardware. In this future services-based world, there appeared to be little incentive to fund software improvements outside of security projects.

In 2010, in the world in which open source had won, software engineers and programmers also were in oversupply and had become unionized, effectively preventing any attempt by the current developed world to take back the revenue without direct government intervention.

From a world perspective, 2010 was generally a better place with more balanced trade policies among countries, but the existing software industry and the United States clearly had paid a significant price to get there.

If we extend the what-if speculation forward in time, we eventually return to a period in which hardware vendors, once again, are proprietary. Granted, this takes us to about 2020, but the core assumption here is that once a central power like Microsoft is removed, hardware vendors go back to favoring differentiation over sharing, and they eventually return to the pre-Microsoft world that appears closer to the natural state.

Open Source Kills Innovation

What this exercise creates is the assumption that open-source software kills software innovation because it effectively, over time, kills the funding for it. Much of the innovation we have today comes from proprietary companies.

Microsoft -- despite beliefs to the contrary -- is generating a disproportionate share of these efforts today, largely because of the budget cuts other firms have made.

In addition, Microsoft continues to fund large institutional research programs -- both domestically and abroad. Were they to vanish suddenly, the revenues would not flow to entities that would pick up where Microsoft left off.

I've often found that people don't consider the full repercussions of major changes; instead, they get so excited about the change itself that they forget to plan for the outcome. To make sure this doesn't happen, those who are driving for change also must address the negative aspects of that change to mitigate those negatives -- which brings to mind the SCO-IBM issue.

Festival of Subpoenas

One thing that is perfectly clear is that -- in a future open-source software world -- attorneys will flourish, especially if the recent spate of subpoenas is any indication. SCO has served Linus Torvalds, Richard Stallman, Stuart Cohen of the Open Source Development Labs, Transmeta legal counsel John Horsley and Novell.

I'm guessing the Transmeta subpoena is for documentation during the time Linus worked there. Win or lose, Transmeta definitely doesn't need that distraction right now. With the exception of Transmeta, the subpoenas seem to be a result of the normal course of building a foundation of testimony and evidence -- with the likely hostile witnesses -- before the trial actually begins and helping to prepare for the pretrial phase of the action.

IBM, on the other hand, has served BayStar Capital (which invested US$50 million in SCO), Deutsche Bank Group (which issued a favorable financial report on SCO), the Yankee Group (which suggested IBM might lose the fight) and Renaissance Ventures (which invested in SCO). This series of subpoenas looks punitive to me because I can't figure out how any of these parties are directly pertinent to the case.

None of them appears to be an expert on the code in question. They weren't involved with the contract in any way that I can see, and appear to have simply done things that might have helped SCO get funding or positive press. IBM could be trying to better understand the why behind these companies' positions, but one would think that would be better done in a more casual way rather than with attorneys present.

Depositions can be incredibly time-consuming and painful, and if this is an effort to silence those that believe SCO has a case, it could be effective. I find it interesting that if Microsoft had used a similar tactic, we'd have cried foul very loudly.

I think this is another example of that pesky "free speech" thing that often only seems important when someone is trying to silence a voice you agree with. I do think, however, that the risk to IBM is very high and says something about what the company, internally, thinks of its chances of winning.

The Impact on IBM

Why this is interesting is that SCO appears to be attempting to prepare for trial, while IBM appears to be trying to destroy SCO's ability to sustain the fight. With SCO's legal team still on contingency, it still looks to me like SCO is more confident of winning in court than IBM is.

What is also interesting is that IBM appears to be taking an excessive amount of risk with these actions. There is a rule that says you shouldn't attack anyone who buys ink by the barrel. The Yankee Group, which is owned by Reuters, has several analysts who are broadly used by the press.

Deutsche Bank was the pivotal firm during the HP merger approval process, and the company is considered one of the powers in the financial industry. For some time, there has been a debate among financial analysts about whether IBM's valuation should be adjusted to better reflect its increasing reliance on its services business. Linux is clearly a services business.

Analysts as a group -- whether industry or financial -- don't like to feel that any company can threaten their objectivity. Of late, they are particularly sensitive to this issue -- and for good reason. There is a good chance, depending on how IBM handles the SCO issue, that one of the firms could take extreme exception to this approach and change its position relative to IBM's valuation or product set.

Personally, I'm not convinced that the potential benefit of this approach is in line with the risk, but having been critical about IBM's unwillingness to take risks in the past, I have to admit this one took some guts. One thing is for sure: Regardless of how it turns out, this fight undoubtedly will make history and give us something to argue about for years to come.

Rob Enderle, a TechNewsWorld columnist, is the Principal Analyst for the Enderle Group, a company founded on the concept of providing a unique perspective on personal technology products and trends.

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