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Cup of Joe: Open Source Is A Win For Big Corporations And A Fail For Entrepreneurs

posted on October 23, 2010


Android LogoWell I have some big news to share with you today. This week I ventured in to the 21st-century and purchased my first smart phone. I ended up going with Motorola’s DroidX. There are a lot of reasons why I decided to go with DroidX. But one of the reasons was a post by well-known venture capitalist Fred Wilson. Fred outlines the major market advantage that Andriod has over the iPhone.

Wilson illustrates that Android apps have a much larger market because Google’s open source software allows for wider integration with a more diverse array of devices and companies. Whereas the iPhone market is tightly controlled around only one manufacturer and service provider (at the moment). Because of this, companies looking to expand into the mobile app market should consider the Android platform as a more stable and larger market.

This got me thinking a lot about open-source software and its affect on business. In the past, I have had a love-hate relationship with open-source. When I was first learning how to write software for the web. I was a complete open-source fan boy. I remember feeling a real sense of community and openness within the open-source development world. However, as I began to develop software with a business motive I soon found that as an entrepreneur open-source can have devastating impact on protecting your investments and scaling your business.

My major beef with open-source software is the use of licenses such as the GPL that do not protect entrepreneurs from having their products and ideas stolen. Now don’t get me wrong, there are plenty of successful entrepreneurs that have built scaling, sustainable businesses on the GPL. In fact there are a whole host of emerging WordPress developers that are building thriving businesses on top of the GPL. To a great extent their success is completely driven on ability to leverage their own unique communities and marketing efforts.

However, this does not excuse the fact that anyone can take their products and do whatever they please without their permission. For example if I wanted to build my own WordPress premium theme business all I would have to do is purchase premium themes from other WordPress developers and sell the same themes on my own websites. I could even sell them a few dollars cheaper to under cut their original creators.

This type “steal and sell” business model is completely legal under the GPL and is happening at an increasing rate. Because of this, open-source software licenses like the GPL can be devastating for software developers that build innovative products with little marketing/legal investment.

While open-source can have a negative impact on entrepreneurs it has worked wonders for corporations. Take Google for example. With Google’s open source Android platform Google is able to access an expanding mobile market that has potential to drive the future of online communication. With Android, Google already is able to connect and spread its platform to millions of new users. This type of access and flexibility would not be possible without open-source software. Keeping Android open-source allows for Google to engage many different service providers and device manufacturers. Which means more users and more ads.

I am thankful for open source because it has the power to spread information and educate. However, I do not advise entrepreneurs or small businesses to create open-source products as their primary business model, unless you are willing to take a substantial loss in revenue.


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  • http://workingseo.com Suthnautr

    What you say is so right, Joe. The premium WordPress Theme example was one of the first things I thought of too. I was thinking about Chris Pierson’s wonderful Thesis Theme in particular and how the special added functionality built into Thesis gives him a bit of an edge because of the superior support provided by him and his crew. I’m a big fan of paying for what works and that includes open source wherever I can.

    What you say about Corporations taking advantage and benefitting from free open source to the detriment of those trying to earn a living is similar to what happens to a lot of service providers in states like Florida with large populations of well pensioned retirees who volunteer to work all sorts of positions for free simply to have something to do. Migrant illegal immigrants at least have to be paid something – but free work (especially in high tech areas requiring years of training and expertise) is devastating to those forced to condend with having to compete against it.

    Welcome to the Android Fan Club, Joe! I got mine last month. These things are great. Good post – keep up the great work!

    • http://joehall.me/ Joe Hall

      Thanks Dave!

  • personne

    I could not agree less with this article, and it doesn’t seem like you understood free/open source very well. It’s about the race to make the best in the most open way possible, which always has practical value and is the most competitive means possible. Some members of the community value sharing, making what has surfaced available so we can move on, and there’s an unfathomable amount of moving on to do.

    Outside the community some want or can only comprehend a hoarding mentality, they can’t compete or imagine anything valuable outside doing whatever everyone else is doing. The result leads to something known as fake artificial scarcity — http://www.foresight.org/nanodot/?p=4220 The current economic model always favours those around the boardroom table, the corporations and manipulators, it’s up to you if that’s what you want to play to.

    But it’s ok, from the moment you claimed the iPhone is only available from one carrier your parochialism became clear.

    • http://joehall.me/ Joe Hall

      I am not really sure how my comment about the iPhone constitutes parochialism. I was referring to it in comparison to more open source alternatives.

      Its fine to have different economic views, and different ideas on wealth. But if you want to build a self sustaining business model, you can’t rewrite all the rules while existing in an economy that runs in contrast to what you are trying to achieve.

      Also, I don’t think building good technology is the same thing as having a business. Open source is awesome at building awesome technology. Its not so great at building businesses.

  • http://realmoneyonline4u.com/ Dawn Le

    Well, I guess any thing has two sides, just consider the pros and cons carefully before setting things up…or making some mistake to learn is sometimes acceptable.

  • personne

    But then you end up building business for the sake of building business. This is actually one criticism of the US: the goal has become feeding a known economy, not progressing. The result is often empty, inefficient, flawed, it creates a completely unnecessary and harmful impediment to efficiency and fair access.

    My point about the iPhone is about carriers. There are thousands of carriers around the world, in many countries more than one carrier provides the iPhone. To you (parochially) there’s only one carrier, but to many readers your article stopped making sense at that point. Business is global, interacting with global citizens. International intellectual property laws (hoarding) as a solution to generations of astounding technological breakthrough is a poor solution that always favours a particular few.

  • http://metalmonstermarketing.com Steve G

    Well said Joe.. We’ve been saying nearly the same thing since shortly after open source become viable.. It is a wonderful way to build technology.. It is a great way to get involved in a community.. It is a very dangerous thing to build a business around.. When anyone can take your work, make any changes to it that they want, and even sell it, it leaves you basing your entire business on the good will of your users and their willingness to continue to pay for something that they may be able to get for free somewhere else..

  • http://throughput.us Jeff SKI Kinsey

    >> However, as I began to develop software with a business motive I soon found that as an entrepreneur open-source can have devastating impact on protecting your investments and scaling your business. <<

    I believe what "personne" (and myself) are suggesting is that yours is a very limited view and shows a basic misunderstanding of the Open Source Software movement. At least the "real" movement, vs. the bogus claims of proprietary giants trying to hijack the phrase.

    There are numerous approaches to protect one's property and the GPL is but one. One that seems to lack the protections you deem necessary for your efforts. Great. In many countries of the world you are free to select another, or as it seems, simply throw in the towel on the concept.

    But please do not throw out my baby with your dirty bath water.

    Let's agree to disagree.

    -ski

    • http://joehall.me/ Joe Hall

      I think what you and personne are talking about, is a great idea in theory. But i just can’t see it really building a scalable business. I would love it if we could build businesses in the manner and style that open source operates, but that doesn’t seem to happen. Most of the open source based businesses are propped up by venture capital and never end up making enough to become self sufficient.

      In fact I can’t think of any company, that offers open source products as its chief product that isn’t dependent on venture capital. If I am wrong, please correct me.

      • Chet

        You keep missing the point, Joe. The “copyleft” philosophy of GPL-style open source means that you are NOT SUPPOSED to produce products that only you can sell. Offering software for sale as the primary thrust of a business is exactly the OPPOSITE of what it’s about! Why do you keep looking for a bone in boneless ribs?

        That said… Did you research any open-source licenses other than the GPL for this article? You sound like you might be more comfortable with a BSD-style license. You can close your code after making your changes and make all the profit you want (if you can) selling your product without anyone stealing it — that is, if you don’t care that in doing so you’re denying everyone else the very benefits of software freedom that enabled you to do so.

        Businesses that succeed with open-source do so with SERVICES, not by selling the software. See also: IBM, Oracle (including largely Sun and MySQL), Red Hat, and Google. Stop trying to be the clown that thinks everyone should buy a copy of his funny shoes instead of selling his entertainment.

        • http://joehall.me/ Joe Hall

          I wish I sold clown shoes! :)

          I will look into the BSD license.

          I am not missing the point at all. I understand entirely the “copyleft” philosophy. I am just stating that I don’t agree with it as it pertains to selling products.

          As for services versus products, that’s fine. But it seems that the vast majority of companies that offer services instead of products don’t scale at the same rate. Because services are costly. where as products can be reproduced efficiently.

  • Chet

    The only thing about open source that “can have devastating impact on protecting your investments and scaling your business” is knowing the license terms but not really understanding them.

    Only an idiot could somehow expect to make GPL code into an asset protected from capitalisation by others, since the GPL’s very purpose is to guarantee the freedom of others to do exactly that.

    Analogy: Don’t play Texas hold ‘em if you’re going to cry about the board cards being face up for all players to use.

    • http://joehall.me/ Joe Hall

      Exactly Chet, I agree completely.

  • http://wpgarage.com Miriam Schwab

    WordPress premium developers have found a way to protect their work, and that is by GPLing the WordPress code, but copyrighting the HTML, CSS and graphics. This applies pretty well to premium themes, but I think that premium plugins must have a hard time with this type of protection.

    The other way they protect their work is by providing support to paying customers.

    As many point out, people can steal and resell any type of software, whether it has a GPL license or not. Meaning, a regular copyright is not necessarily a guarantee that others won’t rip off your stuff.

    • http://joehall.me/ Joe Hall

      Yeah, i think copyrighting the HTML/JS/CSS and Images is a solid strategy.

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