Does Open Source Mean a Race to Zero, Threatening Industry?

by Sam Dean - Apr. 02, 2009Comments (0)

Here is yet another post arguing that open source software introduces a pricing "race to zero" that threatens the entire software industry, especially commercial efforts within it. It's from Gene Quinn, a patent attorney, writing for IP Watchdog. Dana Blankenhorn has an interesting reaction post up, in which he argues that open source doesn't drive all costs to zero, but that costs become shared. I agree with Blankenhorn, but there are several other fundamental problems with Quinn's argument.

Quinn's position has been echoed by other patent attorneys and purveyors of proprietary software, who are concerned that open source steamrolls over IP rights, and destroys opportunities to command pricing power with software applications. He writes:

"What is happening is that open source solutions are forcing down pricing and the race to zero is on. As zero is approached, however, less and less money will be available to be made, proprietary software giants will long since have gone belly-up and leading open source companies, such as Red Hat, will not be able to compete. It is quite possible that the open source movement will ultimately result in a collapse of the industry, and that would not be a good thing."

This argument ignores many of the positive benefits that open source has on the software industry, and on users. First of all, an increasing number of open source components are going into proprietary software products, improving them with no development costs for the companies that own the products. In fact, at the recent Open Source Business Conference, Mozilla CEO John Lilly said that "in five years 100 percent of software will contain open source."

Speaking of Mozilla, we recently covered the fact that Firefox has become the number one browser in Europe. It represents a big threat to Microsoft's Internet Explorer all over the world at this point. Here, we are seeing a classic example of how a disruptive open source application--best-of-breed in my opinion--can force proprietary players to improve their game. In fact, Microsoft CEO Steve Ballmer has said that his company is looking closely at adopting an open source browser engine, citing WebKit in particular. This comes from a person who once called open source "a cancer."

Quinn's argument about Red Hat doesn't hold water, either. Red Hat has built its success on providing top-quality support and services, not on selling software applications. A free Linux model creates the largest possible ecosystem of potential buyers for its support and services. This was echoed recently by Red Hat CEO Jim Whitehurst, also speaking at the Open Source Business Conference: "Our biggest competitor is not Microsoft, it’s not Novell, it’s people stopping paying us for support.”

Open source opens doors for new business models like Red Hat's, it's making its way into proprietary solutions and improving them, and it is forcing more competitive efforts from proprietary players. Those trends will continue, and rather than threatening the collapse of the software industry, they are more threatening to patent lawyers.