The Software Industry Of Tomorrow

One of the criticisms of free software you hear over and over again is that there is no business model for software companies to use with free software. After all, it is said, how can you sell something that your customers can get for free? What this criticism really says is, "how can companies use their present business model to sell free software?" Obviously they can't.

If ever there was a technology that could be described as "disruptive," it would be free software. It scares the hell out of people. It is feared that if all software were free, no one would have any incentive to write software and thus the whole world would just dry up. This line of reasoning overlooks several important facts:

  1. Most software is not packaged product. The truth is that most software is developed for internal use.

  2. People still want software and are willing to pay for it. Since software is still needed, there will always be work for programmers to solve other people's problems.

  3. Software development in its present form is very wasteful. Closed source code has a chilling effect on software development. There is tremendous incentive to reinvent the wheel as licensing other closed source tools is as limiting to developers as it is to end-users. This failure to "stand on the shoulders of giants" along with the proprietary nature of their own work causes continuous limits on their own development resources.

The present closed source model is a fairly recent development in the software industry. Before the PC, most software was contracted and those contracts always provided for source code to be given to the customer. The customer, after all, wanted control of his computer and wanted the freedom to have another contractor provide future maintenance of the code. Once the PC software industry discovered the secret of selling a $2 diskette for $400, the present business model fully took hold. But such a trick can only work if you can enforce an artificial shortage on the software.

The model of the future will be very different. In the future, when you pay for software you will pay for its development. You will not pay for the effects of the artificial shortage of software. In fact, there will be a variety of new kinds of business models:

  1. Software Development Houses are a traditional business that develops software for hire. In the future, they will market their services to groups of companies that wish a particular application built. The resulting project will be open to outside developers and the customers for participation. One example is the relationship between the Mozilla project and Netscape. Another example is Cygnus Solutions division of Red Hat.

  2. Development Brokers will be a new type of business that will find groups of users for a particular application or system and will organize them into consortiums that will fund the development of projects. They are the middlemen that will bring users and software development houses together. They will negotiate the project requirements, the acceptance plans, and contract administration with the software development houses. There have been a few attempts at this model, but so far they have mistakenly attempted to match up large companies and individual developers.

  3. Development Support Companies will provide on-line services for developers. Early examples of this business are SourceForge and Collab.Net. One problem that software development houses will face is how to host projects for open source development and maintenance. Various companies will step forward to address this market.

  4. System Integration and Management Services will emerge to coordinate the delivery of software products to users. This is not practical in the closed source world and it results in severe logistical and cost issues for large users of software systems. Early examples of this developing model are the Red Hat Network and Ximian Red Carpet.

As you can see, there will be a future after all.