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The original free software company

The model for running a business that sells free software goes back a long way. In 1989, two years before Linus Torvalds made the first Linux announcement to comp.os.minix and nine years before the creation of the "Open Source Initiative", John Gilmore, David Vinayak Wallace and Michael Tiemann set up Cygnus Support (later Cygnus Solutions), the first company in the world dedicated to the promotion and support of free software.

John Gilmore in 2001
John Gilmore in 2001
According to John Gilmore, the slogan on the first Cygnus Support T-shirt was "We make free software affordable."

Cygnus became a key contributor to GNU and Linux and reaped a considerable reward for being the first company to take the then radical (and to many people, counter-intuitive) step of marketing software that was released exclusively under free software licenses. Richard Stallman noted that Cygnus was a recursive acronym for 'Cygnus - Your GNU Support', although Tiemann later quipped "That's like saying Emacs stands for 'Eight Megabytes And Constantly Swapping'."

By the time the company was acquired by Red Hat for $600 million in November 1999, "making all of its early employees into millionaires", Cygnus employed more than 120 people and had annual revenues over $20 million.

A Socialist Polemic

"On the surface", Tiemann wrote of his initial encounter with free software, the GNU Manifesto "read like a socialist polemic, but I saw something different. I saw a business plan in disguise. The basic idea was simple: Open Source would unify the efforts of programmers around the world, and companies that provided commercial services (customisations, enhancements, bug fixes, support) based on that software could capitalise on the economies of scale..."

Michael Tiemann
Michael Tiemann at MySQL 05
In the same article Tiemann recounted "At first I tried to make my argument the way that Stallman made his: on the merits. I would explain how freedom to share would lead to greater innovation at lower cost, greater economies of scale through more open standards, and people would universally respond 'It's a great idea, but it will never work, because nobody is going to pay money for free software.' After two years of polishing my rhetoric, refining my arguments, and delivering my messages to people who paid for me to fly all over the world, I never got farther than 'It's a great idea, but...,' then I had my second insight: if everybody thinks it's a great idea, it probably is, and if nobody thinks it will work, I'll have no competition!"

Subsequently, Cygnus became a significant provider of support for free software products in many sectors of industry. Major clients included Intel, AMD, 3Com and Adobe. And as Gilmore recounts "ultimately, we did get million-dollar contracts, such as one from Sony for building PlayStation compilers and emulators. This allowed game developers to start working a year before the PlayStation hardware was available."

The Route to Untold Riches

The attractions of building a business around free software are obvious. In his definition of Open Core Licensing Lampitt argues that vendors profit from the knowledge that "the open source nature of a product promotes a lively ecosystem that pops up around it. That ecosystem might be driven by a handful of hardcore developers and/or partners, as well as the occasional 'long tail' specialist contributors. Nonetheless, the benefit is there."

The problem is to identify revenue streams. Customers are happy to pay for upkeep, maintenance, training and support if these services bring apparent reward. An open source company has to be quick on its feet, and know its market. A user with a particular concern or requirement can often gain access to the individual developer resulting in more rapid and responsive support. On the other hand if the support isn't good enough, or a company feels it has the internal resources to maintain the product itself, it can always download the software for free.

JBoss claims downloads reaching into the millions. Its paying customers are many less, but free downloads provide free advertising, bring future contributors and customers, and encourage feedback. In the long run, paying JBoss to maintain the software is cheaper than employing a specialist to do the work for you.

The days of Gates and Ellison, when software could be the route to untold riches, are gone, perhaps forever, not just because of the influence of free software, but because the pace of development and customisation in the world of information technology means that the long term value of software is somewhere near to zero. Last year's revolutionary product is soon defunct or commoditised.

A truly open source or free software company will foster its ecosystem and have relatively low overheads which provides opportunities for competitive pricing. The price it pays for this is conformance to the principles of free and open source software. This is an issue of trust.

Next: To the Core

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