Eric Dunbar eric.dunbar at
Sun Nov 20 07:59:05 CST 2005

On 11/19/05, Daniel Robitaille <robitaille at> wrote:
> On 11/11/05, Daniel Robitaille <robitaille at> wrote:
> > According to ZDnet, Mark Shuttleworth, Bruce Perens, Richard Stallman
> > will be in Tunis next week during the World Summit on the Information
> > Society  to talk about Open Source:
> >
> >
> a  follow up on this story.  Bruce Perens is blogging about the
> conference on this web site:
> Yesterday's story is:
>   "Friday, November 18: Richard Stallman Gets in Trouble with UN
> Security for Wearing a Tin-Foil Hat"

Perens' November 18 piece is an interesting read: here are two
"excerpts" (for those of you not so inclined to read the *whole* thing


"Friday, November 18: My Speech
I bring you greetings from the hundreds of thousands of Open Source
Software developers around the world. We embody many of the goals of
the United Nations: we are a community without borders, a global
network that shares knowledge, a social movement that produces real
products available equally to the rich or poor, an economic reality
that has engaged the world's largest companies and talented
individuals in a collaboration of equals. Our work facilitates global
e-inclusion and a sustainable infrastructure for technology and
innovation in developing nations. Millions of people use our software
to create global markets for local business through the Internet."


"When we first started to explain Open Source, it was a social
phenomenon of individuals. Today, large companies like IBM and Merrill
Lynch invest Millions into Open Source development. But how can we
possibly support ourselves by giving away our software? To answer that
question, I'll give you a quick introduction to the economics of Open

For most businesses, software is a enabling technology rather than
their product. For example, sells books, but uses a web
server to reach their customers. It doesn't matter to Amazon that the
web-serving software doesn't sell for a profit. Its function is to
help sell books, and they are happy to invest in their software
cost-centers to enable their book-selling profit center.

Software-intensive businesses have two kinds of software:
differentiating software that makes their business look better than
their competitor's business, and non-differentiating software that is
essential to operate the business but doesn't make their store
significantly more attractive to their customers. The "recommendation"
software of, which suggests books that customers with
similar interests have purchased, makes their web store different from
that of other book sellers. Obviously, Amazon must have total
ownership of that software, so that they can keep it from falling into
the hands of their competitors. Otherwise, they'd lose their business
differentiation. But Amazon's customers don't care whether Amazon uses
Microsoft Word or OpenOffice to write letters. That's
non-differentiating software. At least 95% of the software used by a
business is non-differentiating.

Both Open Source and Microsoft produce only non-differentiating
software, simply because anyone can buy a copy.

Differentiating software is developed by programmers who are employed
by, or under contract to, the company that will use it. Because that
company must have complete control over who is allowed to run their
differentiating software, that company must bear the entire cost and
risk of its development. Non-differentiating software is developed by
retail manufacturers like Microsoft or by Open Source. Retail
manufacturers invest a large amount of money in software development,
and must finish developing their product before they can make their
first profit. They use the stock market to distribute the cost and
risk of that development, and then eventually retail sales distribute
the cost and, if they're lucky, allow the investors to take profit.

In contrast, Open Source developers release software as soon as it
becomes useful to others, much earlier than a retail manufacturer
would. At that point, individuals or other companies start using the
software. If it's useful to them, they can contribute their own work
to its further development, or pay other developers to add new
features. Because there can be many partners, development of Open
Source software proceeds at a very rapid pace after it is first
distributed. Because the work of development is shared among those
partners, the cost and risk of that development is shared and nobody
has to bear the entire cost alone.

Last year, Microsoft spent fourteen percent of their revenue on all
research and development, and this is a high for that industry. When
we add the overheads of the sales pipeline, it's easy to show that
customers get less than five cents of software development for every
dollar they spend on software. Obviously, this sort of software
requires a huge mass market before it can be reasonably priced.
Because Open Source does not bear the heavy costs that retail
manufacturers pay to find customers - advertising, creating glossy
boxes that are thrown out as soon as the product is purchased, and the
revenue taken by the wholesale and retail sales pipeline, they are
able to put much more money into development and much less into
unproductive overheads. What do companies do with the money they save
on those overheads? It's not lost from the economy - they put it into
other projects that are important to them."

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