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The Economics of Open Source: Why the Billion Dollar Barrier is Irrelevant

Jun 28, 2010, 12:34 (2 Talkback[s])
(Other stories by Steve O'grady)

""Indeed, I would go so far as to say that very few open source startups will ever get anywhere near to $1 billion. Not because they are incompetent, or because open source will 'fail' in any sense. But because the economics of open source software – and therefore the business dynamics – are so different from those of traditional software that it simply won't be possible in most markets." – Glyn Moody, "Why No Billion-Dollar Open Source Companies?

"The explanation of why zero pure play open source vendors have hit the one billion dollar revenue mark has never seemed, to me, particularly complicated. The economics of open source are, as Glyn notes above, fundamentally differentiated from the closed source models that preceded it. Open source as an application development model enjoys many advantages over proprietary, in-house development; distribution and usage among them. But revenue extraction has not traditionally been a strength, for obvious reasons. When payment is optional, as it is with most open source software, fewer users become commercial buyers. Next up, a study proving that objects further away are harder to see."

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