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Who will pay for innovation?

Posted by johnreynolds on July 12, 2005 at 6:00 AM PDT

Back in 1973, a young Bill Gates was demonized for asking the following:

"Who can afford to do professional work for nothing? What hobbyist can put 3-man years into programming, finding all bugs, documenting his product and distribute for free?"

In 2005, Marc Fleury voiced a similar thought in a BusinessWeek interview:

"No one is going to work for free."

Marc elaborated on this in a later blog:

"Without financial compensation comparable, if not superior to, what they could earn in the proprietary software world, most of the top FOSS developers move on or simply cannot sustain the time commitment to FOSS projects demanded by the Enterprise IT consumer.
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When you think of an Open Source project in terms of the people who actually write it; what comes to mind?

Do you envision a passionate group of developers who are working on a project because they love it, or do you picture a competent group of developers who are working on a project because they are paid to?

My first direct use of Open Source was in 1990 with Michael Tiemann’s GNU C++ compiler and with Emacs. I may have been naïve, but my perception was that the folks who committed to these projects were motivated by a passion to create rather then by dreams of profit. Browsing through Linus Torvald’s recollections of the early days of Linux seems to confirm my impression; there’s no evidence that money played a motivational role in the creation of Linux.

Money wasn’t much of a open source motivation in the 80s and early 90s, but it was always a big factor. Much of the "free" software that was created during that period was funded either by DARPA or by silicon vendors like Intel and Motorola (to help sell their products). Many of these projects were carried out by consortia such as Austin’s now defunct MCC.

A lot has changed in the business of Open Source since 1990, and it reminds me a lot of what happened in Personal Computers between 1973 and today. What was started by enthusiasts and hobbyists morphed into an industry dominated by giant corporations (and low profit margins).

Since 1973 a lot of PC companies have come and go. In the early days there was real diversity: Atari, Osbourne, Apple, Commodore, Amiga, Sinclair, etc. IBM’s entry into the market, and the standardization on Intel and MS-DOS (and later Windows), removed almost all distinctions between the PC manufacturers. The only companies that were able to survive were those with the most efficient manufacturing and marketing operations. Profit marging for PCs were driven incredibly low.

When profit margins get low only companies with low overheads survive.

The scary part is that innovation (in terms of features) was not the biggest factor in success. The game was won on reducing costs, not on producing better products.

With FOSS cutting profit margins, what is going to keep driving innovation? My bet is that it's going to be the enthusiasts and hobbyists, not the entrepreneurs and captains of industry.

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