Thread by @Jay_Judkowitz

With @salil at #OpenCoreSummit happening while I'm between jobs I finally have a chance to write the essay I've wanted to write for 7 years -- OSS has killed the independent software business.

I say this with no judgement. It's not good or bad. It just is.

There are a lot of great software companies out there and more of them are created every day, but it is virtually impossible to build a huge pure software company from scratch anymore. Why? OSS.

If you write OSS, you can only monetize it indirectly - consulting, training, running it as a service. If you don't do one of those things, (a) no one pays you since the SW is just there for the taking and (b) someone will just run it as a service anyway and make all the money.

And, that's not even considering the fact that with most licenses, the developers can just leave for a competitor or start their own thing. If it's not amicable, then they can fork it. There is no stickiness in just the software.

Can you write closed source software or use a restrictive OSS license? Nope. If the software is at all useful, someone will just make a non-restrictive OSS approximation and that will become the standard and you will be stuck rebasing your work on theirs or developing a shim.

So, if OSS is killing the idea of a pure independent software startup, who is it good for? Huge companies with assets that are unattainable for a startup. Hardware companies, cloud companies, networking companies, services companies, and enterprise relationship companies.

OSS was supposed to help small developers, but it really helps big companies make more money off the effort of the community (who they often pay directly or indirectly, to be fair)
It helps non-pure SW startups too. What's in OSS is one less piece for them to build to get started

What OSS really does is ensure that a pure software play can't come in and disintermediate big vendors from their customers (like Microsoft and VMware did back in their early days). Anything that gets traction, big vendors can just coopt without having to do a big acquisition.

It's ironic. All those years, MS feared OSS as being detrimental to their business, but once they were a certain size (which they hit a long time ago), they were free to embrace OSS and leverage it to retain their position. They've finally figured this out.

So, why is this happening? Conspiracy by big companies like IBM? Nope. It's pure market forces. Customers want it this way, especially huge enterprise customers, like banks, etc...

Think about it, if you are a zillion dollar enterprise, do you want some up and coming SW company to have a lock on your infrastructure and have them become a billion dollar company at your expense? Absolutely not.

Furthermore, customers got tired paying thousands of dollars for a floppy, CD, DVD, or a license key. They will pay for machines, networks, support, consulting, and managed services. They will no longer pay real money to burn bits to silicon.

So, the big IT companies and the big IT buyers have the same agenda - no new dominant SW companies. That's why this is happening.

What do you do if you just want to get paid to write software? Join a company with SW as part of a more comprehensive offering and do what you love.

What if you want to build the next Microsoft or VMware as a pure software company? Well, you can't. What can you do instead?

You can start an OSS company and get big revenue at low margins for delivering services and being trusted to maintain the code.

You can also start a SaaS - even getting away with closed source software again! If you make a valuable enough service, enterprise customers will pay to have that service always on and fully managed. But, you don't get thousands of $/DVD margins. You pay for the infra and SREs.

You can bake your software into an appliance. Again, more cost and lower margins than pure software, but if you do something really useful, you can make a whole lot of money. (e.g. Nutanix)

OSS has changed everything for starting and funding software companies. It's helps big vendors and big customers by preventing the growth of huge software only business with insane margins.

We can get nostalgic about that, but I assure you, customers are just fine with it.

Anyway, I hope I don't get completely roasted for this, but it's something I've wanted to get off my chest for 7 years. Thanks for reading.