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Progress Is Not Proprietary
Thursday, November 20 2003 @ 09:04 AM EST

There are several articles I know you will enjoy knowing about. You may not agree with every word, but there are some interesting ideas to consider. First, an economist explains why Linux code has a big advantage over Microsoft's -- it is written for love instead of for money. The article is entitled "Why Linux is Wealthier Than Microsoft," and I expect "the always fair and balanced" Rob Enderle will upchuck his breakfast when he reads it, because it is the definitive answer to his anti-Linux FUD about Microsoft being the only font of innovation.

As it happens, software is one of those things that, like barn-building, may work better sharing instead of competing, according to Russ Roberts, the author. Roberts teaches economics and is the J. Fish & Lillian F. Smith Distinguished Scholar at the Mercatus Center at George Mason University in Fairfax, Va., so I'm thinking he knows more than Enderle about innovation and the economy.

His view is that innovation flourishes in disorganization, not in top-down control environments:

"Microsoft uses money to motivate. And no doubt about it, that's a powerful incentive. But others exist. The community of Linux users and developers is held together by pride and the thrill of working toward a common goal of a universal, free (or at least relatively inexpensive), elegant, bug-free or bug-resistant alternative to Windows, the world's dominant computer operating system.

"Can the volunteers who work on improving Linux outperform employees dreaming of stock options? . . . With some causes, passion and pride can outperform money.   Designing software may be such a cause. . . . Even if money trumps idealism as a motivator, Torvalds has a bigger team -- the millions who use Linux and continue to tinker with it. Potentially, he has more brainpower on his team.

"Torvalds has another advantage. His organization is less organized than Microsoft. It's really a disorganization. . . . But remember the problem that every organization's leader faces: The team's smartest member, even if he or she is nominally in control, is vastly more ignorant than the entire network of people who compose the organization. . . .

"Being disorganized can actually leverage that knowledge more effectively than a command-and-control hierarchy. Innovation must rely on creativity generated by the mass of folks underneath. In a dynamic system, trial and error is a powerful force for change. A bottom-up system with a gatekeeper can be more innovative than the hierarchical system over which Gates reigns. It can generate a lot more trials, and a good gatekeeper can throw out the errors."

Then you might be interested in this interview Darl gave to VARBusiness just after his keynote speech. Actually, I think IBM might be interested in it too, not to mention the judge at the conference on discovery, because it shows SCO admitting they have a motive not to hurry the case along and are mighty happy to let the clock tick away without any progress in the case:

"McBride: Going forward we have three dials. The core business, we think that's bottomed out and there's upside now with new products coming. We haven't had a new product in our OpenServer base in years and years.

"The second dial is the 2.5 million Linux servers out there today that are paired with our intellectual property in them. We have a licensed product $699, $1,399. Chris [Sontag] is driving that and that's another multi-billion-dollar revenue opportunity.

"The third bucket has to do with the IBM settlement. We filed that at $3 billion. Every day they don't resolve this, the AIX meter is still ticking....

"That's in a Utah courtroom 18 months out. That's a down the road revenue opportunity but the first two dials are going right now, and today's announcement today with Boies will really help move the second dial along.

"VARBusiness : Have you seen any movement on IBM's part to cease additional AIX development.

"McBride : Right now, we're talking about the Linux base. We're a little company we have to choose our battles. Our goal is to take the Linux thing and get that tightened down and then swing back around on AIX. We're sort of fine to let the AIX thing tick, because the longer it goes, when we actually end up in courtroom, we can go back to June 13, 2003, and add damages. We're sort of fine to let that one run. I don't sense they've stopped shipping AIX and both sides right now are kind of on the Linux battlefront.

"VARBusiness: What's the issue here?

"McBride : It's that they've taken a substantial amount of our code is what creates the battleground. It's interesting to hear Red Hat speak at financial conference yesterday and their comment is, 'We're really scaling Linux up. Linux is really growing up.' If you take IBM out of the equation, Linux would not be growing up, it would not be SMP-enabled, it would not be multi processing, scaling up to hundreds of servers. It is IBM that is enabling that."

Not even a million dollars and 400,000 shares is enough to cork this guy's mouth. You'd need 24/7 legal aid, travelling with him everywhere, like PR handlers do, holding his hand and screening the questions and telling him what not to answer. SCO just submitted court papers saying they never accused IBM in public. Duh, Darl. And this: "We haven't had a new product in our OpenServer base in years and years." But Linux couldn't scale without stealing their code? Exhibit C: Darl on what his goal is -- and could anyone put it more baldly than this?:

"Our belief is that SCO has great opportunity in the future to let Linux keep going, not to put it on its back but for us to get a transaction fee every time it's sold. That's really our goal."

Yoo Hoo! Red Hat! IBM! Are you taking notes?

Chris Sontag was in the interview too, and he demonstrates, once again, how much he doesn't grok the GPL:

"CRN : HP I believe is the only vendor who's talked about indemnifying customers, if you guys sue an HP customer, what happens?

"Chris Sontag : Well. HP put a lot of provisos in place [to qualify for indemnification.] You have to be an HP customer on HP hardware. You have to have a support agreement with HP which very few of their customers have. And you can't modify the code which may not be a huge issue because a very small number of commercial end users have wanted to modify the code anyway.

"If I were a commercial end user independent of anything else, given the nature of the GPL I would avoid modifying the code, I would avoid doing anything that could be considered a distribution of my application. If I'm Merrill Lynch and have a trading application proprietary to Merrill Lynch and deploy it across all my trading desks, if that deployment occurred where the Linux OS and app are distributed togetherm [sic] there are arguments that Merrill would have to provide their proprietary trading application in source form to everyone. That's a problem. I'm sure all of Merrill's competitors would love to get that but it's hard for a company to be financially viable when all of the basises [sic] are shared.

"One of the economic issues in general with Linux under the GPL is there's no ability to carve out and contribute some things and hold back stuff I consider valuable."

To these guys with their heads stuck in the proprietary fog, modifying the code is the same as distributing it. Can you believe it? Wouldn't it be funny if this whole problem arose because those swashbuckling pirates in Utah misunderstood the GPL and brought all this misery on the IT world to protect themselves from a misunderstanding that exists only in their little heads? Well, actually, that wouldn't be so funny. In any case, it's more likely he is just making FUD pies here. He probably knows perfectly well that you can modify GPL code all you want and keep it all to yourself and as long as you don't distribute, which is a separate act from modification, you don't need to GPL your proprietary code. Merrill Lynch isn't in the software business, so they are in no danger.

Here's why Sontag says they won't show any more code to the Linux community: " . . .if we keep showing it, they'll just take that out and say 'no harm no foul.'" Well, any damages just went down, Chris. Sheesh, guys. You paid all that money. You should ask your new partner to give you a class in IP law. We know you have PowerPoint, so he could break it down in pictures. Oh. I forgot. That's not Boies' specialty, is it? Sontag says something else I hope the SEC notes:

"In the last year we've gone from almost no cash to more than $60 million in cash. Core operations are financially profitable."

Core operations? What core would that be? The only part of their operation that is profitable is their IP licenses and the stock story, no? If those are their "core operations" then I'd say the alleged Novell non-compete doesn't apply for sure. Novell isn't in the lawsuit business, so they aren't competing with SCO's core operations, according to my reading of this interview.

Then there is this tidbit about Microsoft:

"McBride: The funny part is we didn't even talk to Microsoft about this outside the normal public interest level things... when we talk to them it's about what's happening in the marketplace."

"When we talk to them" not "when we talked to them"? So, while Boies said he never had any conversations with Microsoft, and no one at his firm, so far as he knew, had either, does it sound like McBride is having ongoing discussions, or does it not? Of course, when they talk about what is happening in the marketplace, the subject of Linux and the lawsuit wouldn't enter into the conversation, because that has nothing to do with the marketplace.

McBride tells us one more interesting detail. He describes the legal battle with IBM as David and Goliath, and says this about Boies:

"The legal stone is clearly coming from David. He used to be with Cravath. It is an epic battle. The guy at Cravath supporting IBM used to work for David. [He's] Evan Chessler. So now you've got that sub-plot of the Grasshopper and Master thing."

I don't know about you, but there isn't a boss I've ever worked for I couldn't outmaneuver, because the underling always knows more about the boss than the boss knows about the employee. That's basic math. The underling has to study the boss to keep the job. The reverse isn't true, so lacking the motivation, they hardly ever know much about the people working for them, or what they could do without all the restrictions they place on them. I am sure not one of my ex-bosses would ever have predicted Groklaw, for example, as being in my skill set. Bosses never let you do half of the things you could do, if they only knew. I therefore expect that Chessler will outthink and outplay Boies on everything where private knowledge will play any role in this battle. McBride also says SCO will start going on the offensive now that they've got the money thing taken care of. That sentence is funny enough without any embellishment from me.

Here is the actual explanation of what this is all about, speaking of FUD. It's all about money and not wanting to drop a dying business model and adopt the new one, a la IBM:

"The SCO Group Inc.'s Chief Executive Officer, Darl McBride, enlisted the help of the World Intellectual Property Organization (WIPO) to bolster his arguments against the open source GPL (GNU General Public License) and Linux during a keynote address at the CD Expo conference here in Las Vegas.

"Citing WIPO data, McBride said that the value of the worldwide software market would approach $229 billion by 2007, and that it was being threatened by the ideas behind the Free Software Foundation's GPL, the software license that governs Linux.

"'The world, especially here in America, is shifting to one that is an information society,' McBride said. 'In the future, is that $229 billion in software still going to be there? Or in the case of the Free Software Foundation's goal, is proprietary software going to go away?'"

Finally, has an article, "Can a Subpoena Stop a Movement," by Peter Skarzynski and Pierre Loewe. The short answer is No. They say they don't think SCO realizes what an opportunity it has handed IBM. And here's why they say that:

"While the market's initial reaction to the SCO announcement boosted its share price, it's not at all clear that SCO understands what it's up against--or the opening it's giving industry titan IBM to line up as the defender of the little guy.

"Start with the fact that Linux isn't as much product as it is a movement. As the emblem of open source and brainchild of Linus Torvalds, Linux stands for the notion that progress is not proprietary. . . . In the Linux contest, the battle lines are clear: It's SCO's legal scolds papering the IT industry with cease-and-desist e-mails, versus IBM and the Red Hats of the world looking for ways to make Linux even more limber for a variety of commercial applications."

The authors are CEO and a founding director of Strategos, which is hardly a zealot Linux company. In fact, if you read their web site, you find out that they show companies how to reinvent themself and to strategize to "put competitors at continual disadvantage and create new wealth for shareholders." That's not GNU/Linux language. If folks like this, who are all about the bottom line, say SCO will find itself "on the wrong side of history" and that it's time to take sides, I think the tide must be going out for SCO, maybe dragging Enderle out with it. With all the money and effort that has gone into the SCO/MS FUD, it wasn't enough to win the PR battle. Isn't that simply amazing? Even the headline writers are starting to get the news. The Forbes headline on the story about the SCO teleconference is: "Boies Joins SCO Shakedown." So I guess it's true. Money can't buy everything. That's the real David and Goliath story.

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