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Goldman Sachs: Linux Will Dominate in the Corporate Data Center - and a Tip for Them
Saturday, June 23 2007 @ 11:41 AM EDT

There's a very interesting paper published by Goldman Sachs and posted by Hewlett Packard, Fear the Penguin [PDF]. You will recall that both companies sent representatives to join Steve Ballmer and Ron Hovsepian on the stage and to speak about how wonderful it all was on the day Microsoft and Novell announced their deal. According to the paper, Linux is going to take over the corporate data center. Here's the first paragraph:
Linux-on-Intel appears likely to emerge as the dominant platform in corporate data centers. This paradigm shift should have significant implications for a broad range of enterprise IT vendors. Our handbook highlights key themes and offers an initial framework for investing in Linux’s emergence.

Isn't this the the company that brokered that deal? Anyway, the paper is presumably so you too can make a bundle from Linux. Microsoft evidently knows it is over for them going forward as the dominant player in that area, and the deal, with its "you must pay me forever to use Linux" aspect, likely flows from that stark awareness. And all the folks that make money from Microsoft want to find a way to make money from Linux going forward now.

I have a tip for them. If you want the community to code for you -- and you do, as that is the source of the money you want to make -- respect the terms of the GPL and its intent. And block Microsoft from being able to redefine what the community can do with its code. Otherwise, things won't work out well for your investments.

I'm providing this free tip, because I discern from the paper that the Goldman Sachs folks who wrote it don't know as much about Linux as they imagine in one respect:

We believe the emergence of Linux will most directly benefit independent PC semiconductor companies (Intel and AMD) and Intel-based server businesses (Dell) while having a mixed impact on proprietary systems companies (Hewlett-Packard, IBM, and Sun Microsystems). It should also benefit “open” infrastructure software vendors such as BEA Systems, BMC Software, Oracle, and Veritas at the expense of infrastructure software companies with proprietary solutions, though it may negatively affect overall software pricing at the same time. Although we believe that Red Hat is well on its way to establishing a definitive standard for enterprise Linux, we also believe it is primarily a service provider and that it should be valued as such.

Enterprise dudes have a lot of trouble with the FOSS concept. They are used to selling licenses for software in a box, and that is what they know. It's like the RIAA. They want to sell albums, no matter what you, the customer, wants.

Well, here's the news, boys: things have changed. Much of what you know or think you know is out-of-date. And if you don't want to sink like a stone, you need to make some changes.

Here's part of what the enterprise doesn't know: In the United States, Linux adoption comes from the large commercial guys, but outside of the US, it's not that way. In Europe, it's small to medium businesses, educational entities and nonprofits, for example. In Asia, it's government. A lot of FOSS coders are in Europe, actually, not the US. What does that mean? It means if you mess with the GPL, you won't make the money you thought you would. Because outside of your rarified air, that's what people care about. That is your miscalculation. Most FOSS coders chose that license, and for a reason: to keep folks like you from strip mining the ecosystem. You think you'll make a bundle if you could just find a way to strip mine, but what will happen if you do is the US will be isolated with Brand X Dead End Linux. The rest of the world will continue to code and share under the GPL, which will be rewritten as needed to protect the community, and they will find a way to prevent you from ripping off their work in ways that are offensive to them. What you need, to make some money, is partnerships with the community, not just the vendors who just gather up their work and pass it along. Not formal partnerships, but an atmosphere of respect, one for the other. I'm not saying what vendors do isn't valuable. It is. But it's not the mouth of the river you want flowing your way.

Business folks think they can do to Linux what they did to Unix. But you can't. Why not? It worked there, despite the outcries from the true authors of the code. Here's why. This time, the GPL stands in your way. You can close off one iteration of code, but you can't take it all proprietary, the way you did Unix. Ha ha. That's the bottom line.

Here's what else you don't yet understand. The community understands licenses. They are brainiacs. You can't fool them. You can buy a few, but you could just hire people if you want to control them. Then you are right back where you started, in a Cathedral instead of a Bazaar, and you are dying to get the Bazaar. To get the Bazaar, you have to play fair, as defined by the license.

Ask yourself a question: is Linux winning in the data center because of you? Was it you who saw five or ten years ago it would happen? That it should? Or was it the geeks, the guys who wrote it and used it, who saw the value of the operating system and got it into all the places where they worked? Sometimes they had to sneak it in, because you were too dense to see its value, IIRC. See what I mean? When it comes to software, you can't get rid of the geeks and be successful. As Steve Ballmer told you, it's about developers. Developers, developers, developers. You are messing with the guys that can make you successful. How counterintuitive is that, if you want the Golden Goose to keep laying those Golden Eggs?

Software isn't soap. You can't manufacture it, package it up and you're set for life. It has to be updated and patched and innovated forward, perpetually. Who will do that for you if they dislike your business practices? Novell apparently imagined that there would be an outcry from a small number of "extreme fringe" folks and then it'd pass. But that isn't what happened, is it? How did their second quarter compare to the first? The community as a whole spoke: they hate these patent deals. You can interoperate all you want, but patent deals are violative of the GPL. Period. Extrapolate. Add in the possibility of litigation that can draw your company in or involve your investment, and you have to ask the pragmatic question: is this worth it? You can annoy your customers too, but then they drop you. How much more your upstream suppliers?

If you want the Bazaar, you also have to block Microsoft from shutting it down. The attempt to isolate noncommercial coders from commercial users and make Linux de facto proprietary would mean its doom. I'm sure Microsoft knows that, even if you didn't get it yet. The Goldman Sachs paper quotes from Linus' first email:

"Hello everybody... I'm doing a (free) operating system (just a hobby, won't be big and professional...)." —Linus Torvalds

Let's imagine, now, that Microsoft's patent deals were in place back then. So to begin with, Linus and Linux are hobbyists, by Microsoft's current definition. But of course, nowadays it's beating Microsoft in the corporate data center, or is about to, according to this Goldman Sachs paper. So a guy can start out with nothing but a hobby in mind, and if enough people help out, you can end up with software that has a huge commercial footprint. But what would that mean for Linus and Linux? Let's read the wording from Microsoft's patent pledge to noncommercial programmers, and imagine, if you will, that it applied to Linus back then, just as Linux began to take on a commercial aspect:

This pledge is personal to You and does not apply to any use or distribution of Your Original Work by others....An “Individual Contributor” is an individual open source software developer (and not any corporation, partnership or other legal entity)....

The rights provided under this pledge are personal to You and are not for the benefit of others....

Many software developers, often referred to as “hobbyists,” write code not with the expectation of making money, but because they enjoy solving technical challenges and participating in a community of enthusiasts who recognize and encourage one another’s talents. One such community of hobbyist developers participate in the development of open source software. To further encourage these efforts, this pledge provides non-compensated individual hobbyist developers royalty-free use of Microsoft patents as set forth below....

Non-Assertion of Patents Pledge

Microsoft hereby covenants not to assert Microsoft Patents against each Non-Compensated Individual Hobbyist Developer (also referred to as “You”) for Your personal creation of an originally authored work (“Original Work”) and personal use of Your Original Work. This pledge is personal to You and does not apply to the use of Your Original Work by others or to the distribution of Your Original Work by You or others. A “Non-Compensated Individual Hobbyist Developer” is an individual software developer (i.e., a person and not any corporation, partnership or other legal entity), including a developer of open source software, who receives no monetary payment or any other forms of consideration that can be valued monetarily for their creation of their Original Works. The fact that You may be employed as a software developer by, and receive a salary from, a corporation, partnership or other legal entity, does not disqualify You from treatment as a “Non-Compensated Individual Hobbyist Developer” under this pledge, provided Your activities related to the creation of Your Original Work are performed during Your free time and outside the scope of Your employment.

As you can see, the second Linus stepped off of the noncommercial oasis, he'd be liable for a patent infringement claim, as would his code if you used it or sold it in a commercial world. I'm not saying I believe Microsoft has any valid patents. I have no idea, because like SCO, they never tell us. But let's imagine, for the sake of the discussion, that they did. Linux could never become what it has become, had those patent pledges been in place back then.

Get it? This promise not to sue hobbyist coders only if they remain hobbyists is the death sentence for any future Linux-style projects from the community. But that is who gave you Linux, folks. IBM didn't do it. Neither did HP or Microsoft or Goldman Sachs. And you can't mistreat those guys who have the skill to keep that money train chugging along for you, if you want them to keep coding. It's a matter of fairness. Tit for tat, if you will. They aren't asking you for money. I know you'd gladly pay that. But what they are asking for instead is that you respect the license terms they chose for their work.

The GPL tells you what you can and can't do, just like Microsoft's EULAs. And if you disrespect the GPL, you will find no one willing to code for you. I told you it wouldn't work out for Novell, didn't I? Well?

So that's a little friendly advice for you. I hope you believe me this time. It'll save you a lot of trouble. There really is a lot of money to be made, but not if you try to shove Linux into the proprietary mold. It won't work, and you'll lose money. Let FOSS be what it was intended by its authors, and make your money in new ways. Because as Red Hat has demonstrated by doing it, despite all of your dire predictions that it could never work, there is money to be made.

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