Two months ago I blogged about the best open source presentation ever?, which was remarkable because mostly when I read what other people have to say about open source, I'm much less charitable (for example, this about James DeLong's latest paid product). Last week I saw that the Olliance Group posted a report about open source and my first response was to address, point by point, the myriad failures of facts, logic, and conclusions that it contained. But the report is so long, and the errors so many, that I considered my alternatives. Then I saw this bunk from Rich Green of Sun Microsystems, and I thought about that famous line from Al Gore's movie "An Inconvenient Truth" about how it is impossible to explain something to somebody when their paycheck depends on them not understanding it. So instead of responding to them, I'm going to try producing my own "think tank" result, based on my own experiences with information technology, design, innovation, and the good old fashioned bottom line. Since at least 1989, the open source business model has always been about profit, as it was when I started the first such company (and delivered the first open source profits). This focus on profit had and has as much to do with emulating purveyors of proprietary software as it does with emulating the purveyors of apples, aircraft, or art. There is nothing magical, paradoxical, or abnormal about open source profit, at least when GAAP rules are followed when reporting it, just as there is nothing strange about selling an apple, an airplane, or a work of art for a profit. The premise behind the profit objective is based on the theory that innovation drives competitive success, and that the open source development model is the most reliable, the most scalable, and the most rapid and direct way to achieve innovation, period. A corollary to that theory is that anti-competitive behavior eliminates the incentive to innovate because it undercuts the benefits of innovation. Thus, open source seeks competitive markets and open source succeeds best when all players are competitive. All the talk of hybrid models is a smokescreen meant to hide the ways in which companies seek to limit, rather than enhance competition. Open source has never needed the kind of venture capital that proprietary software companies do. This is a feature, not a bug. We started Cygnus with $6,000, and we achieved profitability our first year of operations (and for years thereafter). A business model that can flourish without VCs is a stronger, not a weaker model than one that must continually seek financing to develop new products. Independence provides a greater opportunity to innovate, and hence provides a stronger base from which to compete. There are three academic authors that I believe explain at least 90% of the success I have observed among both open source companies and the open source community. (I need to figure out how to properly integrate their work into our research page.) In summary: Eric Von Hippel's work on user-driven innovation explains why more innovation happens more rapidly and more successfully when users have the tools and the freedom to innovate as compared with proprietary models that exclude users from key innovation processes. My take on his work is that 85% of all break-through innovation comes from users, not vendors, and open source is a way to harness the 5/6ths of the world sidelined by proprietary software models. David Upton's work on flexibility as a key factor in determining both innovation speed and reliability in information technology. It also explains why "release early/release often" is such a robust model for software development and innovation. Carliss Baldwin's application of game theory to the subjects of modular architecture and developer motivations gives mathematical explanations to many of the insights detailed in Eric Raymond's "The Cathedral and the Bazaar" and later writings. This includes "with many eyes, all bugs are shallow", "the comedy of the commons", and why developers do so well just by "scratching their own itch". Can these effects be accomplished without open source software? Yes, to some extent, but why do things the hard way? Are there other things besides innovation that determine the success or failure of a high-tech company? Of course--management competence being one big one. But in my book, efficient, high-quality, long-term innovation is the fundamental competitive challenge in building a sustainable technology business, and thus the profit-maximizing strategy is one that encourages innovation, rather than extinguishing it. Finally, nationally-scoped surveys of actual users, actual productivity, and actual intellectual capital are building a body of statistical evidence confirming what these theories tell us. Namely, that open source is the future economic base for ICT in Europe, Japan (link TBD), and other countries. Any report that concludes anything less is not intellectually competitive. Come on guys--let's move the ball forward, not into somebody's proprietary gym bag!