Open Source and Proprietary Software: The Search for a ... - SSRN

Open Source and Proprietary Software: The Search for a Profitable Middle-Ground By Chris Nosko, Anne Layne-Farrar, and Daniel Garcia Swartz* March 2005

I. Introduction The open-source software model, with its emphasis on harnessing the imagination of programmers across organizations and across cyberspace, has been hailed as the most significant change in computing since Apple played David to IBM’s Goliath. Yet, while dozens of key software products have already been created using this approach, enterprises dedicated to bringing open-source software into the mainstream of the information economy have had a rough time finding ways to stay afloat. To research economists, open-source software’s growing pains offer fascinating insights into the impact of technological change on the organization of markets. But to firms investing billions of dollars in IT infrastructure, there’s nothing academic about the issue. Since computer software is such an important part of the production process in so many different industries, choosing the right software model (in terms of development, licensing, and distribution) can make a significant difference for the bottom line. Traditional software companies generate revenue from the sale of their intellectual property – a strategy usually thought not to be feasible for open-source software firms because they retain only limited rights in their inventions. During the frenzy of the high-tech boom, the issue of how to capture the fruits of innovation without owning the tree was largely ignored. A dozen companies waving the open-source banner received heady infusions of venture capital. And a few managed successful IPO’s even as they rejected traditional intellectual property protection offered by commercial licensing. Instead, they developed business models loosely based on support services.

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All three authors were with LECG at the time this article was written; Anne Layne-Farrar and Daniel Garcia Swartz are still. The authors would like to thank David Evans and Richard Schmalensee for helpful comments and Irina Danilkina for research support. Please direct any comments or questions to [email protected] or [email protected].

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In the wake of the dot-com bust, open-source-oriented companies were forced to rethink revenue generation – easier said than done. Since most open source enthusiasts identified more with community than with property, charging for what had been free ran counter to their beliefs. Besides, joining what many viewed as the Dark Side didn’t necessarily make good business sense since they relied heavily on the open-source community for free help in debugging and improving code. Still, revenue had to be conjured to keep the lights on and Wall Street analysts at bay. The approach that some of these companies have adopted is to honor aspects of the open-source model while inching toward reliance on fees for the use of intellectual property. To this end, firms have created hybrids combining elements of free code with code that is licensed for cash. Open source companies MySQL, BitMover, and Red Hat typify this creep toward middle ground. Ironically, firms known for licensing software in traditional ways have been struggling almost as hard to cope in the post-dot-com world. Many proprietary software makers have found they can better satisfy their customers, and generate more profit, by adopting aspects of the open-source software model. Thus Sun, heretofore a symbol of capitalism unbound, has opened its Solaris operating system in hopes that wider use will stimulate demand for Sun hardware and consulting services. For its part, Apple has incorporated a large portion of one open-source operating system, FreeBSD, into its new operating system and “open-sourced” the underlying core of this operating system. Even Microsoft – that icon of proprietary software – has adopted some aspects of the opensource philosophy through its Shared Source Initiative, allowing some developers limited access to code from some Microsoft products. Here, we offer a closer look at these companies to illustrate how very different sorts of firms are inching towards a fruitful convergence. Based on our admittedly small sample, we conclude that open-source software companies are more likely to succeed if they can use open-source products as entrée into domains protected by traditional intellectual property, and that proprietary software companies can benefit from aspect of the open-source software model without abandoning revenues from intellectual property.

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II. Understanding Open-Source Software The Free Software Foundation (FSF), headed by veteran programmer Richard Stallman, represents one end of the software spectrum. Stallman’s vision stems from his early frustrations at the MIT Artificial Intelligence Lab, where he witnessed the rise of proprietary software firsthand. He believes society is best served when software is freely shared, and views the proprietary / open-source debate as a battle over morality. “Computer users should be free to modify programs to fit their needs and free to share software,” he asserts, “because helping other people is the basis of society.”1 Market economics has no legitimate place in software development. To the FSF, it is not enough to distribute software and allow users to do with it what they want – some, after all, might choose to include free code in proprietary products. Instead, Stallman uses copyright law to keep code open. The General Public License (GPL) gives “everyone permission to run the program, copy the program, modify the program, and distribute modified versions – but not permission to add restrictions of their own.”2 Thus all software licensed under the GPL must be redistributed under the GPL – even it’s modified – creating what is sometimes termed a “viral” license. A more moderate vision of open source came from a partnership between software developers at AT&T and researchers at Berkeley, who spawned a variant of the UNIX operating system called BSD. Like most academics, the Berkeley developers were more interested in having their work acknowledged as scientifically important than in earning royalties. The Berkeley computer programmers felt the best way to achieve that end was to distribute the work as broadly as possible. The license they created thus requires the original work to include the source code along with acknowledgments for contributors, but allows derivative works to be distributed under different sorts of licenses – even proprietary licenses. The BSD opensource license therefore encourages commercial developers to embrace the code as their own. By the mid-1990s it was clear that the FSF and the BSD models could both yield high-quality products. Much of the software used to run the Internet was distributed with 1

C. DiBona, S. Ockman, and M. Stone, eds., “Open Sources: Voices from the Open Source Revolution” (O Reilly & Associates Inc., 1999), 55. 2 Ibid, 59.

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these licenses; Linux, released under the GPL, was a big hit as an operating system for network servers. But open-source software evolved in a haphazard way, and few outside the tech community knew much about it. To extend the reach of open-source, a group of software developers met to tone down the ideology and to make open-source business-friendly. These developers were driven by the pragmatic belief that software development is often done best when it is done openly. “We think the economic self-interest arguments for open source are strong enough that nobody needs to go on any moral crusades about it,” the group wrote.3 One concern was the label “free software.” These middle-of-the-roaders believed the expression scared away commercial firms intrigued by open-source software’s potential for efficiencies but worried they couldn’t profit from their investments. As an alternative, the group formally adopted the term “open source” and created the Open Source Initiative (OSI) to set standards. For the OSI, a user has to be able to read the code, modify it, and redistribute it if the program is to be called open-source. Access to source code is a prerequisite, but so are well-defined distribution rules. A product that includes source code, but does not allow successive developers to do anything other than look at it, cannot be called opensource software. Nonetheless, the OSI definition does not require variations of the software to remain open. It allows software to be licensed initially as open-source, but derivatives may be distributed as proprietary software.

III. Open-Source Software Today Open-source business models are drifting toward the traditional. Some new software development business models retain pieces of the open source model, but generate revenue through the clever use of intellectual property. Market segments with less flexible demand (businesses) are compelled to buy a license for the open code from the developer. But non-commercial users don’t have to pay, giving the development company the feedback from a large network of users who would otherwise not be around to help. Several companies illustrate this process.

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Open Source Initiative—FAQ: Advocacy, www.opensource.org

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A. MySQL: Price Discrimination MySQL is the world’s most popular open-source database system, with over five million active installations.4 The first version was released on the Internet in 1996 and was widely used to store information for advanced web pages. As the program was improved, people began to use it for larger, mission-critical applications. Today, it successfully competes with database products including Oracle Database, IBM DB2, and Microsoft SQL Server. In 2001 the principal developers formed MySQL AB as a forprofit entity, with investments from companies including banking giant ABN Amro. MySQL is released under two licenses. Anyone can download the source code for free and redistribute it as long as the redistributed product is licensed under an opensource license. The second license, for companies planning to customize the product for commercial purposes, removes the GPL restrictions and allows purchasers to distribute it integrated with proprietary products.5 Developers can thus take MySQL, customize it, and redistribute it as part of a larger product, like an accounting package. If the larger product is released as open-source, no license needs to be purchased. If the product is distributed in proprietary form, a commercial license must be acquired. Other than the license, the two versions of MySQL are identical. Why go to the trouble of segmenting the market? Database systems exhibit “network effects,” which make a product more valuable to individual users as the total number of users grows. These network effects allow MySQL AB to profit from the twopart licensing scheme. Databases are almost never simply purchased and implemented off-the-shelf. Instead, a database product is customized to meet specific needs. As more people use a particular package, more developers become trained in customizing the system, more documentation is written, and more software add-ons are created. This makes the system more valuable to each user, since trained developers and convenient add-on packages are easier to find and cheaper to use. With MySQL, the no-cost GPL licensing option encourages network effects by creating a pool of developers familiar with the product. Meanwhile, commercial users

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See www.mysql.com. MySQL Licensing Policy, www.mysql.com

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who intend to embed MySQL into other products are more likely to purchase a commercial license if wide use of the GPL version has made the software easy to maintain. Some revenue is certainly lost because some users who download the GPL version would have, if required, purchased a license. But the lost unit sales are offset by the higher prices that can be charged to commercial users. To license this way, MySQL abandons some aspects of the open source model, moving it closer to proprietary software. First, the MySQL model is based on owning and controlling the copyrights to software. Most GPL-licensed products include source code and documentation from many different places, making single ownership difficult if not impossible. MySQL, on the other hand, develops almost all code in-house. Company developers even rewrite bug fixes offered by the external developers in order to maintain clean copyright ownership.6 MySQL then uses copyright in exactly the same way as a traditional proprietary software company would. The MySQL model is thus an ingenious combination of proprietary and opensource approaches. Taking the bug fixes and improvements that external developers offer lowers development costs, while rewriting the exact wording of code that outsiders submit preserves copyright protection. Price discrimination is employed effectively by separating users according to product usage. Commercial users are willing to pay at least in part because of the network effects created by the free licensing for non-commercial use under the GPL. B. BitKeeper: Creating a Software Lock BitKeeper, a source code management (SCM) tool made by BitMover, illustrates an approach similar to MySQL’s – but one that has led to considerable friction with many open-source advocates. SCM software helps developers keep track of changes made to source code. Consider two developers working on the same file at the same time; each has to be careful not to overwrite the other’s changes. SCM software automatically keeps track of different versions of the file and merges changes so that developers need not worry about overwriting.

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Mikko Valimaki, “Dual Licensing in Open Source Software,” Systemes d’Information et Management 8, no. 1 (2003):63-75.

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BitKeeper is an advanced SCM system developed by Larry McVoy, a former Sun employee who had been toiling in the open-source vineyards for years. The company has a unique licensing scheme designed to separate developers using the product for opensource work from companies using it for proprietary development. The license allows BitKeeper to be used for free as long as two conditions are met: first, developers cannot be working on a competing product, regardless of whether it is open-source or closedsource. Second, comments on source code changes must be posted to an open website, allowing everyone access to project management details. This latter condition separates the free system from the commercial version because corporate customers rarely want to post management details for all comers. So they purchase the corporate version, which allows code changes to be hidden or routed to an internal corporate server. BitKeeper has had a rocky relationship with many open-source advocates. A provision in the original license restricted developers’ ability to change and redistribute the code. Consequently, many in the open-source community reject the license as proprietary. Plainly, BitKeeper occupies an interesting middle ground. Much like MySQL, BitMover is able to segment demand, allowing developers to use the program without undermining commercial software companies’ willingness to pay. What’s more, the free version acts as an advertisement for the commercial version. The BitMover home page includes an encomium from Linus Torvalds. C. Red Hat: Using Trademark and Contracts to Extract Revenue Unlike MySQL and BitKeeper, which started with mixed licensing agreements, Red Hat began as a pure open-source company but has gradually hedged its bets. The company attempts to profit by solving a problem inherent in the Linux development model – overcoming the inconvenience of modularity. For major operating systems, the components of the package are integrated by the distributor and sold as a single program. Since no one developer exists for Linux, bits and pieces of the operating system tend to float around – some in forms unusable by nonprofessionals. Specific Linux distributions consolidate these bits and pieces in a convenient package.

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Red Hat is arguably the premiere Linux distribution, with more than 50 percent of Linux server distribution shipments in 2002.7 The company was founded in 1995 and subsequently enjoyed incredible growth, topped off with an IPO in 1999 that generated the eighth-biggest first-day percentage gain in Wall Street history.8 Like many other high-tech companies, Red Hat lost quite a bit of value in the dot-com crash, but has rebounded successfully. Red Hat really does three things. First, it integrates components of Linux into a cohesive distribution, including commonly used open-source products along with the core operating system. Second, it adds its own software to provide a better user experience and to make installation and updating easier. Third, it sells support packages and certifies that external administrators are qualified to work on Red Hat products. The company includes open-source software only and the code it writes is licensed under the GPL. When Red Hat first began selling Linux, the company concentrated on generating revenue through support services and packaged products containing a manual and a CD to facilitate installation. Since the code was available online at no cost, Red Hat customers were, in effect, paying for the convenience of the integrated physical package. Unlike other operating systems, users could buy the Red Hat Linux package once and install it on as many computers as they wanted.9 This strategy fit neatly with the open source model, but Red Hat had a problem common in open-source companies: inadequate revenue. Red Hat changed its business model drastically in 2003. It split distribution into two products – the Fedora Project, a more traditional open-source project run by Red Hat, and Red Hat Enterprise Linux (RHEL), the flagship product. Fedora is the place for experiments to run and outside developers to submit code, while RHEL is a stable version of Linux for paying customers. Code developed for Fedora might or might not go in RHEL; Red Hat decides. Along with the split came a new licensing agreement. RHEL source code is available from Red Hat, but the code computers need to run the operating system is 7

S. Shankland, “Red Hat overhauls flagship Linux,” October 22, 2003, news.com.com W. G. Rohm, “Inside The Red Hat IPO,” November 1999, www.linux-mag.com 9 D. Lyons, “Linux Loyalists Leery,” March 31, 2004 www.forbes.com 8

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available only with the purchase of a support subscription.10 And support subscriptions must be purchased for each computer – just like proprietary licenses. One fundamental problem with generating revenue from GPL software is that anyone can take the source code, “compile” it for computers to read, and resell it without incurring the original creator’s development costs. Red Hat cleverly sidesteps this problem with trademark protection. Another company could rebuild RHEL from freely available source code, but it would have to strip out all references to Red Hat to comply with trademark law. Thus Red Hat uses trademark law to limit the potential for another company to undercut its profits. In many ways, Red Hat’s model combines the best of the open-source and the proprietary worlds. Red Hat is a Linux distribution and thus benefits from all the development work on Linux done by the open-source community. It also benefits from having knowledgeable developers report bugs in the source code – for original Linux and add-on products. Meanwhile, the company uses trademark protection and supportcontract licensing to emulate proprietary licensing and generate revenues. As with MySQL, price discrimination is at play. Here, though, the market is segmented according to whether users prefer to pay for the distribution in terms of time and expertise (downloading and compiling code themselves) or in cash (subscribing to RHEL). Red Hat’s new licensing model has allowed it to escape the fate of some other enterprises distributing Linux. MandrakeSoft, which distributes Mandrake Linux, filed for bankruptcy in January 2003.11 The company has since emerged from Chapter 11, but earns a fraction of Red Hat’s revenues. SCO (formerly Caldera) illustrates the problems of an improperly handled transition from pure open-source distribution to a partially proprietary model. In 2001 Caldera announced that it would sell its Linux distribution, OpenLinux, with a per-CPU licensing scheme. Unlike Red Hat, which offered a free alternative, OpenLinux simply

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Advanced users could compile the source code themselves. As discussed below, this has many disadvantages for corporate customers. 11 S. Shankland, “Mandrake Linux files for bankruptcy,” January 15, 2003, news.com.com

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imposed a traditional proprietary license for all versions.12 The strategy enraged the open-source community, and in May 2003, SCO suspended sales of OpenLinux.13 SUSE is the only other distribution to have weathered the transition with some success – and their acquisition by Novell has certainly helped.

IV. Convergence from the proprietary side While businesses built around open-source software continue to experiment with ways to earn profits from property rights, proprietary software firms have been approaching the same issues from the opposite direction. They have recognized some advantages of the open source model, but are wary of giving up their intellectual property. As Sun co-founder Bill Joy once explained, “we’re spending over a billion dollars a year in research. I can't just throw it all on the street.”14 Middle paths are emerging, though. The three firms examined here have adopted unique aspects of the open source model that allow for profits. A. Apple: Proprietary Software Based on Open Source Code Apple’s concessions to open-source began in the mid-1990s, when it was seeking a replacement for its aging operating system. It purchased NeXT, creator of an operating system (NextStep) based on a partially open-source UNIX variation.15 Because the code Apple acquired with NeXT was not licensed under the GPL, Apple was under no obligation to release the source code for its new operating system based on NextStep. Nonetheless, in 1999 it made the strategic decision to release pieces of the operating system under an open source license. Apple offered the source code for the underlying kernel and miscellaneous components, calling the resulting open-source project Darwin.16 But it held back the most valuable code, including the graphical user interface and the Mac OS application support. Since Darwin does not include all the components usually associated with an

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“Change for Caldera OpenLinux Workstation 3.1 Will Require "Per System" Licenses,” Jun 25, 2001, linuxtoday.com 13 This was done mainly because SCO had filed a number of suits against other users and distributors of Linux, claiming that they violated SCO’s intellectual property in UNIX. Id. 14 E. E. Kim, “The Joy of Unix,” November 1999, www.linux-mag.com 15 Mike S. “The NeXT Mac OS: Part 1,” www.macopz.com 16 S. Shankland, “Apple opens parts of its OS,” March 16, 1999, news.com.com

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operating system, somebody would need to invest considerable resources to transform it into a fully operational product that might compete with Apple’s proprietary offerings. Apple’s decision to release Darwin might have been a goodwill gesture, but other explanations are more plausible. First, the release lowered the company’s ongoing costs. The open-source community is continually improving the code underlying the Mac OS X, reducing Apple’s workload. Note, too, that Apple also benefits from outside testing. Since outside developers have access to the source code, they can report bugs to Apple – sometimes with code patches already designed. Second, independent hardware makers with access to the source code can more easily integrate their products with Mac OS X. Third, releasing Darwin encourages outside developers to try experiments with the code that may yield improvements, but are not a priority for internal Apple developers. For example, although Apple released a version of Darwin that ran on Intel chips, it was incomplete and imposed strict limitations on hardware. But external developers are creating a distribution package for the Intel platform,17 popularizing Darwin and providing positive feedback to the Mac OS and Apple platform. Apple has retained control of its most valuable intellectual property. Users can still buy the Apple experience from only one place. But open-source improves that experience without eroding Apple’s revenue-generating capabilities in the process. B. Sun: Open-Source as a Loss Leader Sun operates primarily as a proprietary software and hardware producer – mostly selling high-end servers. These systems typically include Sun’s proprietary variant of UNIX, Solaris, as well as its proprietary microprocessor, the UltraSPARC. On a typical system, Sun profits from licensing software and selling hardware, as well as from selling services with the package. Sun has had a tumultuous relationship with the open-source community. Despite the fact that its co-founder and chief scientist, Bill Joy, was one of the principal developers of BSD at the University of California, for most of the company’s life Sun chose to keep a tight reign on software development, paying only lip service to the opensource movement. The company focused on what it terms “open standards,” pushing for

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The GNU-Darwin Distribution, www.gnu-darwin.org

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companies to adopt similar outer layers (usually defined by Sun) in order to allow for interoperability but keeping underlying implementation details secret. More recently, however, Sun has tried to integrate open-source software in a number of projects. It purchased Star Division, a German developer of a word processor suite that ran on Windows and UNIX.18 And in 2000, it established a new organization, OpenOffice.org, which released the Star source code under a BSD-style license. Today, Open Office is by far the most popular office productivity suite for Linux.19 Sun also released a number of commercial versions of the suite. The commercial product shares much of the open version’s source code. But Sun adds components with licensing restrictions that prevent open-source release (a third-party-developed spell checker and database) as well as features that users expect from polished packaged software (support and a warranty). Sun uses the open-source version as a “loss leader” for the premium commercial product. Some speculate that this is part of a long-term strategy to challenge Microsoft’s dominance in desktop productivity software.20 Early in the 1990s, Sun developed the programming language Java, which was designed so that programs can be written once but run on many different operating systems without alteration. Although it has not fully lived up to the initial hype, Java has succeeded in niche markets – it is used quite successfully to develop advanced websites. In 1999, Sun released the Java source code under a hybrid license called the Sun Community Source License (SCSL). The SCSL makes source code available, but does not allow the product to be redistributed in any form without a license purchased from Sun. The license also requires derivative products (even those for internal use) to meet certain compatibility requirements. In essence, releasing source code helps developers to create and test their own products and stimulates interest in the original product, while still generating revenues for Sun from commercially distributed derivative works. This kind of license makes a lot of sense for a product like Java. Prior to its release under the SCSL, developers could release Java with their products as long as it was packaged in machine-readable form and Sun was paid the license fee. Now that the 18

S. Shankland, “Sun buying Microsoft Office competitor,” August 20, 1999, news.com.com “2003 Readers' Choice Awards,” Linux Journal, November 01, 2003, www.linuxjournal.com 20 B. Perens, “Sun's StarOffice Release: Is It Really What You Think?,” perens.com 19

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source code is available, software developers can better integrate their products with Java, which gives them incentives to include Java in their distributions and to write for the Java platform. It also increases Sun’s licensing revenue. Additionally, developers can improve Sun’s proprietary code and contribute ideas on how to improve Java. In many ways the SCSL is similar to the MySQL licensing scheme. The economic principles are the same: generate network externalities by distributing source code, and profit from the resulting popularity by charging for commercial licenses. But in contrast to MySQL, Sun controls everything that gets put into the product, including whether derivatives can be distributed. Not surprisingly, many open-source advocates have not embraced the SCSL. “No amount of talk or posturing can change the fact that Java's ‘Sun Community Source License’ is an instrument of proprietary lock-in,” writes open-source guru Eric Raymond.21 Sun recently fulfilled a long-standing promise to open its crown jewel, the Solaris operating system. In 2000, it released Solaris under the SCSL,22 but subsequently restricted access to schools alone. In early 2004, Sun promised to release Solaris as true open-source software, possibly under the GPL.23 Then in early 2005, Sun followed though. The company will likely use the open- source product as a “loss leader” to generate sales of hardware and ancillary services. C. Microsoft: Selected Source Code Release If the Free Software Foundation inhabits the open end of the software spectrum, Microsoft is typically portrayed as representing the other extreme. Indeed, the debate between open-source advocates and Microsoft has been heated at times, with open-source enthusiasts accusing Microsoft of writing bad code and profiting from its dominant market position.24 For his part, Microsoft CEO Steve Ballmer once described software released under the GPL as a “cancer.”25 The last few years have seen a bit of a thaw in this frosty relationship, though mainly because Microsoft has offered the occasional verbal olive branch. Nonetheless, the company’s actions arguably have been more important than its words. In May 2001, 21

“Let Java Go, Round 2,”February 19, 2004, www.catb.org L. Rohde and D. Toft, “Sun goes half open-source with Solaris,” October 4, 1999, www.cnn.com 23 R. McMillan, “Sun considers GPL license for Solaris,” April 30, 2004, www.infoworld.com 24 Halloween Documents FAQ, Open Source Initiative, www.opensource.org 25 “Microsoft's Ballmer: "Linux is a cancer",” Jun 01 2001, www.linux.org/ 22

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Microsoft announced its Shared Source Initiative,26 opening the source code of many of Microsoft’s products, including Windows, to some software developers. The licensing scheme is tiered with different restrictions on different products for different people. Options range from lenient source code licensing for Windows CE (for handhelds) to very restricted licensing for Windows 2000 Server code. Only a select few can gain access to the latter, and even they are generally not allowed to modify it. To preserve its copyright, Microsoft also bars the use of code from Shared Source products in other products. The Open Source Initiative warns that, because of this restriction, developers risk being “contaminated” by the code: “Shared source, therefore, behaves like a virus that infects developers' brains. … Failing to implement …precautions could result in your organization's being sued for ruinous compensatory damages by Microsoft's armies of lawyers.”27 Nonetheless, the initiative is evidence that Microsoft is moving toward the middle. Microsoft is unlikely to join the open-source crusade any time soon, but it appears ready to search for common ground that preserves its ability to use intellectual property to generate revenue.

V. Conclusions Open-source and proprietary software models remain distinct, but we predict that less software will be licensed at either extreme in the future. As MySQL, Red Hat and BitMover illustrate, open-source companies are moving to mixed models that allow enough intellectual property retention to earn profits. Meanwhile, as Apple, Sun and Microsoft suggest, proprietary companies are opening source code to create better products for less money – without relinquishing key intellectual property. Ultimately, the search for profitability in software, which relies in large part on intellectual property rights, will force companies into niches all along the software spectrum. Just which niches will depend on the characteristics of their particular products, customer bases, and market environments.

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Basic Principles of Software Source Code Licensing, Microsoft Inc., March 2003, www.microsoft.com “Shared Source: A Dangerous Virus,” www.opensource.org

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From a business perspective – specifically, IT managers – this is mostly good news. As open-source-based companies become more sophisticated in price discrimination, fewer commercial users will be able to hitch a ride on the free software gravy train. But given the difficulties of sustaining a vibrant open-source community in its purest form, even those who pay for formerly free software may be better off. The reliable presence of open-source alternatives to proprietary software will spur competition, speeding innovation and keeping down prices for proprietary products. Moreover, that proprietary software companies are adopting aspects of the opensource model is plainly in the interest of business customers. Giving external developers access to proprietary code means faster debugging and should deepen the pool of programmers with experience in maintaining and customizing software used by business. It is also likely to improve the quality of open-source development, since no amount of copyright or patent protection will prevent programmers from using insights gained from access to proprietary intellectually property. The only downside is that the process of convergence is likely to be messy, as the open-source community struggles to redefine its legal turf and proprietary software companies grapple with maximizing revenues from licenses without complete control over access to source code. The intangible nature of the property embodied in software mixed with the very tangible consequences of success or failure in the software industry almost guarantees a wild ride.

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