Ashlee Vance’s insightful piece in Monday’s NYTimes on the implications of the wrangling between the EU and Larry Ellison over Sun and MySQL lit up a lot of conversation in open source circles. And with Open Source reaching something like a ten-year mark since Redhat and Linux broke forth in a big way, it’s a good time to ask the question? Is Open Source a business model, and if so, can it succeed? I think the answer lies in a more nuanced understanding of open source, from three perspectives: as a business model, as development method, and as social network.

Where VCs and shareholders  have profited from open source is in the famously large corporate exits; companies that didn’t win the exit sweepstakes, not so much. Corporate tech titans don’t need open source just to wave as a flag in their messaging. Like the broadcast media once did, large software companies thrive by driving standardization on their terms — making everyone solve the same problem the same way. Which brings to mind the old joke about computing standards: the problem is that there are so many of them.

While standards are extremely helpful in allowing problems to be solved discretely and then integrated into bigger solutions, standards are an enabler, not a business model. But here’s where the development methodologies of open source converge well with their social networking aspects: they drive a diverse meritocracy, not completely beholden to any one interest, to innovate and solve for a fragmentation problem. Developers compete to better each others’ code — and where the problem is broader, with more pockets of problems to solve, more developers can be involved and work their way up the meritocracy.

I think this aspect of the convergence of open source with business models can be seen in some “open source” companies  — where open source is successfully using the problems of fragmentation to create business opportunity. A couple worth noting:

  • Funambol and smartphones: in addition to the iphone, this company has made a business of opening the code for syncing any smartphone, letting developers keep the software up-to-date; mobile phone companies and mobile operators pay for support without relying on one device, OS, or vendor
  • Talend and data repositories: Every major software maker stores its data in a different way, and then extracts a premium for extracting the data; Talend provides the extraction tools free and makes a living by helping make the data cleaner — which, in fact, is where the value lies

VMWare’s purchase of Springsource also helps fit this model — where their server products built a common foundation for developers across a fragmented landscape; something that VMWare (and Citrix) have both made a market of. And of course, we at Lucid Imagination believe search fits equally well: organizations have to sift through ever-exploding volume and variety of data, and it’s always changing. We believe in Lucene/Solr search technology because it does the best job of providing everyone the flexibility to own just their search apps leverage their data, now and as the data changes over time

Each of these markets has a dominant, non-open source player (iPhone, Google), but the dynamics of the market drive the emergence of players who want independence. And where’s there’s fragmentation, there’s opportunity for open source to thrive.