looking east

“What you say sounds great, but honestly, how can we make money with FOSS?” This is a question I have been frequently asked since I have come to China. It’s the kind of question which made think a lot about FOSS and it’s business model. It’s a question which seems crucial for China, and since I have been asked so many times, I have been trying to improve my answer by asking other people. However, none of these solutions seemed really satisfying, and whatever I said was met with strong resistance and further questions.

When reading the book Open Sources: Voices from the Open Source Revolution, I found the following answer to the question by Robert Young:

“That question assumes that it is easy, or at least easier, to make money selling proprietary binary-only software.

This is a mistake. Most software ventures, whether based on free or proprietary software, fail. Given that until very recently all software ventures were of the proprietary binary-only kind, it is therefore safe to say that the IP (Intellectual Property) model of software development and marketing is a very difficult way to make a living. […]

No one expects it to be easy to make money in free software. While making money with free software is a challenge, the challenge is not necessarily greater than with proprietary software. In fact you make money in free software exactly the same way you do it in proprietary software: by building a great product, marketing it with skill and imagination, looking after your customers, and thereby building a brand that stands for quality and customer service.” (chapter 9)

The fact that it’s very difficult to make money with proprietary software is probably even more true for China. In a country in which nobody is actually willing to pay for software, the question should not be: “How can we make money with FOSS?”, but rather: “How can we make money with software?”. But let’s first continue looking at the original question. As Robert Young puts it, in some cases using FOSS can even be a competitive advantage:

“Marketing with skill and imagination, particularly in highly competitive markets, requires that you offer solutions to your customers that others cannot or will not match. To that end Open Source is not a liability but a competitive advantage. The Open Source development model produces software that is stable, flexible, and highly customizable. So the vendor of open-source software starts with a quality product. The trick is to devise an effective way to make money delivering the benefits of open-source software to you clients.” (chapter 9)

This is exactly what I tried to say when I tried to answer the question. I told them that FOSS allowed them to start off with a high-quality source base rather than reimplementing everything from scratch, that open source made it easier (and affordable) to build highly customised products, I mentioned that in the West many businesses have been created because of the relative low cost of building software on top of FOSS. However, all these explanations were countered with more questions and strange looks.

Today, I believe that Robert Young does successfully answer the question of how to make money with FOSS. I also think that my answers were not totally wrong, though I simply missed one important fact: That making money with FOSS doesn’t have to be harder than making money with proprietary software. And thanks to Robert Young, I believe that the real question should be “How can we make money with software?”, and more specifically, “How can we make money with software in China?”.

I have spent a bit over three months in China, trying to find out how FOSS is organised and how it’s different in China from what we see the West. When I met Basile two weeks ago in Beijing, we have come up with the following hypotheses:

• Language is an impediment. Most FOSS activities take place in English.
• There is no culture of innovation in China.
• The discussion culture in FOSS projects is too confrontational.
• FOSS is still too young in China to be successful.
• There is only little support for FOSS in the Chinese software industry. Piracy has a negative effect on the creation of a proper software industry in general. Customers are not willing to pay for software.
• Students don’t learn about FOSS at universities and hence don’t know about it.
• Individuals can’t make money with FOSS in China.
• Chinese government policies are not favourable towards FOSS.

These hypotheses are an extension to the ones presented in an earlier entry I have posted in February. They are specifically applied to China (because that’s the country I am currently studying) rather than Asia in general, though I do think that most of them could be applied to other countries like Thailand too.

Despite the fact that these hypotheses are rather negative in their formulation and might have some other shortcomings, I believe that they provide a good basis for further discussions. Also, hypotheses are there to be proved or disproved, they don’t need to be valid in the first place.

Why am I posting this?

Because I would like to get some feedback. I would love to know if there is something completely wrong with them, if I have totally missed the point, if I have forgotten something important, or anything else you have thought of while reading them. Please let me know :).

I have participated in the First Beijing City Aesthetic Marathon today, running for about 20 minutes through the hutongs and markets around Tianshuiyuan. The Beijing City Aesthetic Marathon is an art project initiated by HOIO (Samuel Herzog). It’s a sportive challenge and a way to discover Beijing at the same time. The 42.195 kilometres of the Marathon are run in sections by different persons. Every runner is asked to take HOIO into the part of Beijing they consider the most beautiful and exciting route through the city. Sections can be as short as one kilometre and as long as what can be done by a person in one hour (that’s the maximum battery lifetime of the camera). Each run is filmed by Samuel Herzog. You can see an overview of the previous runs here.

Samuel Herzog will be in Beijing until Saturday July 19th, if you are interested in taking him through your favorite part of Beijing, you can contact him at hoio[at]bluewin.ch.

Despite the fact that nobody is willing to pay for software and that proprietary software is free as in free beer, there are some points to be considered:

• FOSS is legal to use, copy, modify, and distribute. Especially in China, where new laws can be enforced within little time, this can be a considerable advantage. However, it doesn’t seem that anti-piracy laws will be enforced anytime soon.
• FOSS can be modified to meet the exact needs of the users. This is impossible with proprietary software.
• FOSS has always been free, and FOSS-based companies have always been forced to come up with different business models. Hence the Chinese situation is not that different from other countries.

The question is: If people don’t pay for software, will they pay for customisation of open source code? Are they willing to pay for services and support related to the software?

I have been in China for almost three months now. I have attended quite a number of FOSS-related events, have spoken to many people, and observed everyday programming at Exoweb. I have taken notes, asked questions, actively participated, and helped organising events. I now have a large pile of important-looking business cards, some new contacts on GTalk, Twitter, Facebook, and a wiki full of words describing what I have experienced, but I am still struggling to describe open source in China.

So far it seems that FOSS in China is mainly about talks, about promotion, about words, not that much about code. When it comes to software, China and Thailand are special cases: Software is generally available for free or little money, independent of it being open source or not. Piracy is omnipresent, licenses don’t exist. It seems almost impossible to make money with software development in China. People just don’t want to pay for it.

Questions

How does this influence software development in China? Are there new business models emerging from this? Is there a need for China to have a software industry at all? How does it influence innovation and creativity? How do existing software development companies survive? What about web (2.0) development?

The next Beijing Open Party will take place on July 19th at the Thoughtworks offices in Beijing. If you want to give a talk, you can propose it on the Beijing Open Party google group. Alternatively you can also just show up at the party and propose your topic. The party’s original announcement can be found here.

Event:  BeijingOpenParty July: Summer Daydreams (仲夏梦舞)
Date: July 19th
Time:  13.30 - 17.30
Address:  Room 1105, 11th Floor GuoHua Plaza, No.3 Dongzhimen South Street, Dongcheng District, Beijing, China, 100007, see map.

“Free Software is a set of practices for the distributed collaborative creation of software source code that is then made openly and freely available through a clever, unconventional use of copyright law. But it is much more: Free Software exemplifies a considerable reorientation of knowledge and power in contemporary society — a reorientation of power with respect to the creation, dissemination, and authorization of knowledge in the era of the Internet.”

Christopher M. Kelty, Two Bits (2008), page 2.

What happens if we place this definition in an imaginary context in which copyright law doesn’t exist, where people are prosecuted for mentioning “reorientation of knowledge and power”, and where creativity is not considered a positive trait?

Yesterday, the Quadcopter group of the Beijing LUG met at the Exoweb office to assemble the pieces of the boarduino  microcontrollers. We had lots of fun, and I learned a great deal about hardware, soldering, resistors, LED’s, analog, and digital pins, as well as microchips. Although the Quadcopter group’s final goal is to build a quadcopter, the microcontrolles we built yesterday were rather an educational experiment in which we tried to understand the internals of the boarduino.

The boarduino is an Open Source arduino clone which can run the same software as the arduino. Unfortunately, we didn’t succeed in loading the bootloader to the chip yesterday, so we will need to wait for next time to start programming.

Exoweb shows a strong commitment to Free and Open Source Software (FOSS), most of the computers run Linux, much of the software developed is based on Python’s Django framework, and a few people are actively involved in Open Source projects.  One of my tasks at Exoweb is to strengthen the relations between Exoweb and the FOSS communities by encouraging FOSS-related activities, and finding ways for Exoweb to collaborate with the communities.

The Open Source Business Model

I was invited to a discussion about Open Source in China at the Programmer magazine two weeks ago, and one of the things I learned was that companies trying to build on FOSS don’t seem to be very successful in China, and many of them are struggling for survival. One of their main worries is how to actually make money with Open Source. Of course it is true that if a company wants to build a completely new FOSS  product, it would be hard to find a way to finance the development.

However, as the Exoweb example shows, you don’t really need to start with a new product, but you could just build your business based on existing FOSS software. In that case, the company doesn’t need to invest in product development at all, but can immediately start their business by customising an existing product for the needs of their customers. This is one of the main reasons why the FOSS business model has proved to be so successful in the West.

Contributing Back

Using FOSS products is an excellent way to get started. And once you have become fairly familiar with the internals of the products you are using, you will might start building your own reusable components based on the existing software. You might also discover bugs, fix them, and send patches to the community. As this will improve your final product you are building for a client, the time spent on building components and patches can be, at least partly, covered by the customer’s mandate. Of course, the client has to agree to that, especially if the code is being  published with an Open Source license.

However, contributing to FOSS might in many cases require more time than just writing the code for a specific project. The patch has to be documented and packaged according to the the FOSS project’s standards, and the the reusable components have to be maintained and improved to guarantee future reusability. While one can easily understand the reasons for contributing back a patch, questions might arise as for the components to be open sourced or not. In some cases, like Linux which is based on GPL, developers are in theory constrained by the original project’s license. Though despite this fact, I strongly doubt that the GPL could be enforced in China.

There could be other reasons for a company to open source a component’s or extension’s code: Maintenance and marketing. When the company is the only owner and developer of the extension, they will be forced to change the code whenever they decide to upgrade to a newer version of the original product. In an Open Source world, however, there might be other developers interested in maintaining the code, or even better, the code is added to the project’s core and is thus maintained by the community. Additionally, creating and maintaining Open Source code can have a considerable marketing effect for the company.

Exoweb and the FOSS World

Exoweb is trying to actively engage in the Django and Python community, as well as other local communities like the Beijing Linux User Group (BLUG). They have hosted the Django Sprint in Beijing in December last year, and are currently planning other similar events. Additionally, some of the teams are developing extensions which they want to add to Django’s contribution repository, and a few developers are working on their own FOSS projects. In order to encourage it’s employees, Exoweb additionally offers a 10 per-cent time during which everyone is free to work on whatever they want. Exoweb also offers hosting for internal FOSS projects on contrib.exoweb.net.

“Go GNOME - Free Your Desktop” is the theme of the first GNOME Asia Summit to take place on October 17/18 2008 in Beijing. The summit aims at strengthening the ties among GNOME and Open Source community members in Asia. The organisers are currently calling for speakers to send their talk proposals to asia-summit[at]gnome.org. In order for the summit to become a truly Asian event, it would be cool if developers and geeks from all over Asia apply. So don’t be shy, just send in your proposals!