Although Azure is now an enthusiastic backer of the segment, it was a struggle to overcome the built-in distrust of open-source evidenced by many industry veterans. Mike Kwatinetz, a general partner in the firm, says, "We didn't want to invest in a company that thought of itself as communist."
Kwatinetz, who was speaking tongue-in-cheek, was making a serious point. The open-source business model is radically different from that of conventional software companies, and the cultural differences can be profound.
Red Hat's business model has a number of subtleties, but in general it works like this: Potential customers can download Red Hat's version of Linux and try it for free. If they like it, they may then buy a subscription from Red Hat that provides support, upgrades and access to newer versions of the software.
Unlike conventional software, open-source software functions under a general license that gives customers access to the source code, and they are free to modify it as they see fit.
Meanwhile, tens of thousands of open-source programmers hammer out patches and additions to open-source software and make their work freely available to users.
Siebel, No; Open Source, Yes
The growing popularity of open source in the business world is based, in part, on dissatisfaction with expensive -- and often unsuccessful -- installations of mainstream software.
Siebel Systems, for example, developed a terrible reputation (deserved or not) for installing problem-fraught customer relationship management software. Eventually, the former highflier was
forced to sell itself
(ORCL - Get Report)
In contrast, IT managers can download open-source software and test it to their hearts' content
. If they don't like it, all they've lost is the labor time. If they do like it, they can buy a subscription instead of a license that commits them to large payments for a number of years.
Moreover, the same IT managers can modify the code themselves, or troll the Web for improvements hammered out by members of the open-source development community.