Lessons from Google and Red Hat for Facebook and Open Source

Matt has articulated something I’ve tried to explain to people many times. From his post:

Twentieth century software business models focus on scarcity because they’re founded upon 20th century conceptions of property (actually, their origin is a few centuries’ older than that, but never mind).

Scarcity is the absolute wrong way to build a software business in the 21st century, with the rise of digitization. It is pointless and fruitless to insist that the digital world act like the physical or analog world, and build business models that conform to this false view. To thrive in the new software world, we need to embrace its changes rather than fight them.

The old model was to assume that the value was in the software itself and to therefore lock it up. It turns out, however, as Tim O’Reilly notes, that data is the real value, not bits and bytes. You don’t discover or, rather, uncover, that value until you have abundance.

There will be a few companies that continue to effectively monetize the old world. Oracle, Microsoft, IBM, and SAP, to name the four primary ones. But these outdated models will eventually fall against the rising tide of abundance-based business models, because the new models recognize that digital bits really do want to be free, and that all attempts to artificially lock them are doomed to fail.

It fascinates me how many companies still operate under the guise of artificial scarcity. The landscape is rapidly changing and the shift is so large and fundamental that it seems some are completely missing it. That’s not all that surprising in the end, but as with most industry paradigm shifts, at least one seemingly invincible player will almost invariably not survive.

–jeremy

Amazon to host Red Hat Linux online

In a move that’s somewhat divergent from the direction they’ve been headed, Red Hat recently announced that RHEL will soon be available on the Amazon EC2 platform. I say somewhat divergent because Red Hat had been clearly focused on the Enterprise market for a while now. From the article:

Red Hat on Wednesday announced a significant departure from its current business plan, saying its flagship Linux product will be available on Amazon.com’s Elastic Computing Cloud online service.

Previously, the Raleigh, N.C.-based company only sold its Red Hat Enterprise Linux product in the form of a support contract costing between $349 and $2,499 per year. But in a beta program beginning in the fourth quarter, the software will be available on Amazon’s EC2 infrastructure, Red Hat said.

The move also signals a new phase in EC2. By using RHEL, a supported product for which numerous applications are certified, the online service looks more like a variation of an existing, established software product and less like a radical departure from how computing is typically performed today.

Currently, EC2, still in beta, is effectively a blank slate on which customers install and manage their own software.

The Amazon partnership was among a host of Red Hat announcements. In addition, the company upgraded its RHEL to version 5.1, including new virtualization abilities with Xen 3.1, announced an upcoming RHEL version geared for use embedded as a foundation for software companies’ products, and declared an ambitious goal to conquer half the server market.

Pricing for the Red Hat EC2 option is variable–a classic example of the “pay as you go” philosophy that some prefer, because it ties expenses to actual use, though it can be less predictable. The service will cost $19 per month plus 21, 53, or 94 cents per hour, depending on computing and storage capacity, plus 11 cents per gigabyte transferred in and 19 cents per gigabyte transferred out.

Amazon is doing some really cool things lately and I think this move makes a lot of sense for Red Hat. They have been really emphasizing virtualization recently, and EC2 plays right into that. When EC2 comes out of Beta (which to me means: an SLA, some kind of persistent storage and a static IP) it will be an extremely compelling platform.

–jeremy

How badly is CentOS hurting Red Hat?

That’s the question asked in this article:

Why does Red Hat tolerate CentOS? The Community ENTerprise Operating System is an identical binary clone of Red Hat Enterprise Linux (minus the trademarks), compiled from the source code RPMs that Red Hat conveniently provides on its FTP site. It is also completely free, as in beer. CentOS provides no paid support, but it does track Red Hat updates and patches closely, and usually makes them available within a few hours or at most a few days of the upstream provider, which it refers to for legal reasons as “a prominent North American Enterprise Linux vendor.” Free support for CentOS can be found in numerous places around the web, and a few third parties offer modestly priced paid support for those who want it.

It’s easy to understand what CentOS is. The question is, how much business is it really taking away from Red Hat? The answer: probably more than you think. For a hint about what’s going on, check out this amazing comparative chart on Google Trends.

I used to think most CentOS users were either just fooling around and not really running production servers, or else were using it in small IT shops populated by Linux geeks with a do-it-yourself culture. But a recent conversation with a friend set me straight. (I published part of this conversation here.) My friend runs the web site of a big city daily newspaper. Although it’s not in the same league as the Wall Street Journal or the New York Times, it serves tens of millions of page views per month and pumps a big time advertising revenue stream into the coffers of the media conglomerate that owns it. The site is managed by a small in-house team and runs on several dozen dual and quad Intel servers with a classic LAMP stack that includes Apache, Perl, MySQL and of course Linux.

Until fairly recently they ran this web site on an old version of Red Hat with essentially no outside support. But they found that the up-to-date versions of the applications in their stack didn’t run so well on Red Hat 7.3, so they decided they needed to upgrade to something more recent. Naturally the first thing they looked at was RHEL 4 (this started a while back), and then RHEL 5. But they freaked out when they saw Red Hat’s prices. $1,299 per year for 24×7 support on the two socket version of RHEL 5, or $2,499 for the unlimited socket version. True, if you cut back to 12×5 support those prices come down, dropping to $799 and $1499 respectively. But even if they run RHEL on a mix of two and four socket machines, they’re still looking at $50K per year minimum for the privilege of sticking the little red logo on their servers.
Bottom line? They decided to go with CentOS 5, which they are now rolling out to their production servers.

So, is CentOS hurting Red Hat? I don’t think so, in fact I’d say it’s actually helping Red Hat. You see, the company mentioned didn’t balk on Red Hat because of anything but price. That means if they didn’t move over to CentOS, they would have moved to Debian, or Ubuntu, or Suse… or insert some gratis distro or direct Red Hat competitor here. Now, with a CentOS base let’s say the company grows or needs to run an app that is only supported on RHEL/SLES. What distro do you think they are likely to pay for in that scenario.

It goes further than that, though. Many members of the CentOS community are also valued members of the Fedora community. Red Hat gets Open Source at a very fundamental level and sees the benefit of this. Also, with no free version of their enterprise product, CentOS serves as a way to get broader exposure and therefore enables additional gratis testing for many RHEL bits. In the end I see CentOS and RHEL as more complimentary then competitive. I know it doesn’t appear that way at first glance, but when you really look at the market each is serving, it becomes a little more clear.

–jeremy

Acacia's Latest Target: NetFlix

It’s not just Red Hat and Novell. From TechDirt

Acacia has become one of the most hated firms by technology companies that actually do stuff. That’s because Acacia is one of the biggest (if not the biggest) firms out there in the business of buying up patents solely to sue companies. Acacia learned a while ago, though, that it was best to keep its name out of many of these suits, so it apparently tries to set up subsidiaries for many of the patents it buys (sometimes giving them silly names to make people think the companies actually do something). Now, one of those subsidiaries, named Refined Recommendation Corporation is suing Netflix over a patent it holds on optimizing interest potential. It’s a patent on the idea of making recommendations or presenting specific information based on user actions. I can recall both individuals and companies working on similar things well before this patent was applied for in 2000, but that’s a different issue altogether. Does anyone believe that Netflix (and plenty of other companies) wouldn’t be doing content recommendations for people without this particular “breakthrough”?

–jeremy

Patent Infringement Lawsuit Filed Against Red Hat & Novell III

(coverage continues)

Via 451 CAOS Theory: It looks like the Acacia lawsuit may indeed have little to do with Open Source and be just another general patent troll case. From the article:

The nation’s first Linux patent suit currently facing Red Hat and Novell isn’t about open source at all. Or so the plaintiff says.

IP Innovation last week filed the patent lawsuit against Linux in Texas, alleging that both Red Hat and Novell infringe on U.S. Patent No. 5,072,412, “User Interface with Multiple Workspaces for Sharing Display System Objects.”

Neither IP Innovation nor its parent company Acacia Research responded to request for comment at the time the patent suit first came to light. But today, in a statement sent to InternetNews.com, Acacia Chairman and CEO Paul Ryan defended the firm’s actions and argued that there is no conspiracy against open source coming from his firm.

“IP Innovation is not attempting to inject itself in the ongoing philosophical debate of whether products or services which utilize open source are subject to the same intellectual property laws/behaviors as non-open source offerings,” Ryan said in the statement. “Acacia and its subsidiaries do not philosophically differentiate any company, but rather seek to consistently and fairly monetize patent rights from those companies which incorporate patented technology.”

The company also dismissed allegations that Microsoft somehow is using Acacia as a kind of proxy to fight a patent battle against Linux. A pair of key Acacia employees recently joined the patent-holding firm from Microsoft.

Additionally, Groklaw notes that the patent involved is scheduled to expire on December 10, 2008. That could explain why Microsoft, who could easily afford to ensure that the case lasts longer than that, has not been made a target. It’s strangely reassuring to see that this probably doesn’t have anything to do with Open Source. That’s a sad indication of the state of the current situation.

–jeremy

Patent Infringement Lawsuit Filed Against Red Hat & Novell II

(A follow up to previous coverage)

As you may have guessed, this topic is being discussed heavily around the web. Mark Radcliffe points out that Open Source companies are likely becoming a more tempting target to patent trolls due to the stunning growth in the sector (keep in mind that Microsoft, Apple, et al. put up with this kind of thing all the time):

Although I and many attorneys in the open source industry have long been concerned about patent challenges to open source companies, this case appears to be the first by patent trolls against an open source licensor. The open source industry provides a tempting target because of its rapid growth. This morning, Eben Moglen at the Software Freedow Law Center Seminar on FOSS issues noted that Brad Bunnell of Microsoft joined Acacia on October 1 . According to news reports, Brad spent sixteen years at Microsoft at a number of positions which included General Manager, Intellectual Property Licensing. http://biz.yahoo.com/bw/071001/20071001005590.html?.v=1

Eben raises the intriguing question about whether these incidents are related. Given the time that it takes to prepare a patent lawsuit, Brad’s hiring probably did not effect the filing of this lawsuit. However the hiring may indicate the addition of a new business line for Acacia: suits against open source companies. Steve Ballmer’s recent comments about Red Hat’s obligation to pay Microsoft for alleged use of its patents makes this lawsuit and the timing of the move interesting.

Matt Asay points out a list of coincidences:

* One or more former Microsoft licensing execs join Acacia or one or its companies;
* Ballmer makes his most recent statement regarding Red Hat;
* Almost the same day, Red Hat (and presumbably Novell) receive notice of the alleged infringement from IP Innovation (Acacia);
* Before either company has a chance to consider the letter and respond, IP Innovation files its lawsuit in Texas;
* Novell changes all of its IP indemnification the same day (which it has named “Technology Assurance Program” as contrasted with Red Hat’s Open Source Assurance Program Novell apparently isn’t interested in assuring open source, just technology ;-);
* Novell’s new program notes a change in the Microsoft/Novell deal that covers GPLv3 code distributed by Novell for downstream recipients.

Hmm….I forget sometimes who is on which team, but it certainly seems like two sides have been conspiring on this, and I don’t mean IP Innovation and Microsoft (which is almost a given).

Stephen Walli (who was still at Microsoft when the SCO suit was launched) gives some advice that I couldn’t agree with more: Take a deep breath. Be calm. He continues:

The U.S. Supreme Court continues to involve itself in the broken patent system. The Linux Foundation and the Open Invention Network are both geared for this particular fight. I have confidence that the Groklaw community will step into the breach of reporting and investigation again. IBM, Intel, and HP have a vested interest in the outcome, and nobody plays IP games the way IBM does. Over the next few weeks, lawyers will come together behind the scenes from all the interested parties on the defending side. Hopefully egos won’t be too large, and a coherent plan of negotiation will emerge.

Some of the more interesting questions for me will be:

* Why Red Hat AND Novell?
* Why not Microsoft? (Acacia went after Apple who settled. Microsoft would seem to have deeper pockets than Red Hat or Novell. It would seem to be the more interesting business discussion.)
* If Microsoft is not involved, should they be? If Apple settled, and then this suit settles, Microsoft should know they’re next on the list. Or are they trusting IBM et al to win this one for them?

To quote one of my favourite lawyers in this space:

“If the F/OSS community wants to be in commercial space, community members will have to learn to deal calmly with IP litigation. The F/OSS production model will work where it makes sense, and it will not work where it doesn’t. It’s really just that simple. Particular claims in individual suits—even one against a flagship program such as the GNU/Linux OS—will not determine the fate of the community. Such cases present factual issues that will get resolved one way or another; they do not represent a crisis for F/OSS production as a whole. Norm entrepreneurial rhetoric that plays off such cases should be treated as entertainment. Enjoy it if you like it, take inspiration from it if you must, but don’t confuse it with the way things actually get done.”

I’m sure some former colleagues at Microsoft are excited. Mr. Smith and Mr. Ballmer most assuredly. But just as with the SCO Group litigation, there is no reason to celebrate. They shouldn’t confuse this with “the way things actually get done.” Pax.

I do find it interesting that Acacia went from Apple to Red Hat / Novell, when Microsoft surely would have been a much more compelling target from a business perspective. It becomes a simple case of follow the money from there. More information will come out of this in the coming weeks and months, so staying calm and focusing on what’s important is surely the correct course of action.

–jeremy

Patent Infringement Lawsuit Filed Against Red Hat & Novell

Earlier this month, Ballmer reiterated his stance on patents and Linux:

Microsoft chief executive Steve Ballmer has warned users of Red Hat Linux that they will have to pay Microsoft for its intellectual property.

“People who use Red Hat, at least with respect to our intellectual property, in a sense have an obligation to compensate us,” Ballmer said last week at a company event in London discussing online services in the UK.

Red Hat quickly fired back:

Red Hat is assuring its customers that they can continue to deploy its Linux operating system with confidence and without fear of legal retribution from Microsoft, despite the increasingly vocal threats emanating from the Redmond, Wash., company.

In a scathing response to Ballmer’s remarks, Red Hat’s IP team said the reality is that the community development approach of free and open-source code represents a healthy development paradigm, which, when viewed from the perspective of pending lawsuits related to intellectual property, is at least as safe as proprietary software.

“We are also aware of no patent lawsuit against Linux. Ever. Anywhere,” the team said in a blog posting.

The Linux vendor, which is based in Raleigh, N.C., also gives customers open-source intellectual property protections through its Open Source Assurance Program, which includes a promise to replace the software if there is an intellectual property issue.

“This provides customers with assurances of uninterrupted use of the technology solution. Protecting our customers is a top priority, and we take it very seriously. Our confidence in our technology and protections for customers remains strong and has not wavered,” the blog posting said.

While many people thought Ballmer was just continuing his FUD campaign, a scant couple days later an IP infringement lawsuit was actually filed:

Plaintiffs IP Innovation and Technology Licensing Corp. claim to have the rights to U.S. Patent No. 5,072,412 for a User Interface with Multiple Workspaces for Sharing Display System Objects issued Dec. 10, 1991 along with two other similar patents.

Defendants Red Hat Inc. and Novell have allegedly committed acts of infringement through products including the Red Hat Linux system, the Novell Suse Linex Enterprise Desktop and the Novell Suse Linex Enterprise Server.

“Red Hat’s and Novell’s infringement, contributory infringement and inducement to infringe has injured plaintiffs and plaintiffs are entitled to recover damages adequate to compensate them for such infringement but in no event less than a reasonable royalty,” the original complaint states.

The plaintiffs also allege that defendants received notice of the patents, therefore the infringing activities have been deliberate and willful.

Plaintiffs are seeking an injunction from the court, increased damages and other relief that the court or a jury may deem just and proper.

T. John Ward Jr. of Ward & Smith Law Firm in Longview is representing the plaintiff.

The case has been assigned to U.S. District Judge Leonard E. Davis.

You have to find it ironic that “IP Innovation” is suing based on something seemingly obvious that was patented in a 1991 by Xerox. Things get interesting from there though. It seems IP Innovation LLC is a subsidiary of Acacia. Looking at Acacia closer, you see:

In July 2007, Acacia Research Corporation announced that Jonathan Taub joined its Acacia Technologies group as Vice President. Mr. Taub joins Acacia from Microsoft, where he was Director, Strategic Alliances for the Mobile and Embedded Devices (MED) division since 2004.

and

Acacia Technologies Names Brad Brunell, Former Microsoft General Manager, Intellectual Property Licensing, to Management Team

Monday October 1, 6:01 am ET

NEWPORT BEACH, Calif.–(BUSINESS WIRE)–Acacia Research Corporation (NASDAQ:ACTG – News) announced today that its Acacia Technologies group, a leader in technology licensing, has named Brad Brunell as Senior Vice President.

Mr. Brunell joins Acacia from Microsoft, where during his 16 year career he held a number of management positions, including General Manager, Intellectual Property Licensing.

So the SCOX trial isn’t even officially over and we already have a company with large Microsoft ties filing a clear patent troll case against Linux. You think they’d at least hide the connections better this time. It should be noted that IP Innovation appears to have previously gotten some money out of Apple for this, so it’s not simply aimed at FOSS. How much of this are we going to have to go though until the system is actually fixed? Too much. Let the SCO II games begin.

–jeremy