I'll try to keep it short this time :-). Michael Tiemmann was one of the founders of Cygnus software, which was started on $6K and was sold to Red Hat for $600M. Tiemmann went on to become CTO of Red Hat and is currently (I think) VP of Open Source Affairs.
The key quotes from this link. When looking at the GNU Manifesto, "Suffice it to say that on the surface, it read like a socialist polemic, but I saw something different. I saw a business plan in disguise."
Later he goes on to say: "I would explain how freedom to share would lead to greater innovation at lower cost, greater economies of scale through more open standards, etc., and people would universally respond 'It's a great idea, but it will never work, because nobody is going to pay money for free software.' After two years of polishing my rhetoric, refining my arguments, and delivering my messages to people who paid for me to fly all over the world, I never got farther than 'It's a great idea, but . . .,' when I had my second insight: if everybody thinks it's a great idea, it probably is, and if nobody thinks it will work, I'll have no competition!"
IMHO opinion, Red Hat's best idea was acquiring Cygnus and buying into Tiemmann's ideas. The result is what you see now.
The thing that fascinates me is that Tiemmann still has no competition because nobody thinks it will work.
Having worked for a company that followed his model (Sendmail) I still say it doesn't work. I think Cygnus was a fluke. Also, assuming it was sold for 10x revenue, which is pretty standard, that means the revenue was only $60M a year. That's tiny for an enterprise software company.
Actually, IIRC revenue was $130M per quarter. In fact, after Cygnus was acquired the division it became drove revenue in Red Hat for a long time. It's been a very long time since I looked at it, but the records are public so if you are interested you could find out.
I'm curious about Sendmail. What was the business model? Cygnus's business model was essentially custom development. They did have a proprietary product for a short time, but as one of the terms of sale of the company they ditched it.
Just looking at sendmail now, it appears they were trying to make money dual licensing. I agree that this will never work.
Sendmail's original model was to get the best Sendmail consultants in the world under one roof and then deploy them building custom solutions.
Sadly a new CEO came in and declared that "the margins are in boxed software, so that's what we're going to focus on" and then fired all the consultants.
So maybe you're right, maybe it would have worked if they had stuck to the original plan.
But even then, it still wasn't a path to a huge business. 500M a year in revenue is definitely amazing and I would kill to own such a business, but it's not "rocket ship" successful, which is what most of the folks with this model are aiming for.
That's very unfortunate. I'd love to see someone else try that model, but I suspect that you are right that many people have a gold rush mentality. Getting paid for doing work is not as good as getting paid many times for having done some work in past. I've had a similar experience with a couple of startups I've worked on. You can show them how the custom development has high demand and is generating revenue, but they want to sell the box and gamble on getting their "multiples". From a certain perspective I can understand it. According to my link, Cygnus was limited in growth because they just couldn't hire people fast enough.
I'll try to keep it short this time :-). Michael Tiemmann was one of the founders of Cygnus software, which was started on $6K and was sold to Red Hat for $600M. Tiemmann went on to become CTO of Red Hat and is currently (I think) VP of Open Source Affairs.
The key quotes from this link. When looking at the GNU Manifesto, "Suffice it to say that on the surface, it read like a socialist polemic, but I saw something different. I saw a business plan in disguise."
Later he goes on to say: "I would explain how freedom to share would lead to greater innovation at lower cost, greater economies of scale through more open standards, etc., and people would universally respond 'It's a great idea, but it will never work, because nobody is going to pay money for free software.' After two years of polishing my rhetoric, refining my arguments, and delivering my messages to people who paid for me to fly all over the world, I never got farther than 'It's a great idea, but . . .,' when I had my second insight: if everybody thinks it's a great idea, it probably is, and if nobody thinks it will work, I'll have no competition!"
IMHO opinion, Red Hat's best idea was acquiring Cygnus and buying into Tiemmann's ideas. The result is what you see now.
The thing that fascinates me is that Tiemmann still has no competition because nobody thinks it will work.