The Linux Business Model: Copyleft.

Let’s talk operating systems. What seems effortless in the daily workings of a computer is actually due to one essential piece of programming: the Operating System (OS). The invisible hand of computing technology that makes what you’re doing now possible. Operating systems have a not-so-long but cramped history that includes technological innovation, entrepreneurship, cut throat legal battles, policy revaluation and… hippies. A software company in the middle of all of this and still managing to be culturally side-lined is Linux. A company started not so much as a business but as a philosophy that is now managed to command eyes including Microsoft’s and Apple’s.

Hippies have entered the market with a new weapon in the form of technological sharing with the open source movement, an old idea placed on a new stage; and it’s working. With this fairly curious business model, Linux has secretly become a hard-hitter in the software market.

Go back 50 years: Mousetrap, Mop tops and Beehives, Martin Luther King Jr, the Kennedys, The Beatle’s and a venture by AT&T. In the 1960’s AT&T started a project to create an OS to efficiently manage multiple software units simultaneously. Falling through in 1969 the venture left an idea and half finished product on the table which the programmers decided to personally pick up. When their personal efforts came to fruition the product they had was UNIX a powerful OS, the basis of all post-operating systems.

 

As the software market developed began monopolies did not exist and/ or were not sought after, copyrights had no legal footing in programming and all you needed was a computer and smarts… That is to say computers were the size of houses, a degree in computing was a rare thing and AT&T had only just designed the product to run all this. At the time AT&T gave out its newly acquired OS (UNIX), without restrictions, to universities. Those whom acquired it quickly redesigned and redistributed the product developing NET-1 and NET-2 remodelled versions of UNIX. When the OS demand became apparent it was too late for AT&T, their UNIX was already redesigned. Lawsuits for retroactive legal control of the market followed: USL v. BSDi and SCO v. Novell. The outcome of which gave us the basis for copyright in software and produced a legal framework hard to manoeuvre around felt by all of programming.

 

 

(Richard Stallmand, creator of the Open Software movement)

The legal battles quickly created massive barriers into the new software market. A gap and case for scrapping copyright and ‘sharing’ which the hippie culture was ready to fill and so stood up. Richard Stallman (pictured right) started the fill by programming GNU, an OS based on UNIX but without the specific copyrighted code privileged to AT&T in court. The idea was to enable a less en-cumbersome law surrounding software products alteration. Stallman, a professor at MIT, personally went out of his way to ensure MIT or anyone else had rights to his product, the UNIX substitute.

The central piece, the kernel of his system, came by the hands of Linus Torvalds, a Finnish programmer with a keen entrepreneurial eye. Both Stallman and Torvald believed that in order to evolve programming software to a higher standard within the market they would have to allow for modification. Both freed their product from legally enforced copyrights that hampered innovation.

 

(The GNU/ Linux logo)

The result of their efforts was Linux, a product unrestricted in alteration. Allowing its users the freedom to customise and innovate as they saw fit. Unrestricting it’s further distribution by secondary parties or claiming any of the secondary profit. Linux seek primary profits but do not seek further control or profit once their product is bought.

Most copyright advocates such as Neil Weinstock Netanel claim that ‘Copyright must be sufficiently robust to support a vibrant, diverse, and innovative sector for the creation and distribution of original expression’. The issue is the need to protect the inventor or entrepreneur from competition of their product or service.

Linux as a non-copyrighted product and service gives us a modern and clear look at the weight of this claim through data. How the Open Source business model fairs in the software market at large without copyright.

Firstly Linux as an OS develops, remodels and progresses far faster than other OS’s due to its ‘free’ nature. Secondary profits in the form of royalties from copyright cannot be traced back to Linux, only to the secondary company that further remodelled and distributed their own product. Although this leads to skewed market shares for Linux the advantage is innovation. Microsoft on the other hand holds mass amounts of copyrighted code making it impossible to legally remodel or alter any of the Microsoft system once in the buyers possession. The advantage of this is that it makes the Microsoft product homogeneous and therefore a easy to translate through different sectors. Once taught on Excel you can work in any company that basis operations on Excel. Due to Microsoft’s aggressive pre-instalment policy the software market is distorted towards Microsoft as computers that are bought automatically go down as Microsoft users regardelss of what the uninstall/ install once home. It is therefore hard to obtain data on the use of the primary Linux product in the commercial sphere but data is readily available in the non-commercial sphere (those that have remodelled Linux OS as secondary distributors). Included in the secondary market for Linux are Google, Yahoo, IBM, Oracle, Twitter, Amazon, Facebook, and Redhat all of which are remodelled versions of the Linux OS. Without Linux’s unrestrictive licence these companies would be paying royalties to legal copyright holders such as Microsoft or not being able to develop at all due to the costs or manoeuvring around copyrighted code.

Jim Zemlin’s, executive director of the Linux Foundation, put’s it a different way. ‘The world without Linux might be a very different place. It’s one where computing is kind of crappy and homogeneous. You’re still using Windows CE on your crappy Windows cell phone. That world is grim and dark and Linux is a reason why that world doesn’t exist.’ while also running ‘air traffic control, it runs your bank, and it runs nuclear submarines’ and yes the New York Stock Exchange. This is all due not to its technological superiority but its legal freedom to adoption and adaptation.

We can gain insights into this fast moving Open Source market through tracing these developments. For instance the media giant IBM cooperates largely with others on the Linux product to innovate and meet market demand:

Tech giants such as IBM, Hewlett-Packard, and Intel are clustered around the Finn, contributing technology, marketing muscle, and thousands of professional programmers. IBM alone has 600 programmers dedicated to Linux, up from two in 1999. There’s even a board of directors that helps set the priorities for Linux development.”

Taking data on the non commercial sphere in the netbook market Linux is a big player capturing 30% of market shares. In servers Linux captures over 60% of the host market through Apache and Redhat (shown below). 95% of mainframes are controlled by IBM which uses a remodelled Linux OS and the 10 most powerful supercomputers are all operated through Linux.

 

We can also watch companies that specifically and openly base their operations around Linux itself such as Redhat. Redhat, a North Carolina company founded in 1993, provides customised Linux systems and services for it’s buyers. It produces products such as RedHat: Server, add-ons, scalable file system, web platforms and storage software. The graphs below show in Millions the financial standing of Redhat as of 2011. Redhat employs 3,700 individuals and has a yearly revenue of $1.13 billion. As a secondary company in the shadow of Linux it is content, doing well and uninhibited.

(Financial Analysis of Redhat ‘RHT’ using Bloomberg)

The normal business model is to capture the market through legal controls such as copyright gaining secondary royalties through your primary effort. What this doesn’t take into account is the diffusion, innovation and secondary market that is hampered by this process. If Richard Stallman or Linus Tovald had copyrighted their GNU or Linux programs respectively then we would certainly have search engines, but we wouldn’t have Google. We would have smart phones but not Android. We would have severely limited Open Software programs such as the one used to create this document OpenOffice a program by Oracle. It is only a guess to whether such innovative programs such as Twitter or Facebook would have been able to start up. One thing is certain, that the software your using right now with it’s low cost and manipulability is partly due to Linux not seeking to copyright. According to Jim at the Linux Foundations it goes a little further that that ‘Your life, money, and death is in Linux’s hands‘.

The incentive to copyright actually leaves a lot of innovation off the table, forcing the legal system to do the markets bidding.

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3 thoughts on “The Linux Business Model: Copyleft.

  1. A few quibbles. I’m willing to give you the benefit of the doubt, that they were merely “over-simplified” so as to not confuse non-techie readers.

    1) Linux is not a software company. It is an operating system kernel. It is maintained not by a company, but by a free association of like-minded developers, with the final say on changes to the official version in the hands of Linus Torvalds, its originator. No company owns Linux.

    2) Linux is not “non-copyrighted”. It is copyrighted and licensed under the Gnu GPL. The GPL was carefully worded by lawyers, so that if you fail to heed the license, you can be prosecuted under copyright law. Yes, it gives away *most* of the rights one would expect from copyright (hence the term – “copyleft”), but it does so using copyright law.

    • Hey Padma,

      I am aware that Linux is a kernel for an OS, but as a umbrella term for those in the software market that have foundations in the Linux kernel GNU OS it is useful to think of Linux or Linux/GNU as ‘the starting company’, ‘association’ or ‘philosophy’.

      Thank you for clearing up the non-copyright issue, that was excluded for simplification. As a contract that uses copyright against traditional copyright law it gives a unique insight into what a non-copyrighted market would look and operate like.

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