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Bursting the proprietary-software bubble

Tags:
Mark Taylor,
Recession,
Credit Crunch,
Proprietary

Mark Taylor, Sirius Corporation

Published: 05 Nov 2008 15:32 GMT

Bursting the proprietary-software bubble

Applied judiciously, jargon and bluff can be used to disguise anything, from the causes of the present financial crisis to the true price of software, argues open-source expert Mark Taylor.

When I heard the now-victorious Barack Obama make his 'lipstick on a pig' remark back in September, it got me thinking about language, and how it can be used to deceive as easily as to explain.

While listening to an elaborate theory full of jargon, have you ever felt it seemed completely out of touch with the real world?

I usually work on the premise that, if something can't be explained in plain English, there's a good chance the person using such language is bluffing, trying to keep you in the dark, or trying to pull a fast one — perhaps even all three.

To my mind, the elaborate economic theories and abstract analysis used to explain the causes of the recent global economic crisis are classic lipstick on a pig.

Banks and other financial institutions have spent the past decade dressing up the 'pig' of bad debt using jargon such as 'structured products'.

So convincing was the illusion, they succeeded in transforming loans that would never be repaid into triple-A-rated financial packages that came to underpin the entire global economy. The transformation was achieved by ignoring reality and building a tower of great-sounding, but non-sensical, theory.

Like the emperor's new clothes, when you strip away all the elaborations, you arrive at the simple truth: bad debt is bad debt, however you dress it up, and believing it has any real value has left us all deep in the proverbial.

Behind the facade
So what can this tell us about the proprietary-software market? Is proprietary software simply a pig skilfully dressed up to make the unwitting think it has intrinsic value?

The answer is 'yes', and here's why.

In any free market, the price of a commodity, over time, falls close to that of its marginal cost of production. A number of things can interfere with this process, the most damaging being the existence of a monopoly, but in the absence of market distortion this rule always holds true.

Like the banks, proprietary- software vendors have had to justify the cost of their wares by constructing complex arguments about value

And what is the marginal cost of production of software? The marginal cost of any product is the cost of making the next copy.

If you stop for a moment and consider it, you'll see the cost of making the next copy of any piece of software is almost zero — with perhaps a vanishingly small amount for electricity.

That phenomenon is precisely the same as the one challenging the business models of the music and film industries. The equilibrium, free-market price of software is nothing.

A matter of survival
Free software acknowledges that truth. Proprietary software does not. Instead, like the banks, proprietary-software vendors have had to justify the cost of their wares by constructing complex arguments about value.

Again, lipstick terms such as 'software patents' and 'intellectual property' have been applied so successfully they have entered the vernacular. Yet even a cursory examination of their real meaning shows them to be spurious. They exist only to perpetuate the dominance of monopolists.

Yes, we are living in a proprietary-software bubble and, like the bursting of the easy-credit bubble, this one is about to burst too — it's a matter of survival.

Until now, most organisations were happy to go along with softly purred phrases such as 'industry standard' and 'best of breed', even if it cost them eye-wateringly large sums for their hubris.

However, with huge cuts in IT budgets on their way and company survival on the line, the time for such pride is over. Proprietary vendors will be protecting their margins and, if you are locked in, you must pay.

By the end of this recession, the companies left standing will be those using a massive amount of free software. The proprietary-software bubble is over.

As chief executive of Sirius Corporation, Mark Taylor has been instrumental in the adoption and rollout of open-source software at some of the largest corporations in Europe, including a growing number of companies running exclusively on free software, end to end, server to desktop. A direct participant in some of the leading enterprise open-source projects, Taylor is also a well-known authority on all aspects of the open-source phenomenon.