Tim O'Reilly: Software licenses don't work

PeopleSoft may be spending its nights tossing and turning about a hostile takeover by Oracle, but maybe Oracle should be the one losing sleep. At least that's what O'Reilly & Associates Chief Executive Officer Tim O'Reilly believes.

EBay will someday buy Oracle, open source licenses don't work, and the software market is about to change forever. These are three of the predictions that O'Reilly, a well-known publisher of technical books and an open source advocate, had to offer in an interview conducted the week before his company's annual Open Source Convention. The conference, which attracts a who's who of the open source community, will be held in Portland, Oregon, next week.

Q: You're keynoting at the Open Source Convention next week. What will you be talking about?

Tim O'Reilly: I think there's a paradigm shift going on right now, and it's really around both open source and the Internet, and it's not entirely clear which one is the driver and which one is the passenger, but at least they are fellow travellers.

Let me give you an example of what I would consider a paradigm failure that happens all the time in the open source community. The critic of open source says, "Open source is just not very good at building easy-to-use software." And the open source defender says, "Oh, you haven't seen the latest version of Gnome (GNU Object Model Environment). It's really getting pretty good."

Nobody is pointing out something that I think is way more significant: all of the killer apps of the Internet era: Amazon (.com, Inc), Google (Inc.), and Maps.yahoo.com. They run on Linux or FreeBSD, but they're not apps in the way that people have traditionally thought of applications, so they just don't get considered. Amazon is built with Perl on top of Linux. It's basically a bunch of open source hackers, but they're working for a company that's as fiercely proprietary as any proprietary software company.

What's wrong with this picture? Well, one thing is that one of the fundamental premises of open source is that the licenses are all conditioned on the act of software distribution, and once you're no longer distributing an application, none of the licenses mean squat.

I would go further than the fact that the licenses don't work. I would also point out that these applications are fundamentally different in that their interfaces are composed much more of data than they are of just software. My basic premise is, "Let's stop thinking about licenses for a little bit. Let's stop thinking that that's the core of what matters about open source. And that's not to say that they're completely unimportant, it's just that they can blind (us) to other things that are perhaps more important.

Q: Like what?

O'Reilly: The commoditization of software. Open source is a contributor to the commoditization of software, but it's not the only contributor. Open standards lead to commoditization. The Web browser is proprietary, but it's a commodity.

Basically, we're really seeing the development of something that's analogous to hardware with the IBM (Corp.) PC. If you look at what happened to the hardware business, there was a transitional period where everybody tried to play by the old rules. It wasn't until Dell (Computer Corp.) figured out that, no, the rules really are different, and the business levers are different, that we saw somebody figure out how to really leverage commodity hardware.

Ian Murdock, the guy who started Debian, and now runs a company called Progeny (Linux Systems Inc.) is right on track with this. Instead of seeing Linux as a product, he sees Linux as a set of commodity software components he can put together for different purposes.

Q: Isn't that how IBM sees Linux?

O'Reilly: Absolutely, but I would say that IBM's current strategy with open source is very close to the Compaq (Computer Corp.) strategy in the early days of the PC. There were a whole bunch of vendors who took this commodity thing and tried to tweak it and improve it and add value in some way, and differentiate themselves that way. And so (with) WebSphere, for example, (IBM says) "OK, we'll put together a bunch of open source components with a bunch of proprietary components and we'll bundle it up in some way that everybody will say, "OK, I guess I've got to pay for it." That's a lot like Compaq's strategy.

Somebody will come along eventually and put together the complete open source stack. If you look at the history of the PC, the Compaq strategy didn't fail. It's just that the Dell strategy was marginally better. The whole essence of the Dell approach was build to order, and I think we're going to see the emergence of that business model for Linux.

Q: Is the open source software stack mature enough for there to be an open source Dell?

O'Reilly: Probably not yet. There's this great quote from (optical character recognition and speech technology pioneer) Ray Kurzweil. He said, "I'm an inventor, and I started looking at long-term trends because an invention has to make sense in the world in which it was finished, not the world in which it started." A lot of people are doing plans for the world that's rapidly ending, and you have to do your business plan for the world that's coming.

No, it's not mature enough yet, but that's why there's opportunity there.

Q: Where else do you see opportunities created by these changes?

O'Reilly: The value will be driven up the stack to data. For this I go back to my Amazon and Google examples. Google may have less of a lock. They probably have more of a traditional software lock in that they're just better at what they do. But there's not much difference between Barnesandnoble.com (LLC) and Amazon.com in the software they have. What are different are the customers they have, and the amount of customer contribution to their data.

With eBay it's even clearer. The fact is, it's the critical mass of marketplace buyers and sellers and all the information that people have put in that marketplace as a repository.

So I think we're going to find more and more places where that happens, where somebody gets a critical mass of customers and data and that becomes their source of value. On that basis, I will predict that -- this is an outrageous prediction -- but eBay will buy Oracle someday. The value will have moved so much to people who are not now seen as software suppliers.

Amazon is the furthest along this path, in a lot of ways. Amazon really understands that they are becoming a platform. They are becoming the e-commerce engine of an awful lot more of the Internet than people realize. It's not just a site, but they're running e-commerce for other people, they've built Web services, so people are building applications that (Amazon doesn't) control that use some of their back-end services. They're really moving down that path, and I think other people like that will emerge, and we'll suddenly go, "Oh my God, how did they become such important players?" It will be just the way that IBM thought that Microsoft was not really a competitor until one day they went, "Oh my God, these guys are in the driver's seat."