Open Source a $1 Billion Business, But Just Beginning

Open source has entered the mainstream, says Red Hat CEO Jim Whitehurst, pointing to the billion dollars in revenue it reported in the last fiscal year—a feat only a few software companies (open source or proprietary) have managed. But while open source may have crossed the Rubicon, the battle for the future is just beginning, he says.

Speaking at the opening of Red Hat Summit 2012 to a gathering of more than 3,000 people, Whitehurst began by looking backward, almost to the dawn of human history, to the invention of agriculture as the first industry as a collective endeavor by human beings to extract value from the land. From that time until the birth of the industrial revolution, he says, humans primarily generated value directly from a single physical asset: land. Around 1750 the industrial revolution began to alter that model as the machines humans created to extract value from the land became the primary source of value.

But it was nearly 60 years into the industrial revolution when innovation exploded at an unprecedented scale, and Whitehurst points to the invention of the screw-turning lathe as a direct factor. Humans had automated the process of creating fasteners. Those fasteners were driven by screwdrivers, and more important, he says, is that any screwdriver works with any screw (various head shapes not withstanding) no matter who manufactured them.

“Sixty years after the dawn of the industrial revolution, we finally got standardized piece parts,” he says. “That standardization was critical to driving the next wave of innovation in the industrial revolution.”

“If nuts and bolts at the time had been patentable, if you had to buy your screwdriver from the same company from which you bought your screws, the jet engine would not exist today,” he adds. “The internal combustion engine wouldn’t exist without standardized parts. The airplane wouldn’t exist without the internal combustion engine.”

And now, 60 years after the birth of the information age in which value has once again shifted from industrial assets to the underlying information assets, we are seeing a new form of componetization take hold.

“Sixty years after the invention of the computer, we are finally getting to standardized, componentized piece parts, which is cloud computing,” he says. “It’s so critical to driving the next wave of computing.”

One of the core things cloud does is implode transaction costs, as the barriers to moving digital information from producers to consumers disappear. For some companies, that is a bad thing: He points to an image of a forlorn looking BlockBuster store with empty shelves. But while the change is painful for some, the combination of standardization, componetization and imploding transaction costs is the recipe for innovation, he says.

“We’re seeing that in IT,” he notes. He adds that venture capitalists who fund enterprise IT often speak to him of start-ups, saying, “These guys don’t need more money anymore. They’re just building the thing, putting it up on Amazon as software as a service&the cost of going to market has fundamentally changed.”

But while open source is here and the default choice for many new projects, Whitehurst says the community must continue to push the frontiers of open source if the explosion of innovation is to continue.

“The decisions that you make, that we all make, that IT in general makes overt he next several years-are we going to have truly open architectures or will we just create the next Microsoft-is something that will be decided in the next several years,” he says. “It’s a battle we’re going to have to continue to fight over the next several years.”

Thor Olavsrud covers IT Security, Big Data, Open Source, Microsoft Tools and Servers for CIO.com. Follow Thor on Twitter @ThorOlavsrud. Follow everything from CIO.com on Twitter @CIOonline and on Facebook. Email Thor at tolavsrud@cio.com