Open source is a sixty-billion-dollar industry,^[407] but it has a disproportionate impact on the trillion-dollar IT market. By lowering the cost of computing, open source efforts make more computing options accessible to smaller firms. More reliable, secure computing also lowers costs for all users. OSS also diverts funds that firms would otherwise spend on fixed costs, like operating systems and databases, so that these funds can be spent on innovation or other more competitive initiatives. Think about Google, a firm that some estimate has over 1.4 million servers. Imagine the costs if it had to license software for each of those boxes!

Commercial interest in OSS has sparked an acquisition binge. Red Hat bought open source application server firm JBoss for three hundred fifty million dollars. Novell snapped up SUSE Linux for two hundred ten million dollars. And Sun plunked down over one billion dollars for open source database provider MySQL.^[408] And with Oracle’s bid for Sun, one of the world’s largest commercial software firms has zeroed in on one of the deepest portfolios of open source products.

But how do vendors make money on open source? One way is by selling support and consulting services. While not exactly Microsoft money, Red Hat, the largest purely OSS firm, reported half a billion dollars in revenue in 2008. The firm had two and a half million paid subscriptions offering access to software updates and support services.^[409] Oracle, a firm that sells commercial ERP and database products, provides Linux for free, selling high-margin Linux support contracts for as much as five hundred thousand dollars.^[410] The added benefit for Oracle? Weaning customers away from Microsoft—a firm that sells many products that compete head-to-head with Oracle’s offerings. Service also represents the most important part of IBM’s business. The firm now makes more from services than from selling hardware and software.^[411] And every dollar saved on buying someone else’s software product means more money IBM customers can spend on IBM computers and services. Sun Microsystems was a leader in OSS, even before the Oracle acquisition bid. The firm has used OSS to drive advanced hardware sales, but the firm also sells proprietary products that augment its open source efforts. These products include special optimization, configuration management, and performance tools that can tweak OSS code to work its best.^[412]

Here’s where we also can relate the industry’s evolution to what we’ve learned about standards competition in our earlier chapters. In the pre-Linux days, nearly every major hardware manufacturer made its own, incompatible version of the Unix operating system. These fractured, incompatible markets were each so small that they had difficulty attracting third-party vendors to write application software. Now, much to Microsoft’s dismay, all major hardware firms run Linux. That means there’s a large, unified market that attracts software developers who might otherwise write for Windows.

To keep standards unified, several Linux-supporting hardware and software firms also back the Linux Foundation, the nonprofit effort where Linus Torvalds serves as a fellow, helping to oversee Linux’s evolution. Sharing development expenses in OSS has been likened to going in on a pizza together. Everyone wants a pizza with the same ingredients. The pizza doesn’t make you smarter or better. So why not share the cost of a bigger pie instead of buying by the slice?^[413] With OSS, hardware firms spend less money than they would in the brutal, head-to-head competition where each once offered a “me too” operating system that was incompatible with rivals but offered little differentiation. Hardware firms now find their technical talent can be deployed in other value-added services mentioned above: developing commercial software add-ons, offering consulting services, and enhancing hardware offerings.