The redistribution of technology’s wealth is indeed trickier than I thought.
Open source was an underdog technology. Closed source or “proprietary” software was where the money was. You licensed software. The company that developed it accepted all the costs of growing and maintaining it. The cloud was barely a gleam in Larry Page’s eye, a headache made necessary by Google’s roaring success in search.
The problem was cost. Page, and the folks at Yahoo, saw that you could spend $1 billion/quarter on hyperscale data centers and still not get anywhere. The only way to hold costs down was to software costs, through open source. Open source put everyone’s eyes on the code. They let everyone start building from a higher stack.
Amazon got on board for its store and got the bright idea of re-selling that capacity as the Amazon Elastic Cloud in 2006. This wasn’t a stretch. Amazon had been letting others onto its site since 2000. The idea was to share the costs of its infrastructure, to wholesale the ability to be Amazon. Sounds a lot like open source.
Facebook saw the opportunity in cloud even before it even had the cash flow to get in. Because it was desperate, it saw the need to share hardware as well as software innovation. It launched the Open Compute Project in 2011, going public a year later with a value of just $50 billion.
I say “just” $50 billion because, despite open source and the Open Compute Project, cloud was still prohibitively expensive. It was too rich for IBM. It was too rich for Oracle. Too rich even for AT&T. You needed to invest everything you had in it, and hope cash flow would come in to justify it. Companies that were dedicating their cash to paying off loans or handing out dividends couldn’t justify it.
Microsoft and Apple were latecomers to the cloud party. Microsoft had to turn itself inside-out and accept the reality of open source. The retirement of Steve Ballmer, and his replacement with Satya Nadella, who had been running its cloud operations, was a turning point. Apple came even later, as services like iCloud and iTunes became popular, and it saw cloud as a place to put the immense cash flow it was generating.
Oracle never really got the message. It bought Sun in 2010 to bury open source. It tried to “monetize” all of Sun’s open source projects, demanding cash for what had been free. That’s what the Google vs. Oracle case was all about. It wasn’t just aimed at Google, but at the entire framework of open source. By declaring the instructions for building the software as property, open source could be made illegal.
When the case was finally settled the situation on the ground was very different. Google is worth $1.5 trillion. Oracle is worth “just” $214 billion. IBM is worth just $120 billion. The companies that committed to open source and cloud are now worth nearly $8 trillion and the smallest of the group, Facebook, could buy Oracle 4 times over. Not that it cares to.
The victory of open source and cloud, a ware I’ve covered for 15 years, has turned the world upside down. I was so deep into it that I was shocked when reporters treated this final court victory as a case of the “big guys” crushing a little guy. But that’s what it was.
Open source, born to steal from the rich and give to the poor, is now doing just the opposite. The companies that took advantage of the new model rose to glory. The proprietary model burned to ashes.
Like I said, this redistribution of wealth thing is trickier than I thought.