It's Open Source And (Not Or) Proprietary

by: Dana Blankenhorn

With the launch of the Amazon (AMZN) Kindle Fire, and the continuing success of Apple (AAPL), the old argument over open source or proprietary business models has begun again.

Forbes calls the Kindle a “triumph of open source.” Here at Seeking Alpha, folks like Jason Schwarz pound the table for Apple, calling each new product “a game changer.”

Here's the truth. It's not proprietary or open source. It's proprietary and open source.

Apple and Microsoft (MSFT) fans are right about this much. Most open source projects start by copying the features of proprietary products. That's because software is really complex. An operating system is like a house of cards 100 feet high, that has to stay upright in a shifting breeze. The bigger that system gets, the smaller the number of companies with the capital to compete in the space.

That is where we were when Linux and open source were born. The only other control we had over the Microsoft monopoly was the government, and that was either going to fail or become a chain saw massacre. And before Microsoft, there was the death struggle with IBM, which began with a 1956 consent decree and continues to this day.

No wonder IBM loves open source. Running Linux sure beats lawyering.

Open source changed the technology game. It let lots of people, and lots of companies, cooperate to build something roughly competitive with what the monopolist offers, then innovate on top of it. The Mosaic browser is now on more PCs than Internet Explorer. There are more Android phones than iPhones.

But that does not mean the proprietary folks can't compete. Microsoft remains a very competitive company, and who knows, its new Mango phone could be a winner – especially if it can keep cashing in on the Android boom.

Oracle (ORCL) has done very well competing with open source, by buying it. Its acquisition of Sun Microsystems, and its use of copyright to control projects like Java and mySQL, poked a hole in the whole open source movement. But open source remains active in the database space. There are open source relational databases and a host of noSQL databases out there. Amazon and Google aren't running their businesses on racks of Oracle servers.

The Apple vs. Android battle puts all this in perspective. Android, a version of Linux, was pushed by Google (GOOG) as a direct replacement for Apple's iOS on phones, but both Samsung (OTC:SSNLF) and Amazon (AMZN) have created forks that have an underlying compatibility and some proprietary features. Together these companies, and others, are giving Apple a run for its money.

But I wouldn't sell Apple (AAPL).

Without open source we'd have monopolies, and when you scratch through the legal mumbo-jumbo over patents that's what companies like Apple want. Toss Android from the market because it's too much like our stuff, is what they're arguing (with some success, in some courts).

But this would be a disaster for the market and, in the end, a disaster for Apple as well. Without open source as a strong competitor our only recourse would be to go after Apple as the Justice Department went after Microsoft. Or to make the whole market hostage to the pace of technology change dictated by Apple, paying whatever price Apple decided to charge, as enterprises did with IBM for decades.

So let's forget the open source vs. proprietary argument. It's open source AND proprietary. It's market-based protection that keeps everyone competitive, and gives consumers the best value for the least money.

Disclosure: I am long GOOG, IBM.

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