Free software: It's about the money

It's becoming easier for open-source developers to find investors and sell software in the U.S. than in Europe.

Open-source software developers are seeing a lot of interest in their products in Europe -- but it's North American companies that are opening their checkbooks, said speakers at Paris Capitale du Libre, a conference organized by the Federation of Open Source Software Industry.

"Europe is two to three years ahead of North America in using open source, but two to three years behind in paying for it," said Andrew Aitken, CEO of open-source strategy consultancy Olliance.

At first glance, figures from Mindtouch, an open-source software developer, would seem to bear that out.

"Sixty percent of our distribution is in Europe, but 80 percent of our revenue is from the U.S.," Mindtouch CEO Aaron Fulkerson said.

Most of the Mindtouch staff work in the U.S., so naturally that's where the company makes most of its money delivering services around its Wiki-like enterprise collaboration software.

Many of the Mindtouch developers are of European origin, though, with five or six languages spoken in the company's San Diego office, according to Fulkerson. Its software was designed to be easily localized from the start, and the user community has taken up the challenge, translating the software into around 15 languages, he said.

The company now sees around 1,200 downloads a day in Europe. Users there may still be paying for related services, said Fulkerson, but if so they're buying them from independent systems integrators whose revenue Mindtouch doesn't track.

For Talend, a European vendor of open-source data integration software, the trend is in the other direction. "Before we started doing any marketing in the U.S., we were already getting 40 percent of downloads there," said the company's vice president of marketing, Yves de Montcheuil. Since the company's CEO moved to the U.S. to open an office there, the country now accounts for 60 percent of downloads, "but we're not yet seeing 60 percent of our revenue there," de Montcheuil said.

He sees the gap between downloads and revenue not so much as a missed opportunity but as potential for future growth.

"We have lots of downloads in India, but it's difficult to pursue business without a team in the field. There are companies doing integration there, and when we're ready to launch there, we will benefit from all this activity," he said.

There's another area in which the U.S. is more ready than Europe to write big checks for open-source software, and that's when it comes to early stage venture capital investments in the developers, Aitken said.

"Many of the open-source software companies in North America have venture backing, so it means they have more time to bring in revenue from customers. They have more time to build their product," he said.

"It's not an open-source issue, it's a venture capital issue. There are many more venture capital funds in California, it's just the numbers," Aitken said.

The lack of venture capital in Europe means open-source companies there tend to focus on services that will bring in revenue immediately, he said.

Conference attendees wanting to know the secrets of how to get rich by selling free software will have to wait until Thursday for the answer, as that's the title of the very last conference session.

There may be a clue in the panel lineup, however: It includes Sacha Labourey, chief technology officer at JBoss, bought by Red Hat for US$350 million in 2006; and David Axmark, cofounder of MySQL, for which Sun Microsystems paid around $1 billion in January. Could the secret be to sell the company, not the software?

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Peter Sayer

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