Friday, May 12, 2000

An Unusual Venture at U. of Chicago Focuses on Open-Source Software By SCOTT CARLSON John B. Kennedy has a hefty challenge ahead of him. As the head of Open Channel, an unusual venture based at the University of Chicago, Mr. Kennedy plans to create a viable business marketing open-source software -- programs that are already available to the public at no cost. But how in the world does one make money off something that's free? Actually, this business model isn't outlandish at all. Last August, a company called Red Hat raised $84-million the day of its stock debut after it began distributing and providing technical support for Linux, an open-source operating system. The company made a second stock offering in February and raised $380-million. However, Red Hat is still in the red for the time being; the company expects to start making profits in 2002. Mr. Kennedy and his investors at the university hope to repeat that sort of success with Open Channel by offering support for commercially viable open-source software, which will be distributed on Open Channel's Web site. The company was started in March with a $500,000 investment from the university and the Illinois Coalition, a nonprofit economic-development organization. Mr. Kennedy projects that Open Channel will generate about $6-million annually. But what makes Open Channel unusual is that it also has a nonprofit aim: It will try to foster communities around hundreds of open-source programs that are less viable commercially, including a number of esoteric programs used by scholars. The company hopes to start posting programs by the end of May. "We saw that there were a limited number of ways of publishing software. This was intended to be an alternative way of publishing," says L. Ridgway Scott, a professor of mathematics and computer science at the university who works as an adviser for Open Channel and helped conceive of the company. "Part of the idea was to find ways that the software could be commercialized. That evolved into John's suggestion that we start a nonprofit foundation that will have a commercial wing." "The only way to take software beyond a certain point is to develop it commercially," Mr. Scott says. "The important idea to remember is that software is like a biological entity. When an academic first publishes it, it's like a baby. But if it doesn't grow, it dies. So the question is, how do you get it to grow? That takes money." Software for finite-element analysis, which is often used by engineers to analyze the strength of buildings and other structures, might be among the first offered commercially by Open Channel. Mr. Scott has developed such software. Many other Web sites already feature open-source software, Mr. Scott points out. "But what's a little different about Open Channel is that we are organizing software by discipline, and there are leaders like me that will offer guidance. Our metaphor is that of a museum -- we will be curators. It's a room that you can be led through and educated about how things work." The architecture of open-source software is open for inspection and evaluation by the public, and computer-savvy users can suggest changes to the author to improve a program or fix a bug, making the program more reliable or efficient. The software is also often available free to the public. Before the "open source" term was coined, the programs were often called simply "free software." Thousands of open-source programs are currently available at universities, ranging from software that runs supercolliders to databases that collect and analyze laboratory data. Many open-source programs are available on individual Web sites established by the professors who created the programs. Mr. Kennedy says that Open Channel will try to persuade those professors to move their Web pages to a site maintained by the company. "We'll take care of the more mundane aspects of running a Web site," he says. As a central distribution point for open-source software, Open Channel will offer hundreds of these programs; organize them into "discipline areas," or categories of common interests; and make them available for downloads. The company will also provide e-mail links and contact information for the programs' authors, who could offer technical advice and support for users. Open Channel plans to earn revenue from 10 percent to 15 percent of the programs, those that have commercial applications. "The idea is that we would provide the investment and the capability and the know-how to take those programs commercial," says Mr. Kennedy, who founded and, for 20 years, ran a company that produced marketing software for companies like the International Business Machines Corporation and S.C. Johnson & Son Inc., the maker of Raid insecticide, Drano drain cleaner, and other consumer products. "These programs would still be available open-source -- in other words, free -- to nonprofit organizations and institutions of higher education." The company will hire a staff to support and maintain the commercially viable programs. Open Channel could develop software suites that combine a number of open-source programs for retail sale. Mr. Kennedy says Open Channel also might make money from consulting and training contracts with large companies, from custom programming, and from manuals for the software. "If you're a big enough company and you want Linux support, you might pay Red Hat $100,000 or more for support for a year," he says. "The idea is that the software is essentially free, but there is a long-term involvement that goes beyond that initial sales price, which is where a lot of traditional software companies have made their money. What the whole open-source model is about is basically to provide the support after the fact." At one time, many open-source proponents had anticommercial notions, says Eric S. Raymond, founder of the Open Source Initiative, an organization that promotes open-source engineering. But making money on open-source software does not defy the tenets of today's open-source philosophy, he says. "Back in the days when we called it 'free software,' there was a lot of anticommercialism associated with that label. But the fact that we call it 'open source' now indicates that the community really grew up and wants to work with the market, rather than fight it." The Open Source Initiative's Web page promotes some of the business models that Open Channel has adopted. The main goal of supporters of open-source software, Mr. Raymond adds, is to "educate the world to use engineering practices that lead to reliable software." Easy-to-print version E-mail this article

Senate Appropriations Committee approves increases for N.I.H., Pell Grants Minnesota Vikings owner pledges $50-million to U. of Texas business school 6 new chief executives announced Spring commencement speakers are announced by 16 colleges An unusual venture at U. of Chicago focuses on open-source software Veteran of California Virtual U. blames a flawed business plan for its demise