"...The Web consulting business was great, but it had one problem: limited margins. You could charge only so much for an hour of some consultant's time -- in those days, maybe $200. Some of that went to overhead (say $20) and some to pay the consultant's salary (maybe $70). That leaves you with a mere $110 per hour in gross profit. That's a lot of money, but it paled in comparison with margins in the software industry, in which you can produce additional copies of an application at virtually no cost."

So, if a body-shopping service company is competing against another body-shopping service company, they're facing the same per-employee costs and will have no problems in their market. However, if a body-shopping service company is competing against commercial software for the exact same product and market, commercial software will face lower costs and receive higher revenue for the same work and so will have more resources to bury that competing body-shop every time.

Also, if our company receives a service call, we regard it as a failure of our product to address our customer's needs. If a 'commercial' open source company receives that same call, they regard it as money earned from a support ticket.

Given that difference, which software product would you prefer to run in your business?

Given that difference, which software product would you prefer to run in your business?

Since you and the followup are both wondering why you're being downvoted, I thought I would call this out, and point out that this part of your comment is why you're being downvoted. Because you're assuming that the Open Source support business model is to build shoddy software in order to get more support calls. This is FUD that is frequently used by proprietary vendors to try to discredit Open Source solutions. Open Source developers rightly take offense to being told they are not only building crap, but that they are doing it in order to fleece customers out of their money.

Proprietary software does not have a monopoly on quality software, and never has.

Say you want a car. You may want to go to the dealership and just buy one (Toyota's automated process, thus lowering marginal cost). However, maybe you're the hotrod type and would rather build it and customize it yourself. You pay for someone to help you build it and troubleshoot any mistakes you make along the way. Sure, it took longer to build, and was probably more expensive, but it's exactly want you wanted. I think that's where the value of opensource/support lies.

Commercial open source companies (at least Redhat) use subscription models for their support (in addition to consulting, professional QA, etc) so I don't think they would consider troubleshooting software money earned. In fact, I think this gives them a greater incentive to maintain the quality of their software so they get less support tickets and scale to have more subscription fees per support person. I guess you can say that RedHat, through their support, sells the peace of mind of having that support person if you want to go the open source route.

Addressing your post: Software isn't a car and the marginal cost to manufacture more software licenses is zero. When I direct an hour of effort to our commercial software, I'm gaining many dollars of future passive revenue thanks to that created wealth.

Contrast that with services and a 'free' product, where each hour of effort gets a support dollar but generates no wealth at all! Pitted against that means of generating revenue, a service company giving away its product is going to lose in the long-run every time.

To see this, just look at the software marketplace: Aside from the solitary black-swan exception of RedHat (which arguably sells licenses instead of services anyhow), where are the profitable open source support contract companies?

I can spool up 3,000 software licenses sold today without batting an eye (and add in support charges on top of that if needed) making a ton of cash with which to hire employees for product improvement, but 3,000 hours of support is a huge cost requiring a great many employees to manage before even a penny of profit is obtained.

Bringing this back to my original point: Commercial software companies can easily dominate 'free' open source alternatives given that reality, so they can safely ignore their free 'competition'.

People buy RedHat licenses because it's a defacto standard in the industry. Some people or companies use CentOS, which is a re-branded RedHat. But if you want the original, you have to buy the product.

The support basically amounts to access to their RPM repository. You'd have to pay a lot of money to get access to Alan Cox -- normal tickets just get you access to people who've been through the same training that your manager paid you to go to.