Wednesday, September 29, 2010

The FFII: a decayed pressure group promoting "open standards" for pay -- "staged drama" included

The FFII, a European pressure group originally known for its anti-patent work, has been a vocal participant in the European "open standards" debate for several years. In that context, it collaborates with the OpenForum Europe lobby group (which also has an FFII logo on its website and edited its own Wikipedia entry to mention, among other things, that partnership) and the Free Software Foundation Europe (FSFE).

This blog posting explains why policy-makers, company officials, journalists and honest activists should be extremely skeptical of the FFII's integrity, transparency, competence, and backing.

Especially in connection with "open standards", it turns out that the FFII's General Secretary and possibly also other FFII representatives are simply guns-for-hire willing to advocate positions they don't truly believe in -- provided someone like IBM pays them for it. If they can make money, even "staged drama" is something those people will consider. I have conclusive evidence for that attitude and will publish it further below.

The major issue is that the FFII and its representatives operate under the guise of a purely idealistic non-governmental organization.

The FFII used to be a central hub for the grassroots movement opposing the proposed EU directive on "computer-implemented inventions", which was rejected by the European Parliament in July 2005. At that time, the FFII had a pan-European volunteer network behind it (almost entirely recruited from the open source community) and received donations from many small businesses and individuals.

By now, the organization is in ruins. All that's left is a very small group of people that resulted from an adverse selection. But especially in the "open standards" context, they grossly mislead decision-makers and the media concerning their intentions and the organization's significance.

Defense against unbearable slur

For about six months, and especially over the last few weeks, I have been smeared baselessly and shamelessly by the FFII on Twitter and in discussion forums. Because of the past -- there was a time when the FFII and I had a common political goal -- I tried to avoid escalation. Even though today's FFII is less than a shadow of the FFII of 2004 or 2005, I was hesitant to publish the facts.

In light of what happened yesterday, I determined that I had no other choice but to make it clear just how untrustworthy today's FFII is.

Noted open source journalist Glyn Moody published an article on "Double standards on open standards", and the second paragraph mentions Karsten Gerloff of the FSF Europe. Below the article, I posted comments. I drew attention to the fact that the FSFE doesn't appear to advocate open standards and interoperability in some very important contexts, and it's conspicuous that the FSFE lobbies hand in hand for "open standards" with companies pursuing proprietary lock-in in their core businesses.

Karsten as well as the FSFE's counsel Carlo Piana didn't want to address the actual issue. I asked, repeatedly, two very clear and polite questions. I didn't get any answer, just diversion. So my concerns about the FSFE's position are well-founded. Other people saw this and supported my questions on that page as well as on Twitter.

The FFII's General Secretary then chimed in with baseless slur that's beneath contempt. The FFII's official Twitter account also kept smearing and "trolling" me all day. I decided that enough is enough, especially since I had given the FFII's board every opportunity to get the situation under control but they decided to support their General Secretary.

The FFII's General Secretary openly admitted that he can be -- and has been -- bought

Six months ago, when I started to take a strong interest in the Hercules open source mainframe emulator and related antitrust issues, I participated in a Hercules-related discussion on the FFII's founder and former president Hartmut Pilch's Facebook wall.

That wall was -- and as of now still is -- publicly visible. Any Facebook user, friend or not, can read it.

In that discussion, André Rebentisch, the FFII's General Secretary (and a member of its board), claimed that the Hercules situation was a "staged drama." That is completely wrong. The entire correspondence between TurboHercules (a French open source start-up founded by the creator of the Hercules project) and IBM is available, and there's nothing staged about it. IBM threatened the little company and the founder of the open source project with patents.

On March 28 at 10:56pm, Rebentisch then said:

"You know, I was equally sceptical about Open XML campaigning..."

This refers to the FFII's "NoOOXML" efforts to oppose ISO approval of the OOXML document format standard.

In the same comment, he then suggested he might take an interest in the TurboHercules matter in exchange for money:

"As it is a multi-billion Euro business there should fly sufficient cash around [sic]. I wouldn't be willing to step into the ring without."

So even though he considered the Hercules case a "staged drama", he looked at it as a money-making opportunity for himself.

The FFII later claimed he spoke only in his own name, not for the organization. But a serious non-profit advocacy group can't let one of its officials make statements like this on its founder's public Facebook wall. Just imagine the outcry if a Greenpeace leader said that media reports of pollution by one chemical company are a "staged drama", only to add that participation in such a staged drama, despite skepticism, was negotiable provided that another company was willing to pay.

A few days later, Rebentisch told me in a Facebook email message (I certify that this an accurate, verbatim translation of what he wrote in German):

"For instance, I ran -- together with Benjamin [he meant Benjamin Henrion, the president of the FFII] -- the Open XML campaign, which was about [opposing] ISO standardization of Open XML; there was a fair amount of money behind the effort."

So Rebentisch clearly admits that his work on "open standards" and against the Microsoft-backed OOXML standard was financially motivated. In connection with what he wrote on Facebook, it's clear that money helped overcome his skepticism concerning that cause. With that email he suggests the president of the FFII might have been available on the same basis.

There are strong indications that other leaders of the FFII indeed supported Rebentisch's gun-for-hire approach all along. I have heard from a fairly high-profile source that some money from IBM was contributed, directly or indirectly, to the FFII's "open standards" effort. And the next section discusses the organization's deliberate failure to comply with EU disclosure rules, which is additionally telling.

Consistent refusal to disclose amounts and sources of funding under the EU transparency initiative

In June 2008, the European Commission launched its long-awaited European Transparency Initiative aiming to provide the public with information on the funding of lobbying entities.

Ever since the "register of interest representatives" was started, the FFII has refused to sign up. Registration should take place annually. It's formally voluntary, but more than 3,000 lobbying entities have signed up, and the FFII continually engages in lobbying, so it could be reasonably expected to disclose its funding.

By contrast, I haven't done any lobbying work since the register was started. If I did, I would certainly sign up.

Earlier this month I made the FFII aware -- via email and Twitter - of its failure to do so. All that came back was pure hypocrisy and diversionary tactics. They claimed that they didn't have to register because they represent the interests of civil society (the previous section proved that's not really the case) and that the FFII was disappointed that the EU didn't agree on stronger transparency measures. That's incredible. If they don't think the initiative goes far enough, they should lead by example and at least comply with the rules as they stand (they could still advocate even stricter rules). The reason for the creation of the register is precisely that organizations like the FFII often misrepresent who really backs them and for what purposes; the register is meant to shed some light on that.

In my opinion, the most plausible explanation is that the FFII has something to hide.

This is particularly disgraceful when considering the FFII's long-standing smear of honorable Members of the European Parliament (MEPs) or even a director-general of the European Commission, suggesting they act as corporate stooges for money. The FFII also criticized on numerous occasions other lobby groups, claiming that those were beholden to big industry. I'm not exaggerating when saying that the FFII was similarly aggressive and vocal about those issues as some specialized "watchdog" organizations. But the FFII is like a self-proclaimed watchdog who doesn't want to be transparent himself...

It's pretty clear now that the FFII uses double standards not only in connection with "open standards" but also with transparency and disclosure.

The FFII doesn't have much official support from businesses

While actually being a small group of activists (mostly with an open source background), the FFII tries to position itself -- falsely -- as a representative of small and medium-sized enterprises (SMEs).

In reality, it doesn't have much official support from companies. As Rebentisch's statements show, there may be money from the likes of IBM secretly in play in some of their activities, but what's lacking is a significant, broadbased backing by businesses on an official basis.

Even in its heyday, the FFII wasn't really successful at getting support from companies. To give you an idea, the FFII launched in 2005 a campaign called "The Economic Majority Against Software Patents". Its objective was to demonstrate support from companies for its cause, and collectively, those companies were supposed to outweigh those supporting such patents.

The FFII received sign-ups from less than 2,000 companies with a collective revenue level of about 3.2 billion euros. An "economic majority"? No way. That number was less than 1% of the revenue level of only the most well-known supporters of software patents. In addition to unanimous support for those patents among the big players in the high-tech industry, there was also considerable support among SMEs.

The website also enabled companies to pledge financial support. Most companies didn't offer any money, and the few who did certainly didn't put their money where their mouth was. That effort was an abject failure.

By now, the FFII wouldn't even be able to demonstrate that kind of backing.

The latest example of the FFII totally overstating its support was the amicus curiae brief it filed with the US Supreme Court in the Bilski patent case. The FFII partnered with another NGO and then listed four people from the organization's network as "Global Software Professionals and Business Leaders" supporting the submission as individuals. That labeling was just ridiculous. It sounds like some really powerful, wildly successful people with a strong business background. But one of the four was Rebentisch, who to the best of my knowledge has never even had a serious job. Another one is a lawyer. The third guy runs a judo club and works as a freelance software developer (nothing wrong with that, but that's not a global business leader). The fourth person, finally, has a certain business background, more so than the three others combined, but still isn't a "global business leader" by any reasonable measure.

I don't know what the US Supreme Court thought of that overstatement. What I'm more concerned about is that the FFII tries the same make-believe approach in the EU all the time. They make submissions to the European Commission; they lobby the European Parliament all the time; and they try to influence national governments. All of that without officially representing any noteworthy part of the economy or the electorate.

And when they're not lobbying, they occasionally hang out on Twitter and online discussion boards to smear people who didn't make them a generous offer they couldn't refuse...

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Saturday, September 25, 2010

Does the S in FSF stand for "spamming"?

The Free Software Foundation appears to be turning, slowly but surely, into the Free Spamming Foundation.

Recently I criticized the FSF's belated statement on Oracle's patent infringement suit against Google for a host of reasons. Mostly, I felt that it was misleading pro-GPL propaganda. Note that I vigorously defended MySQL's GPL-based business model and "copyleft" in connection with Oracle's acquisition of Sun. But I reject overstatements of the GPL's (especially the GPLv2's) ability to deal with patent attacks. In addition to that, I criticized the FSF's call to spam Oracle CEO Larry Ellison's email account.

Now I just saw that spamming indeed appears to be a cornerstone of the FSF's strategy concerning patents. Its newest target: the United States Patent and Trademark Office (USPTO).

Under the headline "Encourage the USPTO to stop issuing software patents; deadline September 27", the FSF issued an urgent call on the community to answer a request for comments by the USPTO concerning the interpretation of the Supreme Court's Bilski ruling. For the future evaluation of patent applications, the USPTO wants to write up new guidelines reflective of the Bilski decision.

The Bilski case was (or could have been) a very important one

The Bilski case was an important one indeed, and I reported on it from several angles. In an immediate reaction, I described it as a major disappointment for the NoSoftwarePatents cause; I listed the top ten Bilski losers, among them the FOSS movement; I explained that doing away with software patents on the grounds of them being too abstract is a losing strategy; I also commented on IBM's outrageously cynical submission spitting in the face of the FOSS movement and on Google's position, which definitely didn't speak out against the patentability of software.

So I don't deny that the conclusions the USPTO is now going to draw from the Bilski ruling are an important step. However, spamming the USPTO, whose only job it is to apply the law (not to make it), is an ill-conceived and counterproductive approach. It's like protesting against foot soldiers. It won't do away with a single software patent. It won't reverse the defeat that the Bilski decision was for the abolitionist movement. But it will for sure reflect very unfavorably on the FOSS movement as a whole.

What the USPTO wants is well-crafted professional input

Even though consultations such as this one are open to the general public, patent law is a complex subject requiring a vast amount of knowledge, so what the USPTO really hopes to receive is input from professionals. Let me quote from its request for comments:

The Office is especially interested in receiving comments regarding the scope and extent of the holding in Bilski.

In other words, this is about legal interpretation. The Supreme Court took a position on some aspects of substantive patent law (the rules for what is and what isn't patentable), though not on as many as a lot of people hoped. Now it's about drawing the right conclusions from it.

You can't outvote the law

This isn't going to be a "democratic" decision-making process. It's not a vote on a TV show. If the FSF mobilized a million people to call for the abolition of software patents, it still wouldn't change the basis on which the USPTO has to operate, which is the law as it stands and as the courts, especially the highest one of them in the US, interpret it. Spam doesn't contribute anything of substance. It's just an annoyance and a distraction.

It would be perfectly appropriate for the FSF to make a substantive submission to the USPTO, or to encourage FOSS-friendly patent professionals to do so. But instead of arguing the real issue, the FSF just provides copy-and-paste paragraphs and general guidance and asks the community to tell the USPTO -- among other things -- how software patents "take freedom away from all computer users". Software freedom is a vision I like, but it's not a legal concept. It's not in the Constitution, it's not in the Supreme Court's Bilski decision, and it won't play a role in the USPTO's new guidelines.

An email campaign like that is a nuisance (to put it diplomatically). The USPTO doesn't make the law; it doesn't have the authority to interpret it like a court; it simply has to operate within the given framework. The FSF tries to put some blame on the USPTO but doesn't understand that US patent law was indeed designed to evolve expansively as new technologies are invented and adopted. Restrictions require democratic decisions, and the USPTO isn't a democratic decision-making body. Those decisions are the prerogative of Congress.

The FSF apparently knows that it can't persuade Congress of its anti-IP agenda. So it firstly rested its hopes on the Supreme Court (which made it pretty clear in the Bilski decision that if you want to exclude anything from patent-eligibility, you have to talk to the lawmakers, not to the judges) and now tries to pressure the patent office.

Email campaigns can be legit -- but not in this case

Let me point out that there are indeed situations in which it makes sense to mobilize citizens for email campaigns. In particular, if lawmakers are in the process of forming opinions and preparing decisions, it's perfectly in line with democratic concepts to let citizens voice their wishes, hopes, fears, concerns, doubts, whatever. Our directly elected representatives should listen to us.

Of course, it also depends on how, when and on what scale such campaigns are conducted. There are many circumstances that one must consider. Wherever such a campaign is inappropriate, it backfires. It gives the impression that the ones conducting it have lost on the basis of reason and resort to desperate and defiant spam tactics.

In a case like this request for comments by the USPTO, the only appropriate (and the only productive) input will have to be presented professionally, and there's no strength in numbers.

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Thursday, September 23, 2010

Red Hat's financials are an argument for software patents

Having founded and run the NoSoftwarePatents campaign, one of the hardest things for me to do is to make concessions to the proponents of the patentability of software. But during my campaign I was also known among activists for thinking outside of the box and for trying hard to separate reality from ideology, which is never easy.

In that spirit, I can't help but admit that Red Hat's financials can serve as a fairly strong argument for software patents.

Before I explain why, I want to stress that I'm aware of the sensitivities surrounding this question. Instinctively, most FOSS advocates want to see Red Hat do well in its daily business, and on the stock market (NASDAQ:RHT). But in my opinion, Red Hat sets a bad example.

It's disconcerting that the world's largest open-source-only company pursues a questionable business model that doesn't really stimulate more investment in open source, and that may indeed lead political decision-makers to the conclusion that software patents are needed to protect innovation against unsustainable business models. By "unsustainable" I mean that certain models may work well for one company, or for a few, but could never work for the knowledge economy at large.

Innovation and employment are political goals -- revenues and profits are merely incentives

Thinking back to the debate we had in Europe over software patents and innovation, I remember that the fewest politicians we talked to cared about whether software patents were "just" or inhowfar software was different from other fields of technology. What the decision-makers really cared about were the purposes intellectual property rights serve.

In connection with patents, the two key political objectives that tower above all other considerations are innovation and employment. Politicians realize that innovation has value all by itself, and they know it's a question of competitiveness. But they also want to create and sustain employment, especially in terms of high-quality jobs. That's even more important to them than collecting taxes on a company's sales and profits, although that is, of course, also desirable from a political point of view. As far as innovation and employment are concerned, profitability is just a means to an end: it can serve as an incentive to invest in innovation.

One can argue that the reason why most of the industrialized world has software patents is unrelated to those overarching considerations: patent offices simply grant them, and the courts uphold them. That's true but ignores the fact that if lawmakers wanted, they could do away with those patents. They could pass legislation to that effect. In practical terms, that would mean doing away with large parts of the entire patent system, but legislators could certainly do so if they deemed it good policy. However, they just don't.

In the EU we were able to get a legislative proposal rejected that would have resulted in even more widespread enforcement, but we didn't have any chance to get a truly restrictive law passed. We scored a victory that was only a defensive one. In the US, the Supreme Court recently made it clear in its Bilski decision that judges "should not read into the patent laws limitations and conditions which the legislature has not expressed." That's a clear message: if you want to get rid of software patents, or any other category of patents, talk to Congress, not to the judges.

No one has so far made a convincing case that lawmakers should abolish large parts of the patent system. That experiment just won't happen, at least not anytime soon. The benefits of such a bold move are purely speculative. We can be totally convinced of our views, but we can't prove that this is a better recipe for the economy at large. The risk of abolition doing enormous harm to the economy is far too huge for any political body to take its chances.

Red Hat's business model does more harm than good

A few months ago, open source journalist Glyn Moody asked Red Hat CEO Jim Whitehurst whether his company could reach a turnover of $5 billion, and why it was taking so long. Here's how Glyn reported on the answer he received:

[Whitehurst] said that he did think that Red Hat could get to $5 billion in due course, but that this entailed “replacing $50 billion of revenue” currently enjoyed by other computer companies. What he meant was that to attain that $5 billion of revenue Red Hat would have to displace software that currently costs $50 billion.

This thinking along the lines of a 1-to-10 destruction ratio is familiar to me. MySQL AB, an open source company with which I became involved early on, described its impact the same way.

I actually have doubts whether Red Hat will ever reach that revenue level, and even if it hypothetically did, its destruction ratio won't necessarily stay the same. But rather than getting distracted by investment considerations, let's just take Whitehurst's statement at face value for the sake of the patent argument and do a simple extrapolation.

Running the numbers

The three largest proprietary software companies (leaving the more diversified IBM Corporation out for the sake of simplicity) are Microsoft, Oracle and SAP. Let's look at their contribution to innovation and then compare it to Red Hat and its destructive vision.

Last quarter, Microsoft had R&D expenditures of $2.3 billion (18%) on revenues of $12.9 billion. In its last quarter before acquiring Sun, Oracle's R&D budget amounted to $0.7 billion (12%) on revenues of $5.9 billion; and in its most recent quarter, SAP spent $0.4 billion on R&D, about 14% of its revenues of $2.9 billion. So the weighted average of those three players' R&D expenditures relative to revenues is in the 15% to 16% range.

Assuming that Red Hat indeed achieved the destruction of $50 billion of proprietary software revenues, this would kill an annual R&D budget of roughly $7.5 to $8.0 billion. In exchange, Red Hat would spend about $0.9 to $1.0 billion. That's a very open-source-friendly estimate because Red Hat's R&D percentage would likely go down if the company grew so much, and because there are other Linux players such as Canonical whose contribution to innovation is so minimal it has already drawn criticism from within the FOSS community.

At any rate, the net balance would be a loss of $6.5 to $7.0 billion in R&D, and of all of the high-quality jobs this relates to.

Politically, that would simply be undesirable. Of course, one can argue that consumers and companies outside the IT industry would seemingly "save" costs. But it wouldn't really work that way because with so much less innovation, those IT users wouldn't be able to become as productive as they could with continuing investment in R&D at previous levels.

Conclusions for innovation policy

I explained further above that the political perspective on this is focused on what works for the economy at large. Replacing $50 billion of proprietary software revenues with $5 billion of Red Hat revenues would be theoretically fine if Red Hat's business model were scalable and could serve as a role model for many other companies. But it's a uniquely parasitic model that can't be replicated. The only company for which it works on such a scale is Red Hat itself.

Venture capitalists used to be much more enthusiastic about open source years ago. But since Sun acquired MySQL and Red Hat acquired JBoss, there haven't really been any significant "exits" (IPOs or trade sales) of open source companies. Venture investment in open source startups has cooled off and, compared to previous levels, slowed down to a trickle.

So if I were a political decision-maker concerned with innovation policy, Red Hat would clearly not be a company for me to support. Instead, I would view its financials as an indication that proprietary software developers may very well have a point when requesting strong legal protection for the fruits of their R&D efforts.

From a pragmatic if not utilitarian perspective, it doesn't really matter if there are a few "trolls" taking advantage of the system, or if there's a problem with trivial patents, as long as patent protection favors a sustainable approach to innovation while patent abolition would simply be grist to the mills of a company like Red Hat.

The need for reasonable positions

I just wanted to draw attention to the fact that Red Hat's model is the antithesis of economically sustainable innovation. The proponents of software patentability could use it to their advantage when discussing innovation policy with lawmakers.

In that light, I can't share some people's enthusiasm about Red Hat being the flagship open-source-only company. A more IP-based, R&D-centric company would reflect far more favorably on open source as a whole than a company that just monetizes technologies of which it developed only a very small part (and which it didn't originally create). To foster innovation, the greatest rewards must go to innovators, not to mere monetizers.

The way I have always argued for open source when talking to politicians was that it's needed as a key competitive force to exert pressure on the incumbents. When I argued against Oracle's acquisition of MySQL (as part of Sun) last year, I wrote a position paper that stressed the importance of open source to disruptive innovation, and throughout the merger control process I defended MySQL's GPL-based but IP-centric business model. But it's much easier to argue that open source should be allowed to compete and spur innovation than to make radical demands along the lines of Red Hat's destructive vision. The political response to the latter might be more -- and stronger -- software patents...

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Monday, September 20, 2010

Has the Pirate Party boat sunk? IP-skeptical platform decimated in Swedish election

In last year's European election, the Pirate Party of Sweden garnered 7.1% of the vote, enough for one seat under the EU treaty in place at the time (and two seats following an EU reform treaty). But in yesterday's Swedish national election, the IP-skeptical platform saw its support decimated: a dismal 0.7% according to a television station's exit poll.

That's about the level of the party's first-ever participation in 2006. Sweden has a 4% threshold to win any seat in its national parliament, and it appears very unlikely that the Pirate Party will ever surmount it.

Its German sister party achieved 2.0% in last year's German federal election, also far from the relevant threshold (5% in that case). The German chapter has a lot of debate over whether it's too much of a single-issue party and should become more of a general left-wing liberal party.

I'm not at all surprised that the Pirate Party fails to become a real political force. Three years ago, a MySQL executive made me known with Rick Falkvinge, the party's founder, by email, and in the ensuing correspondence I expressed very serious doubt that the Pirate Party was going to replicate in our times the rise of the Greens in the 1980s. I also expressed my concern that the party's approach -- including its provocative name -- might even discredit the cause of reasonable and balanced IP policy.

Nevertheless, I gave the German Pirate Party a signature last year to support their participation in the federal election (though I didn't vote for them in the end because they took an extremely radical anti-security stance shortly before the vote). I kept my fingers crossed for the Swedish Pirate Party in last year's European election. And I liked Christian Engström's clear condemnation of counterfeiting in the European Parliament two weeks ago.

As you can see, this is pretty complicated, so I have to elaborate on my views to be clear.

A hackle-raising name draws attention at the start but bogs you down in the end

I believe the Pirate Party owes to its name both the enormous attention it received early on and its apparent inability to evolve into a serious political force.

When the party was founded in support of the Pirate Bay file-sharing platform, that name was its key success factor. The organization obviously never meant to support piracy on high seas, or counterfeiting of physical goods. But the idea of a party expressing (to say the least) a great deal of sympathy for the illegal copying of software (programs, music, movies) was shocking, and a shocking appearance can be a way to get listened to and talked about.

To a lot of grown-ups, this symbolized an unbelievable generational divide: on one side, the law-abiding establishment; on the other, a movement of the Internet generation that appeared to advocate lawlessness by the terabyte.

Not only was the name shocking. It was also cool to be a pirate. It was like a great theme for a costume party. Calling oneself a pirate looked like the ultimate expression of anti-establishment protest, and that resulted in a lot of activism in Sweden and the creation of smaller sister parties in many other countries.

That kind of radically provocative positioning had all the ingredients of a one-hit wonder. Unlike the Greens, whose initial environmentalist focus emphasized a positive notion.

Software piracy is a serious problem

Rick basically argued (as do many other activists) that the word "piracy" was a gross overstatement of the nature of the problem. The party as a whole often tried to portray pirates as freedom fighters, which is a major distortion in my view.

I actually know both sides of the argument. In the early 1980s I had (like many millions of people) a Commodore 64. I previously had an Atari 2600 video game console, and I had to buy (or borrow) every game cartridge I wanted to play. Then some friends told me that a C64 was a better deal because I could get the games "for free". In other words, I could get copies from them. Plenty. Back in those days, I couldn't even count how many games I had. I only counted the number of floppy disk boxes.

There was also a fair amount of software I bought. Sometimes I didn't want to wait until I could obtain a pirated version. Sometimes I really wanted to own the thing, or I needed the manual. But I never paid for most of the stuff I played.

My confession goes even further: on a few occasions I also acted as a "cracker", which means that I removed copy protection schemes from commercial software in order to make it copyable. The funniest incident was in the summer of 1986 when a friend brought along a World Cup game for the C64 that he had purchased and we went to the school's computer room. They had a few C64s there, and it took me only a few minutes to disable the copy protection by effectively skipping the code section that checked on it. So several of us went home with a new game.

What's important to consider is that those were the early years of personal computing. There was clearly a lack of awareness for the illegality of those activities. We all knew that there was a theoretical risk, but we doubted that we were going to get caught. We didn't understand that it was unethical behavior, but that doesn't mean that it wasn't.

Post-C64, no more piracy for me

My perspective on this changed rapidly, and fundamentally, when I found myself on the producing side. After a few years as an author of articles for computer magazines and of ten computer books, I became involved with the business of software publishing.

The piracy problem also affected the sales of some Blizzard Entertainment games (especially Starcraft I and Diablo I) in Germany in the second half of the 1990s. At the time I was Blizzard's German consultant and representative.

I can say with a clear conscience that I haven't done any illegal copying, let alone "cracking", ever since the Commodore 64 days. I threw away those floppy disk boxes at some point. Every piece of software I ever used on a PC was properly purchased, or it was (of course) open source. I'm so careful that I only install a second copy of a program on a portable computer if the end user license agreement (EULA) permits it.

This isn't only the right thing to do, and it's safe not only in a legal sense. It's also one of the reasons for which I've never been hit by a computer virus.

So today, I don't associate anything positive with "piracy". Why did I then lend a signature to the Pirate Party even once?

Anti-software-patent activists joined the Pirate Party movement

There are significant overlaps between the Pirate Party and the anti-software-patent movement.

When I read last year about the Swedish Pirate Party's electoral campaign, I saw that Christian Engström was their top-listed candidate. I immediately sent him a message to wish him luck.

Christian once gave an important impulse that contributed to my decision to fight against software patents. On a mailing list, he saw a question I asked, but he felt that MySQL (the company I was advising at the time) wasn't active enough. He told me that view in a rather rude way: not on the list, but by a private reply. It wasn't my fault that it took MySQL some time to decide on what to do (and MySQL supported the cause like no comparable company did relative to its company size). So I basically agreed with Christian. It was necessary to do more.

A few months later, with MySQL's help, I started the NoSoftwarePatents campaign. Christian provided the Swedish translation. He was by far and away the fastest of all translators, and the feedback I got from native speakers of Swedish was extremely positive.

I felt that Christian was a good choice for his party because he's a professional, not a radical. I was confident that he as a person wasn't going to harm the cause of balanced IP policy.

There are also several other "brothers-in-arms" from the fight against the EU software patent directive who joined the Pirate Party, in Sweden, Germany and other countries. So despite my fundamental disagreement with them on copyright and security issues, I wished them luck I hoped that they would raise the profile of IP issues on the political agenda, and I believe that's what they have already achieved.

But I'm afraid for them that they will remain a fringe party forever. At some point they may realize that they're an activist group, a non-governmental organization, even though they will probably continue to call themselves a party and pursue parliamentary ambitions for some more time (until possibly being absorbed by the Greens, with whom the Pirates already caucus in the European Parliament).

Those pirates who really want to shape intellectual property policy will be better advised to join the more established parties and try to leave a mark on their positions. But that will require them to fully appreciate the legitimate interest of the knowledge economy in strong intellectual property rights.

There's much more at stake now than in the heyday of the C64.

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Tuesday, September 14, 2010

The Ubuntu contribution controversy validates the concept of intellectual property

Mark Shuttleworth, the founder of Ubuntu Linux company Canonical, today published a blog posting on the lingering controversy over whether his company's code contributions are reasonably proportionate to the scale of its commercial activities. The South African one-time astronaut argues that "the body of free software needs many organs, many cells, each of which has their own priorities and interests. The body can only exist thanks to all of them."

He doesn't want his company to be measured just by what it contributes to the open source code base (which is little in some people's opinion and he doesn't seem to deny that). He realizes that commercializing open source "without contributing features might just feel like leeching" and basically wants a broader definition of what is considered a meaningful contribution, preferably including the kind of design, packaging and marketing job Canonical does.

This debate started a few months back and doesn't seem to go away soon.

Red Hat's rise once raised similar questions

More than a decade ago, when Red Hat went public and at some point attained a market capitalization of around $20 billion (about three times of what Red Hat is worth now), there was also some concern in the community about whether this was fair.

Even though the quantity of Red Hat's contributions to the Linux code base in recent years may by now appear reasonable compared to its share of the Linux market, the fact of the matter is that Red Hat didn't create Linux and made rather replaceable contributions to its adoption in the early years.

I'm not aware of any other company having derived so much commercial value from a product it neither developed nor acquired. Only in open source is this possible, it seems. Is that a good thing? I'm skeptical and I'll explain my view further below.

Red Hat gave stock worth millions of dollars to Linus Torvalds, and hired other key developers, such as Alan Cox, who became a Red Hat Fellow (now he works for Intel). While Red Hat's gifts to Linux developers were pocket change compared to its own value, there was no legal obligation and it was certainly a significant token of gratitude. But a Red Hat investor I talked to a few years ago nevertheless called the company's business model "parasitic" (and not "symbiotic", which is how Red Hat apologists would rather put it).

The second Linux distributor, SUSE, was acquired in early 2004 by Novell for about $210 million. That amount is dwarfed by the gains Red Hat realized, but still significant for a company that didn't create (or acquire) Linux either, apart from a pretty popular setup tool (YaST).

Now there are constant rumors that Red Hat, too, may be acquired soon. I don't know how much stock to put into that assumption, but any publicly traded company can be acquired if someone is ready, willing and able to lay down the right price. Red Hat's stock has done well in recent weeks, but is still significantly below its IPO price. So Red Hat has been a better deal for its pre-IPO shareholders and for short-term speculators than for long-term investors who came in early and held.

The IP-centric model of MySQL AB

Another major open source project was built on the basis of a business model that is diametrically opposed to the Linux approach.

In 2001, I became involved with MySQL AB, the startup that made the namesake database and was later acquired by Sun (which in turn was bought by Oracle). That was the year the company was founded. When I first met the two most active founders (there was a third one who financed them early on), they had not yet moved into their office.

We had our conversation at the kitchen table in the appartment of one of them (David Axmark) in Uppsala near Stockholm. We had already started the meeting when there was some loud noise from the living room: Monty, the original author of MySQL, was just waking up. Shortly after the dotcom boom that was characterized by lavish spending and (figuratively speaking) marble floors, this was quite some contrast.

But the really impressive part was their IP-centric business model: they always ensured that if someone made an essential contribution to the code base, they would get the relevant intellectual property rights assigned. In some cases, this included that they hired capable contributors as part of the deal.

At the time we also discussed how copyleft (the obligation to publish derived versions of a GPL'd program under the GPL as well, unless they are used only internally) enabled the dual licensing business model. David said that -- even though it appears counterintuitive -- the stricter the copyleft rules are, the better it actually is for dual licensing because it creates demand for a non-copyleft license to the same program code. But the ability to make a GPL'd program available on non-GPL terms requires copyright ownership.

MySQL AB was criticized for contributing too much

The European Commission (as well as antitrust regulators in Russia and China) looked into Oracle's acquisition of Sun of several more months after the US government had already approved the deal because it understood that MySQL wasn't a Linux-like project belonging to everybody and nobody at the same time. MySQL was, even though available under the GPL, essentially a company product and very much an IP-based business.

As a former strategy adviser to MySQL's CEO and shareholder of the company from the early stages until its acquisition by Sun, I knew about that. It just wasn't easy to explain this to other people because Oracle and Sun argued aggressively that an open source project doesn't need any particular company behind it. Interestingly, Richard Stallman agreed with Monty and me rather than with Oracle, Sun and the likes of Eben Moglen. He also explained the legitimacy of MySQL's business model (from a free software point of view) on the website.

Given Richard's support, it's unbelievable that a pathological liar told the community that my work related to the merger control process was directed against the GPL. I debunked that smear in this recent blog posting. I argued for -- not against -- the GPL in connection with MySQL's business model.

The key thing in the current context is that MySQL never had the kind of debate over commensurate contributions that now surrounds Linux.

In the controversy over Oracle's acquisition of MySQL, some argued that MySQL would have been even more successful with a Linux-like model. Those who said so either just wanted to help Oracle and Sun push the deal through or some of them might have vastly (!) overrated their understanding of business issues (or both in some cases).

The people who took that position, including but not limited to Eben Moglen, certainly never built any (or any significant) business. MySQL AB was sold to Sun for $1 billion less than seven years after being founded, which should have upped the ante for those who thought they knew better.

Moreover, MySQL's lead venture capital investor, Benchmark Capital, was the original financier of Red Hat and certainly didn't lack an understanding of the Linux business model. Benchmark also financed eBay and other major successes. If a Linux-like approach had indeed worked better for MySQL, those experts would have been in a perfect position to identify and seize that opportunity, whose understanding of business models in general and FOSS business models in particular is hugely greater than that of Eben Moglen (who effectively joined Oracle's legal team for the merger case). The claim that MySQL picked the wrong business model is an insult to human intelligence, but such absurdities aren't against the law, so we have to live with them in all sorts of contexts.

Intellectual property rights ensure that creators and contributors are rewarded

The one lesson that I believe many more people in the FOSS community should learn from the Ubuntu debate is that intellectual property is a perfectly valid concept. Intellectual property rights (IPRs) were created by governments in order to ensure that innovators and other creative people get to benefit from their work. The IPR system may have its counterproductive protuberances, but the basic underlying idea is a good one.

I firmly believe that one can be pro-FOSS and pro-IP at the same time. That's been my approach ever since my involvement with MySQL started in 2001, and my appreciation of open source goes back to the time when my online gaming startup in the late 1990's used Linux, PostgreSQL and other free software on the server side.

I often disagree with the anti-IP rhetoric of many other FOSS advocates, to the extent that some radicals misperceive my support and respect for intellectual property as a hidden non-FOSS (or even anti-FOSS) agenda. I don't claim that FOSS and IP mix easily. It's non-trivial to strike the balance and reconcile the two value systems. But I won't waver in my tireless efforts and I won't be satisfied with anything less than the best of both worlds.

The fact of the matter is that whether or not one wants to categorize a Red Hat or Ubuntu business model as "parasitic", it certainly can't be a model for the economy at large. It can work for a few, but nature teaches us the limit: a biological system needs mechanisms that create real substance, not just parasites or little symbiotic creatures who can't exist without a host.

The FOSS community can only benefit from showing respect for IP

Even though I know that some are ideological about this and won't agree with me, I think FOSS will only do better if the community shows increasing respect for intellectual property and recognizes that in some areas, for certain kinds of innovation and creative production, IPRs are needed. One can deny that fact and claim that "sharing" and "the Commons" can take care of everything. One can even go as far as Eben Moglen recently did in India (a country that is way behind not only the West but also China in terms of respecting IPRs) and claim that "property" is a bad thing in general. In that speech, which was ideologically much closer to Fidel Castro than Hugo Chávez, he even claimed that mankind can only survive on the basis of "the Commons". I oppose such fundamentalism, and if necessary I will also call out people on hypocrisy if they preach water while actually drinking wine that is financed by patent aggressors like IBM.

I want to be thought-provoking, if necessary even irreverent, and identify and address problems. I don't want to preach to the converted and spread anti-IP propaganda because that only makes problems worse instead of contributing to solutions. Even when I fought against the EU software patent directive, I highlighted my pro-IP values.

It's not always easy to strike the balance. For instance, Richard Stallman argues that the term IP is a "seductive mirage" because of the differences between various IPRs. This isn't as bad as denouncing the concept of property. But RMS overstates the differences between non-material property rights. By rejecting the term IP without proposing a reasonably acceptable alternative, he raises concerns among decision-makers that the free software movement is anti-IP. His claim that ownership of software is immoral adds massively to that impression, even though the position he took on MySQL's dual licensing model shows a kind of pragmatism that a lot of people wouldn't consider him capable of having.

The whole debate over whether Ubuntu contributes enough code to open source is in my opinion the ultimate empirical evidence of our innate respect for rights that ensure a fair reward for true creators rather than free riders. Deep in our hearts, we all understand the legitimacy of intellectual property. We should not let an ill-conceived ideology turn our value system upside down.

Notwithstanding the foregoing, where IPRs are overreaching or where they are used in exclusionary and destructive ways, we should stand up and fight. But you won't seee me throw out the baby with the bathwater only to pander to an ideology.

If you'd like to be updated on patent issues affecting free software and open source, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents.

Monday, September 13, 2010

FSF statement on Oracle vs. Google is a shame: misleads, puts GPL above freedom, spares IBM

The Free Software Foundation needed about one month after the announcement of Oracle's patent infringement suit against Google to issue this statement.

One month was apparently needed to come up with a statement that despite a few good points calls into question whether the FSF truly cares about the values it claims to advocate. The statement is designed to mislead people with propaganda; it demonstrates concern only for the GPL, not for the cause of software freedom; and it's disconcerting that the FSF turns a blind eye to what IBM (one of its sources of funding) does.

I commented on the FSF statement last week. You can find me quoted by ZDNet's Linux and open source blog and by I also posted comments to LinuxWeeklyNews (

Given the importance of not only the Oracle-Google case but also the more fundamental concerns I have about the FSF's statement, I decided to publish this analysis.

Before I go into detail, let me stress that I don't doubt the integrity of Richard Stallman (RMS). He's a true visionary and he's absolutely dedicated to his cause. I have seen him campaign against software patents, and he's the last person in the entire IT universe I'd ever suspect of being in whatever company's pocket. However, I fear he may sometimes rely on people who aren't equally true to those values, and when it comes to the funding of his organization and (even more so) of affiliated entities, Richard may have the attitude of certain Roman emperors.

1. Where I agree: appropriate criticism of Google

The FSF rightly notes that Google "still has not taken any clear position or action against software patents." I also wrote about that fact last month when I analyzed Google's amicus curiae brief in re Bilski & Warsaw v. Kappos.

I share the FSF's view that Google apparently wanted "to make proprietary software development easier on Android." I previously mentioned the "proprietary, closed-source strategies of certain vendors of Android-based phones" and linked to an external article entitled "The Sad State of Open Source in Android tablets".

2. Dangerous and misleading: GPLv2 touted as "strong defense" against patents

This is a passage of the FSF statement that I condemn as dangerous propaganda that's so misleading it's actually dishonest:

And [Google] could have avoided all this by building Android on top of IcedTea, a GPL-covered Java implementation based on Sun's original code, instead of an independent implementation under the Apache License. The GPL is designed to protect everyone's freedom — from each individual user up to the largest corporations — and it could've provided a strong defense against Oracle's attacks. It's sad to see that Google apparently shunned those protections [...]

Watch particularly the middle sentence. On its own, the claim that the GPL is designed to protect software freedom is acceptable as a mission statement. What's wrong is to give a vast majority of all recipients the impression that the GPL can be a "strong defense" against patent attacks. The FSF has every right to promote the GPL, but not by questionable means.

While the FSF doesn't claim so literally, that almost sounds like the GPL is to software developers what the cross and the wooden stake were to Buffy the Vampire Slayer – the lead character of the popular TV series who never left home without them. No version of the GPL can deter patent aggression by any third party who isn't bound to GPL terms itself. Not in any way. Sure, the FSF didn't say the GPL is a magic wand, but the passage I quoted reflects a desire to lead some people to think so.

At the most, the GPL can make things harder for a patent holder who published software under the GPL, provided that (i) the relevant program code reads on the patents asserted and that (ii) the alleged infringer uses that GPL'd software.

The limitations of an implicit patent license

The FSF argues Google should have used IcedTea. IcedTea was derived from Oracle/Sun's OpenJDK, so it's a fork of program code available under the GPLv2.

The GPLv2, however, only has an implicit (implied) patent license. It doesn't say explicitly "I, the patent holder, grant you, the licensee, a perpetual, worldwide, irrevocable license...". There are references to patents in GPLv2 but those are more like an encouragement not to publish patent-encumbered software under the GPL than an actual license grant.

Even when a software license doesn't contain an explicit patent license, it would obviously be unfair if a patent holder could make software available to many people as a trap only to later sue them all for patent infringement. Under US law, the legal theories according to which an "infringer" can argue that he was granted an implied patent license are called legal estoppel, equitable estoppel, conduct, and acquiescence. Other legal systems have similar theories in place.

So it comes down to a general fairness principle, which is easily applied if someone uses unmodified software published by the patent holder: in this case, the original OpenJDK code. But it's complicated and risky once we're talking about forks (derived versions), such as IcedTea or let alone whatever Google would have had to do to turn IcedTea into what its Dalvik virtual machine is for Android.

The FSF would like people to think that the GPLv2's implied patent license extends to forks. The problem is that if programmers rely on this assumption (which is just the FSF's position and absolutely unsupported by case law), they may have to pay the price.

There is indeed serious doubt about the extent to which the exercise of "freedom 3" (the right to distribute modified versions of a free program) is safe if there are patents in play. Dan Ravicher, a lawyer affiliated with the FSF, was honest enough to point out six years ago that this is a "gray area". Last month I already explained that the European Commission also voiced serious doubt about the scope of an implied GPLv2 patent license in its decision on Oracle's acquisition of MySQL as part of Sun. The Commission, too, was concerned about the extent to which forks would be covered.

Promoting the GPL and the FSF's power rather than "freedom 3" and the truth

That's why I really object to the FSF's claim that the GPLv2 "could've provided a strong defense": the GPLv2's ability to protect against patent attacks is reversely proportional to the extent software developers exercise the said "freedom 3" (redistribution of derived works). If you don't modify any patent-encumbered GPL'd code, you're presumably protected; if you make changes to the existing code base, you enter a dangerous gray area (in which IcedTea probably already is, even though the GPL apparently tries to reassure IcedTea users that they're safe); and once you add completely new code on top, it's pretty certain that the GPL can't do anything for you if that code infringes any patents.

The GPL shows that defending software freedom and telling people the whole truth are at best secondary objectives. What the FSF really wants is promote the GPL, spur its adoption and thereby expand its influence. That is, regrettably, the way I interpret that part of the FSF's statement.

One could argue that the FSF only said "could've" (provided a strong defense). But "could've" isn't "might have". The way many people will reasonably interpret it is that if Google had opted for IcedTea under the GPL, it would have been safe (or if it opted for it now, it might be safe in the future). But there's far too serious doubt about that assumption, as I just explained. So it's dishonest to suggest that there could have been a "strong defense."

On the contrary, if Sun had published its OpenJDK under the Apache license 2.0, and if Google had used such code on those terms, there would be a much stronger protection because that license contains an explicit patent grant.

3. Email to Larry Ellison: the wrong approach

The FSF's call on people to send email to Oracle founder and CEO Larry Ellison to protest against software patents is inappropriate. Those are spam tactics. There are email addresses to which it's legitimate to send messages, such as to members of parliaments because they are the elected representatives of citizens and should take direct input from their electorate. It's also OK to send messages to email addresses that are set up for the receipt of input from large numbers of people. But an orchestrated email campaign shouldn't target someone's personal address.

I fought against Oracle's acquisition of Sun, and believe me, that company is a really tough opponent. Still I believe one can deal with controversy in a more civilized way than what the FSF proposes.

I don't think even a million messages would change Oracle's stance on this. But every such email will discredit the FOSS movement in the eyes of serious people.

4. The FSF conspicuously spares IBM

Considering how hard the FSF tries to pressure Oracle and (rightly) criticizes Google for its position on freedom and patents, it doesn't sit well with me that IBM, one of the primary financiers of the FSF and some of its affiliated entities, gets away with much worse behavior.

IBM's patent threats against Hercules, a mainframe emulator that is available under a license recognized by the FSF as a free software license and by the OSI as an open source license, are actually much worse. Those threats became known five months ago, and there's been deafening silence on the part of many free software entities, to the extent that I conclude they are only selectively free.

One can argue that IBM has not (at least not yet) gone to court. However, litigation is always just the last resort for any patent holder. Whether a patent holder has strategic objectives or just wants to make money (like a "patent troll"), everyone prefers to get their way without having to go to court. Most of the damage that patents do is actually done outside the courts.

In IBM's case, there's a clear case of exclusionary strategic use: Big Blue uses those patents to draw a line in the sand and maintain its hugely lucrative mainframe monopoly, keep customers locked in with respect to mainframe legacy workloads, and to expand and extend that lock-in to enterprise cloud computing.

By contrast, there's no indication so far that Oracle wouldn't be willing to negotiate a license deal with Google.

But this isn't just about Oracle as compared to IBM. The FSF's criticism of Google, which I support, would also apply to IBM.

It's true that Google's Bilski brief didn't speak out against the patentability of software; it was basically just a request for slightly higher quality standards. But IBM's Bilski brief was much worse, claiming that software patents liberated programmers and were key to the rise of FOSS. The FSF should have taken Big Blue to task over this. Such unbelievable cynicism would actually have been more of a reason for a pressure campaign against a company than Oracle's dispute with Google, about which there are so many unknowns for now.

Finally, the FSF criticizes Google for having built Dalvik on top of (a part of) "an independent [Java] implementation under the Apache License". What the FSF means is a project named Harmony, which Google decided to fork. I said before that Google probably did this to facilitate closed-source Android products. But you know which company actually started Harmony and isn't mentioned by the FSF? IBM.

On the Harmony project's contributor page, about every second person (ten out of two dozen) is an IBM employee, about half of them from China and half of them from the UK. Plus, IBM is known to fund the Apache Foundation in general.

That doesn't excuse Google in any way. But IBM started this and the fact that it isn't even mentioned raises questions about the FSF's independence from Armonk.

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Friday, September 3, 2010

A gold rush for big iron?

The European Commission's recent decision to launch two parallel antitrust probes of IBM's suspected abuse of the mainframe monopoly raises hopes that this huge market may open up in the not too distant future.

The mainframe business is a gigantic opportunity. For now, no one in that area can compete effectively with IBM, which leverages its mainframe monopoly to sell not only hardware but especially software and services.

The numbers and the strategic implications

IBM owns about 40% of the $24.5 billion market for mainframe software, which is roughly twice the size of the market for Linux-based software. In the total of hardware, software and services, IBM generates approximately 25% of its revenues and more than 40% of its corporate-wide profits in the "big iron" business. That's a profit figure somewhere north of $5 billion (easily), and it's anything but a business in decline.

Companies formerly foreclosed by IBM’s conduct will now want a piece of the action.

Those numbers reflect merely a part of the overall opportunity. Just the largest 10% of mainframe customers have collective annual revenues of $21 trillion, exceeding the GDP of the European Union and the United States.

Mainframes are only a part of their IT budgets. Those top 10% of mainframe customers have an estimated total annual IT budget between $800 billion and $1 trillion based on typical percentages in the relevant industries. If only half of that goes to external vendors and service providers (now or in the "cloudy" future), that's a $400-500 billion opportunity for the industry, or roughly 30% of global IT spending.

IBM does a lot of cross-selling (of Power CPU and Intel-based systems) to many of those customers, benefiting from the privilege position it owes to the mainframe monopoly. If and when the market opens up, IBM will lose its exclusive mainframe gatekeeper status and other vendors will compete more effectively for those accounts.

I've seen the slides of an IBM-internal presentation. "Account control" (in terms of controlling customers) is central to IBM's strategy, and the mainframe monopoly is the key to it. The 40%+ figure of IBM's corporate-wide profits doesn't even include the effects of that. That percentage relates just to sales of mainframe hardware, software and services, irrespective of upselling.

This is all the more important as the IT sector is undergoing a major transformation toward the cloud computing model. There hasn't been a similar need and (especially) opportunity to stake the claims in IT for quite some time.
In this recent posting I described how IBM's new mainframe generation -- the zEnterprise -- is designed from the ground up to "assimilate" (as a journalist put it) Intel-based platforms in the corporate data center. So what I previously called "upselling" (of non-mainframe offerings) is now about to become part of the "data center in a box", or "system of systems", that IBM calls its new mainframe.

Potential strategic investors

It's a given that various IT industry giants will rush to secure a piece of the action, if they think that IBM’s abusive conduct to protect its monopoly will come to an end. They need the regulators to open up the market, but they won't wait until the end of the process. In anticipation of positive things to happen, everyone will try to secure the pole position through strategic investments.

The fact that the regulatory process has only just begun will, of course, be factored in when determining company valuations.

These types of situations and processes aren't unfamiliar to me. I co-founded one of the first online gaming startups in Europe, and we had strategic partnering inquiries from different telecommunications and media companies. One of those talks resulted in the acquisition of our company by Telefónica in early 2000. Subsequently I became involved with MySQL AB as an adviser to the CEO and early-stage shareholder in the company, and later saw the likes of Intel and SAP come in -- and finally, MySQL's acquisition by Sun.

I'd just like to describe from my vantage point after 25 years in the IT industry which players I would imagine to consider investment opportunities in connection with a future competitive mainframe market. The list below is ordered alphabetically. I'd like to clarify that at the time of publication of this posting, I do not own stock (or related derivatives) of any of the companies mentioned.

BMC: This $2 billion company does a large part of its business on the mainframe. When the cards get reshuffled, it won't want to be left behind.

Dell: This computer maker is more diversified than most people know and recently experienced an increase in profitability due to strong sales of enterprise hardware (server, storage and networking products).

Intel: Previously invested in mainframe emulation company Platform Solutions, Inc. (PSI). Can supply high-performance CPUs to power software emulators and could also play a role in hardware emulation.

HP: A natural IBM competitor with a strong foothold in the enterprise market.

Micro Focus: This company is also publicly traded and offers Visual COBOL, a .NET-based implementation of the programming language in which most mainframe legacy software is written. Emulators could run legacy programs on the same servers as Visual COBOL programs, making a gradual migration of workloads a more viable option for customers than it is today.

Microsoft: Invested in PSI (like Intel) and in T3 Technologies. For Microsoft's enterprise software division, improved interoperability with mainframe legacy workloads is essential. I'm not worried for free and open source software: if Linux couldn't compete in such a server-based context, it would never be able to compete with Windows. Customers should have all options. Compared to IBM's monopoly, competitive pressure from Microsoft and its partners would definitely be an improvement. By definition, there can never be two monopolies in the same markets.

Oracle: In its core business (relational database management systems), Oracle misses most of the mainframe opportunity due to IBM's stranglehold on the market. The standard mainframe database is IBM DB2. In a more competitive market, Oracle would be able to sell 11g and its enterprise software to a larger number of IBM's customers. Furthermore, Oracle's hardware division (formerly named Sun Microsystems) could play a key role in connection with emulation (similar to what I wrote above about Intel).

SAP: While not nearly as disadvantaged by IBM's practices as Oracle and others, SAP would also benefit from an open market. Its recent acquisition of Sybase is a cornerstone of its enterprise cloud computing strategy. The integration of mainframe legacy workloads with mobile and other cloud-related technologies will create new opportunities for SAP.

Obvious economic motivations

All of the companies I mentioned, and presumably a number I didn't even think of in this context, know that there is a lot of pent-up demand in the market for more competitively priced solutions for the execution of mainframe legacy workloads.

I wouldn't be surprised to see significant activity in the wake of the launch of antitrust probes. In my experience, such deals are often negotiated in a matter of weeks. Some take longer. But I can't see how the industry would forgo such an opportunity.

It's unhelpful that IBM always tries to use actual or suspected activities of other companies to deflect attention from the serious issues that need to be addressed in the course of the regulatory process. There's no denying the jugular importance of the mainframe to the world economy. IBM maintains its absolute control over this strategic platform with threats, intimidation, FUD and generally anticompetitive behavior, all of which stifles innovation.

Those are the problems. More competition is the solution.

So when the deals happen, let's let IBM cry. Its customers -- who are locked in and get overcharged -- have suffered long enough.

If you'd like to be updated on patent issues affecting free software and open source (including but not limited to the antitrust investigations against IBM), please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents.

Wednesday, September 1, 2010

IBM's cloud grab: the next generation of the mainframe monopoly

In July, the European Commission launched its antitrust probes of IBM's conduct in the mainframe market only four days after IBM's presentation of its new mainframe generation, the zEnterprise.

The Commission took its decision four months after French open source startup TurboHercules had lodged its complaint. That time span is the Commission's goal under its best practice guidelines.

So the EU didn't mean to spoil the party, but there is an important factual connection between the two events: the zEnterprise is an overtly aggressive move by IBM to leverage, expand and extend its mainframe monopoly with a view to enterprise cloud computing. It is high time for intervention to avert abuse that would otherwise cause irreversible damage to the emerging cloud computing market.

In its report on the zEnterprise launch, picked just the right headline:

"IBM zEnterprise mainframe
assimilates Unix and Linux servers
Brings Power 7 and [x86] servers under its control"

The word "assimilates" alludes to Star Trek, but it is appropriate. IBM calls the zEnterprise a "system of systems" and a "datacenter in a box". Indeed, the objective is to absorb x86 (Intel and compatible) servers. "One box to rule them all", one might say.

If this only meant more competition on the x86 side and if customers really had alternative options, I would welcome it. However, the way IBM leverages its mainframe monopoly is abusive and anticompetitive. Let me explain.

Enterprise cloud computing: clarifying the term

Wikipedia defines cloud computing as "Internet-based computing, whereby shared resources, software, and information are provided to computers and other devices on demand".

There are different ways in which enterprises can operate cloud-based services. They may operate their own cloud (meaning they have the infrastructure in house) or use services provided by third parties. In many cases they'll do a combination of both.

Another distinction is that those cloud-based services may be available only to a company's employees (private cloud, like an "Intranet"), to select business partners (public cloud, like an "Extranet"), to the general public, or a combination (public-private cloud).

Mainframe-managed data: the lifeblood of large enterprise clouds

In every one of those setups, the mainframe legacy comes into play. In most cases -- especially in the most important cases -- new enterprise cloud services are not stand-alone creations totally detached from other business operations.

Other business data (and the applications managing them) are the lifeblood of enterprise clouds. For an example, whatever an airline might do in cloud computing, it will usually have to be connected to the reservation system and/or operations management system. Whatever a bank does in the cloud, it will usually need access to account management and the related transaction processing. Whatever an insurance company does in cloud terms, it will usually need access to all of the essential records.

Where do those essential data (and the applications managing them) reside? In most cases, on mainframes. In this recent blog posting I already mentioned that 80% of the world's business data reside on mainframes. That's the percentage across all industries. In the ones I particularly mentioned -- banks, insurance companies, travel reservations -- the number is even closer to 100%.

So to make an enterprise cloud fly, it still has to be tethered to a mainframe in many cases. That metaphor may sound paradoxical. It's just the sad reality of a lock-in of enormous proportions.

A senior IBM executive noted that IT projects don't start on a "green field" these days:

"We ought to look at these things the way we look at a city -- a city is a living, breathing thing, and you don't literally rebuild New York every year: you add to it. And more often than not, you're renovating what's already there -- you're improving what already exists, you're not replacing what exists."

IBM's all-absorbing zEnterprise cloud machine

The zEnterprise (latest mainframe generation) was designed from the ground up to connect mainframe legacy workloads with new cloud computing technologies.

It doesn't really add much new on the original mainframe (System z) side. CPU clock speed went up only from slightly below to slightly above 5 GHz, and the number of processors from 64 to 80 (in each case, 16 are reserved for internal purposes). But the key new element is that the zEnterprise is a "system of systems", integrating x86 (meaning Intel or Intel-compatible) blades to a greater extent.

I've seen and used the integration of different computer architectures in the same system a long time ago. The Commodore 128 had a CP/M component with a separate CPU, and my first PC was a plug-in card for the Amiga. That was fascinating, but those devices were toys.

What IBM now wants to achieve with the zEnterprise is that companies consolidate their entire data centers on the basis of IBM's technology, putting tons of IBM's x86 components under the control of a mainframe. IBM calls it a "data center in a box". I consider it a very dangerous expansion and extension of the mainframe monopoly. Let me explain what's wrong with this.

The need for integration

There are technical reasons for which it does make sense to run a mainframe legacy application on the same system -- not just in the same network -- as new cloud applications that require access to those data and the applications managing them.

One very important aspect is administration. If you run a large IT operation, you need an efficient way to keep track of all the systems, all the time. IBM's Tivoli systems management software can be used to administrate both System z (mainframe legacy) and x86 resources on a zEnterprise. Tivoli is proprietary software and there's no indication that competing vendors of Intel-based hardware would have access to its interfaces.

The need to integrate mainframe legacy workloads and new enterprise cloud applications distorts competition. For the mainframe, IBM has a monopoly. Consequently, Big Blue also has a monopoly for a "system of systems" including the mainframe. This expands, extends and exacerbates the monopoly. The original monopoly (mainframe) is leveraged to create an even broader cloud-related monopoly. It's like one monopoly "spawning" another.

IBM denies its customers an important choice

Customers should have the choice between two different paths to a "datacenter in a box":

  1. the zEnterprise path: bringing x86 hardware under the control of a mainframe

  2. the virtualization path: executing mainframe legacy workloads on Intel-based servers

The second choice is the one IBM denies its customers, and it's a very important one. It would allow many customers to make their purchasing decisions based on new cloud computing needs and to achieve similar performance at a potentially much lower cost.

IBM allows customers only to put the old cart (the mainframe legacy) before the new horse (cloud computing). As long as customer don't have an alternative to the zEnterprise approach, they are going to be overcharged and the lock-in that already exists today will only exacerbate in the future, resulting in ever-increasing costs and less innovation.

There are no technical reasons for not offering the second choice. The Hercules open source mainframe emulator is a reliable and innovative solution. It's a mature piece of software whose development started in 1999, and today's Intel-based hardware is powerful enough for many legacy workloads. The only problem is that IBM doesn't allow customers to run the proprietary z/OS operating system (which is key to execute legacy workloads) in emulation. That restriction must come to an end.

Even those who decide otherwise would benefit from the second choice because it would put pressure on IBM and result in more competitive pricing.

Regulatory intervention can open up the market, restore competition and safeguard innovation. In order to do so, it must be timely and decisive. Now is the time.

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