This is the beginning of a five part series discussing the costs related to starting a new web based company. An entrepreneur will raise money to invest in software, hardware, marketing, sales and human resources. The cost of doing all five of these things has dropped so dramatically that an engineer with a good idea and the time to implement the idea can go nuts for almost no startup capital.
Open source software has matured to the point where world class, high volume applications can be build exclusively on top of them. The largest volume websites are using technologies like Linux, Apache, MySQL and PHP and others. The total software license cost to start a new website: $0.00.
Compare this to a decade ago. The first place a new web startup with VC funding would head was the Oracle store. Stop number two, Netscape. Before you knew it, $500,000 was already spent. Now – its unheard of to pay for licenses. How did this happen?
Let’s take Oracle as an example. Oracle built a hugely powerful database. It is used to power many IT services worldwide – from banking systems, to airlines system to government databases. It has the features required to solve all these giant data problems. However, its also over complicated. It was impossible to just sit down in front of Oracle and figure out how to do anything with it. Oracle, and many other companies, provided multi-thousand-dollar training classes. Oracle database administrators (DBA) were (and probably still) are amongst the best paid IT employees. In fact, I believe that keeping the Oracle database complex was in the best interest of Oracle and the ecosystem that it had created.
Web developers needed the use of an advanced relational database management system, but the complexity or even the perceived complexity kept people away. I remember my first experience with Oracle came when I was consulting at Gateway for Calico – and specifically how others at Gateway treated their in-house DBA. Because he was the expert at the most complicated thing in a very complex data center – he was both admired and feared. Because he was so unavailable, I started learning Oracle on my own – out of necessity. It turns out – its not that that hard to get your hands around; it just took lots of time to understand Oracle terminology and how the various pieces communicated with one another. But, a web developer with a good idea didn’t want to spend the time I did learning a technology that would only be an enabler. He/she wanted to get started on their piece of the Silicon Valley pie.
Therefore, MySQL plugged a big hole in the marketplace. They created a simple database and gave the source code and licenses away for free. Because the need for a lightweight database was so large – it exploded onto the scene. The rapid adoption and open source model allowed for bugs and most desired features to be incorporated at a pace unheard of at Oracle. Finally – MySQL makes money on the adjunct markets the popularity of MySQL has created – training, consulting, OEM/ISV deals, enterprise versions, etc.
Other open source projects have monetized their products using different techniques – but at the end of the day, engineers working on open source projects are not going hungry. And, the next generation of web developers are being unleashed to create without the burden of financiers.
Finding Nilay 