Selling water

Considering that almost all Open Source programs are available on the Internet to be downloaded free, a surprising number of companies have built their business on selling the Linux OS and associated programs. These companies are called Linux distributions. Best-known among them are probably Red Hat Linux, SuSE Linux, Mandrake Linux, and in Finland the Finnish-language version called SOT Linux. Only a few years ago all these companies generated most of their revenue by selling Linux CDs packed in colourful cardboard boxes, in the same way as established software companies.

This business model can be explained by analogy to water, which is free, yet selling it can be good business. And I don't just mean selling water to people living in deserts. We all buy water daily when we turn on the tap. Even though tap water isn't very expensive, paying our water bills certainly pays for staffing at a water purifying plant, and for a few plumbers too. In addition to tap water, most of us also buy bottles of Evian or some other expensive spring water. So selling water can be a profitable business in more ways than one.

Although there are many Open Source programs available for free on the Internet, it's a lot more practical for users to buy a bunch of CDs and get all the most important programs at once instead of having to spend hours on their slow Internet connection, gathering them for free off the Web. In this, the analogy of selling water is interesting, because on the CD market, too, there are two kinds of compilations. Some companies have specialized in making CDs with as many different programs as possible on them and selling them cheap. This is the tap water of Linux distribution. On the other hand, we have companies like Red Hat that sell CDs under the protection of their own trademark and with their own logos - and the funny thing is, people are happy to pay a little more for a genuine Red Hat Linux rather than buy a no-brand CD with more or less identical content.

In many ways, this selling-water business model is a lot like that used by established software companies. In both cases, the business is based on selling software on CDs. However, the similarity is usually only skin-deep. When you buy software from Microsoft, for instance, you don't necessarily buy the CD because you need the CD itself, but because the law says you have to buy it if you want the right to use a particular program. If you have a second computer at home and you want to run the same Microsoft Office software on it, you should buy a second copy of the software on another CD. You don't actually need that second CD, because you already have one with exactly the same content, but you have to buy it anyway.

However, Linux distributions that use the selling-water business model don't make anybody buy anything. If the CD is useful, you can buy it, but if you don't need it (because you can download the software from the Internet) you don't have to buy it and you certainly don't need to buy multiple copies of it. You can use the program anyway, whether or not you have bought the CD. Companies selling such CDs are OK with that and everybody is happy. The mean-spirited business model used by established software companies seems very artificial and a lot of ordinary computer users - laymen, if you will - find it hard to understand why they have to buy multiple copies of an expensive software CD they don't actually need, and really resent it. So, at least selling Linux distribution CDs as CDs seems rather more natural than the various artificial and mean-spirited sanctions imposed by established software companies.