Page last updated at 17:50 GMT, Monday, 3 August 2009 18:50 UK

Is free the new pay?

By Tim Jokl
BBC World Service

Matthew Szulik, chairman of Red Hat
Matthew Szulik, chairman of Red Hat.

Matthew Szulik runs a successful business that gives its products away for free.

What is more, Mr Szulik was recently named the United States Entrepreneur of the Year.

The company he works for - Red Hat - turns a profit by distributing free, open source software; computer programs and applications that anyone can download.

It is one of a several firms that are based on the idea of enthusiastic individuals freely sharing their programming talents.

This community of collaborators has thousands of individuals willing to share their time and ideas in return for not much more than a sense of creative satisfaction.

Open-source now accounts for around 20% of the entire software market.

Against a backdrop of business tradition uneasy with concepts like free and open source, Red Hat offers computer software based on the Linux operating system.

Not only can users download Red Hat software freely but they can also modify it and use it on many different kinds of equipment without having to worry about extra license payments of the kind demanded by the big proprietary software companies.

Chaotic system

Mr Szulik was not at Red Hat from day one. "Red Hat used to be a magazine business when I joined," he told Peter Day on the BBC World Service's Global Business programme.

The business now accounts for 80% of the open-source market, a fact that has led to some people calling it the Microsoft of the open source world.

To improve society through our actions, that's really the genesis of open source software
Matthew Szulik

From the outside, the open source concept can seem chaotic and a little unfocused. It can be potentially hard to govern.

Devotees of established models find the lack of structure, the lack of a price tag and the collaboration with strangers unnerving. But for Red Hat it seems to work.

"When you think about having millions of eyeballs being able to see other people's work, the quality should go up because you are getting this constant user feedback," Mr Szulik says of the way Red Hat software is developed.

"If it can be improved and repaired rapidly on the internet, then the customer gets a better product at the lowest cost."


Mr Szulik cites Eric von Hippel, a sort of father figure to the whole collaborative innovation movement, as a key inspiration.

Professor von Hippel of the Massachusetts Institute of Technology (MIT) has been championing his idea for 30 years.

Massachusetts Institute of Technology (MIT)
Massachusetts Institute of Technology (MIT)

"People like Eric von Hippel...really gave birth to this whole idea of free openness, of collaboration and rapid rates of innovation."

So how can people at Red Hat draw a paycheque? How are they making money?

The answer is reassuringly simple, says Mr Szulik.

"We don't charge for the software.

"What we do charge for is the service. That's the economic basis of the business."

Getting into the black has come about by convincing big corporations that this seemingly open and anarchic model is a viable way to go and that they will not be left high and dry if technical problems arise.

To get to that position of trust, Red Hat has had to grow.

The shift involved moving from being a organisation of enthusiastic technologists to becoming expert in legal processes and technical support.

'Social mission'

"In 2001, Red Hat did not have a business customer. It was technologists and hobbyists," Mr Szulik explained.

The breakthrough came in 2004 when Cisco Systems, Goldman Sachs and Morgan Stanley chose to embrace the Red Hat way.

More recently, Google have taken full advantage of the open source benefits of Linux.

When asked about staying true to principles of openness as the business gains momentum, Mr Szulik said: "It's as much a social mission on my behalf, and on Red Hat's behalf, as it is an economic mission."

"To improve society through our actions, that's really the genesis of open-source software."

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