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Is free the new pay?

By Tim Jokl

BBC World Service

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."

Collaboration

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.

"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."