I don’t think that free software is a handicap, even in business. It’s a strategic advantage, when applied strategically! It’s a handicap only if applied dogmatically.
This is my whole point to the list: the secret of being a successful FSB is to use free software where it’s appropriate, and not to use it where it isn’t, and to understand the dynamics of the markets it creates.
Free software and open source tend to:
1. Fill niches where commercial vendors haven’t yet identified a market. (This is my alpha-geek argument). Hackers build tools that vendors don’t yet supply. When the market gets big enough, vendors go after it with tools that make it accessible to a wider audience. If the vendors were blind long enough, then the free software may have become too widespread to displace, in which case the dynamic below kicks in.
2. Commoditize markets. (The open design of the IBM PC is an even better example than Linux, which hasn’t yet succeeded to the same level.) In commodity markets, brand, being the lowest cost provider, and supply chain management become more important advantages than controlling IP.
3. Allow people versed in computers to share information more easily, lowering the barriers to entry and advancing innovation. This is open source as the late 20th century equivalent to the long tradition of scientific publishing.
These are the three most important dynamics around free software/open source. There are a couple of conclusions I’d draw from these three principles if I were starting an FSB:
If you’re trying to leverage principle #1, you can run a nice cottage business staying ahead of the big guys, surfing the wavefront of innovation.
If you’re trying to leverage principle #2, scale matters.
If you’re trying to leverage principle #3, you’re probably not doing this strictly for business purposes (unless you’re in a business that has product derived from knowledge flow, like I do).
Excellent points, in the context of what I just wrote on thinking of Emergic as a software factory.