I want to return to something I said because on review I realized it wasn't really clear

"The funny thing is that I've never actually seen any viable business models from the open source community about how to build a business around free software (as in beer and freedom) that wasn't entirely couched in "support services". "

When I said "build a business around free software" I meant as the producers or authors of the software.

The reason I make this distinction is that I think most of your examples involves companies building a viable business around open source software as users of the software. I'm also implying a distinction between authors of software vs. people who modify the source to do something they want -- and yes I realize that's a bit of a stretched distinction w/r to open source. Often times the authors are the same people who use and contribute small bits of modifications to the code.

What I mean is that, say Apache for example, comes from the Apache Foundation. If I make some modification to the source to make it do some particular thing I want, I'm modifying the software in the same way a car enthusiast may modify their Honda to do something they want. (If, what I made is generically useful, I can submit it back to the Apache Foundation and perhaps cross the line to become and "author", but in most cases we're talking about people who mod software in some way).

The last place I worked for does about $10bn a year. It's a technology company with their hands in projects as diverse as autonomous undersea robots to text processing systems. They've successfully built a business around a mix of proprietary software solutions and some small percentage of open source software. The default OS is some Microsoft Server OS, databases are almost exclusively Oracle or SQL Server, Web servers are almost always IIS. They also write a lot of their own software, typically in Java (even before it was opened) and/or Perl but most of the software jobs involve writing code in some highly proprietary development environment like those you find in finance, HR, or some other types of systems. Java and Perl just happen to be go-to languages because it's easy to find people who write in those. Python was starting to show up a bit as well when I left that job.

They also get ok mileage from really true open source software. Red Hat finds its way onto some fractional percentage (along with Apache, JBOSS, and a few other odds and ends -- including the aforementioned Perl). But in many cases, they could do what they wanted with completely proprietary solutions. Those systems were usually selected due to some client requirement, or because the licensing costs are free (beer). I only ever ran into one true open source advocate in the entire place, and he was usually laughed out of proposal work because his "solutions" options would have extended the development effort by a year and required hiring an entirely new staff of people raised on that ecosystem rather than the preferred and proprietary MS/Oracle/Sun/Cisco ecosystem. Finding qualified staff to work on the open source stuff was frankly a continuous and quite major problem for us -- often times, because those people counted as people with specialized skillsets vs. the average run-of-the-mill trade school "tech guy" they simply cost more to hire. In other words, we ran the numbers over and over again, and open source rarely made sense for us.

I do think that the reverse is also true though, for small startups open source can make a lot of sense in both senses of the term "freedom". For the bottom line, it's free, if you are doing something weird you can, in theory, mod the software to do something unique. It's not always easy, and I've seen many cases where the target goal was too big for the staff and the startup folded. Web startups are also interesting because for the most part, the work they do with open source results in a completely proprietary web app (something RMS has lamented on quite a bit recently).

Many big businesses likewise do great things with and for open source (IBM, Sun and Apple come to immediate mind) in terms of funding the kinds of expensive Open Source development efforts that would otherwise not exist because building world class software by part-time hobbyists is extremely difficult -- there's really only a very small handful of those projects, and most of them have been funded recently by large corporations looking to leverage the initial investment/development effort to make their solution work like they want.

But by and large, large organizations will move to whatever accomplishes their goals for the least amount of $$$. Even startups. If a startup can use a proprietary solution for $x thousands of dollars vs. modifying some existing open project to scratch some itch for $y thousands of dollars, and x<y they'll go with the solution that costs x. For example, how many startups use Windows or OSX as their primary desktop OS vs. some flavor or Linux/BSD? Probably most.

This guy gets a lot of what I'm saying here.

http://lunduke.com/?p=1075

It's a great analysis of the problems in the community flavored with a hard dose of pragmatic realism. He gets it that "just do it open source" doesn't really make sense in many cases because the community is by and large made-up of people who don't understand what it takes to make a business.