Not free enough

For a country so famously unwilling to pay for commercial software, China’s resistance to adopting free open source software (FOSS) seems mystifying. Low upfront cost, a rapid upgrade cycle, and transparent code that can be easily audited – where’s the downside for a developing nation that aspires to technology stardom on a budget?

Yet China remains one of the world’s largest holdouts for closed, proprietary software. To the current generation of manufacturing-minded Chinese managers, profits come from direct product sales, and software is a product made of code. Service-based arguments for open source are misunderstood and distrusted, trapping China’s software companies in a cycle of near-instant obsolescence. They will have a hard time breaking out.

Piracy is the obvious part of the explanation for FOSS’s lack of traction: Open-source software can actually prove more expensive than pirated proprietary alternatives.

"I have seen versions of Linux that sell for more than pirated Windows because there are more physical disks in the package," said J. Aaron Farr, a software architect who sits on the board of directors for the Apache Foundation, which oversees development of a suite of FOSS projects. There’s also an additional training cost: China’s technology education system is still overwhelmingly focused on Microsoft (MSFT.NASDAQ) products.

Everybody loses under this model. Commercial software companies get ripped off and open source business models fail to attract users. When it comes to design, the Chinese software industry continues to pay programmers to reinvent freely available wheels instead of investing in innovation.

"Chinese managers tend to start every software project from the ground up," said Philip Yue, CEO of open-source web design firm Suzhou Wanghu Networks (SWN). "In the end they usually produce something very horrible."

This is not to say that Chinese firms completely reject FOSS, but by the time it’s deployed it’s usually neither free nor open. Jon Phillips, community director of open-source microblogging site Status.net, pointed out that Chinese programmers have already created hacked, closed-code versions of Google’s (GOOG.NASDAQ) Android operating system.

Therefore even though Beijing wants to wean the country off foreign commercial software, and knows open source is the fastest way to do it, progress has been slow. Chinese end users did not salute Red Flag, the state-endorsed version of the Linux operating system. The same went for FOSS projects launched by Alipay (held by the Alibaba Group, 1688.HK) and Tencent (0700.HK), which were quickly abandoned. Instead, government policy has inadvertently encouraged Chinese companies to rip off foreign software, slap their label on the box, and ask government agencies for subsidies for "domestic innovation."

Blue-collar coders

Nor do Chinese managers care for open source’s collaborative development model, said Yue of SWN. Even if managers adopt a FOSS product, they usually won’t pay programmers to contribute back to the code stream, one of the central tenets of FOSS. And unlike in the West, programmers here don’t have the status to argue otherwise. "In China, developers are blue-collar workers who don’t have a voice in the code they write," Yue said.

Lackluster contribution rates mean that domestic open source projects evolve more slowly than their commercial competitors – the opposite of how they are supposed to work. Farr of the Apache Foundation pointed out that Chinese companies that adopted Red Flag, for example, got stuck with a system with fewer features than pirated Windows and a weak support network.

Fine print in FOSS licenses is another sticking point. Even though such licenses encourage copying, many define "free" in ways that are ultimately intended to produce revenue. In China, however, these revenue models haven’t worked well.

For example, under the "dual license" model used by MySQL database software (now owned by Oracle Systems, ORCL.NASDAQ), you can use it for free so long as it runs inside another FOSS product. But if you produce a closed commercial application using MySQL as a component, you owe a license fee. Chinese software shops routinely ignore such clauses.

"In China, this sort of intellectual property protection is seen as an outsiders’ game that’s not going to benefit the country: ‘Why should we bother with looking into these frameworks?’" said Michelle Thorne, international project manager for open-source copyright NGO Creative Commons. "But with [open source], you have to acknowledge copyright for them to function, which means a certain level of stability in the IP system."

Similarly, support-based business models, in which software is given away while support services or valued-added components are sold, haven’t succeeded in China. As a rule, Chinese companies won’t pay for support services. And domestic firms’ penchant for opaque modifications of open source code – as with closed Chinese versions of Android – not only makes the code useless to the competition, but also isolates the product from free upgrades and bug fixes, and makes it incompatible with value-added paid components.

Preemptive warfare

Open source in China can still generate profits without strong IP protection, albeit indirectly. One of the primary benefits of open source models is the speed at which a product can acquire a large user base and establish its format as a standard.

"Google’s business model is to get people online using the internet as much as possible, period," said Thorne of Creative Commons. "If you have an Android phone, even if it’s not a phone that’s officially ‘Powered by Google,’ chances are the phone’s owners are using apps that work particularly well with Google products." 

Another key benefit is derived by research clusters. Farr of the Apache Foundation uses IBM’s (IBM.NYSE) open source Eclipse development environment as an example.

"[The Eclipse project] is like carmakers using a common engine design. Any changes you make to the engine, you have to share with the other carmakers. You can’t compete on engine design, but you’ve lowered the cost of engine development, and you can reinvest that money in higher-end services," Farr said.

Firms cooperate on open source projects in order to compete with their collaborators – but the diversity and speed of net innovation is accelerated. Even Microsoft, once a sharp critic of FOSS, has joined the movement with its Codeplex open source project.

Such strategies may have little appeal to hit-and-run software developers, but those with more vision are increasingly intrigued. Yue of SWN, for example, has developed an open source web server package called Lamppr, which he is pitching to government entities. He said they are proving receptive, if not completely won over.

"[The government’s] concern [about open source] is long-term support: ‘Will you still be there to support the work you did three years from now?’ The concern is valid because the open source movement in China is not really a movement yet." 

It might not take long. China is now home to an increasingly strident group of open source advocacy groups, including the China Open Source Software Promotion Union. This faction recently saw one of its own, Zhang Wensong, founder of the Linux Virtual Server project, appointed head of online auction site Taobao.com’s software infrastructure team.

Last month, Zhang gave the open source movement in China its most significant boost to date: Taobao opened the source code for its TAIR online database. FOSS advocates were impressed, not only because such a high-profile domestic company had created a new FOSS project, but with the quality of the code released.

"This sort of system is often seen as part of the secret sauce behind scaling large websites. It’s a hot, reasonably advanced technology," said Farr of the Apache Foundation.

Taobao did not respond to requests for comment, but Peter Cheng, open source advocate in China and founder of software consultancy TargetSource, argued that the move will pay off for the company in the short term.

Cheng said Taobao is undergoing rapid growth, and allowing internal and external developers to collaborate on FOSS projects is a good way to attract talent. More importantly, Taobao’s new embrace of open source indicates that management has grasped its biggest advantage.

"Taobao doesn’t care who reads their code. It’s about speed of innovation," said Cheng.