Reducing the risk of risk

US bankruptcy law has hitherto been fairly liberal, allowing people to restart their lives after a financial collapse by legally eliminating debts and leaving the individual with sufficient resources to rebuild. Entrepreneurs, finding traditional business capital difficult to obtain during the critical seed phase when their ideas have not really been proven, have been willing to take that risk of personal financial failure in the name of pursuing new and risky innovative business plans—just the kind needed in a society whose status quo is not sustainable.

In October, however, all of that will change: new legislation, ostensibly to protect the credit industry from “irresponsible consumers”, will make this type of bankruptcy almost impossible. The new law will require almost anyone who does go bankrupt to liquidate assets (in many cases including their own homes), and will also require them to live at subsistence, regardless of how much money they make, redirecting their entire “disposable income” to paying off the debt for five years. Needless to say, this is unlikely to encourage much ambition to make extra money during that time, and the resulting micro-management of personal resources will make any kind of business endeavor during that time impossible.

The new law could make small-business failure punishable by a five year sentence to abject poverty.

Controlling costs

Given much-tighter funds, entrepreneurs will be looking for ways to cut out expenses—especially those early seed-money expenses—to reduce their risk. Modern free software can be a serious tool for that task.

The new law could make small-business failure punishable by a five year sentence to abject poverty

Now any particular enterprise will need a unique set of software, but let's consider a customer-oriented business that needs to produce high-quality graphics, organize projects over the internet, and maintain a web presence for customers and partners. To do this entirely with proprietary software is possible—but what does it cost? MS Windows ($307.99) may come with the computer, but MS Office ($469.00) will need to be purchased, as will more specialized software such as Adobe Photoshop ($589.00), Adobe Illustrator ($510.65), and MS Windows Server 2003 ($389.37). For managing internet projects and web presence, there is MS CRM 1.2 Pro ($1329.33) and MS Project Pro ($1059.79, including the server)[1]. This set of software runs to over $4500!

Yet, it all can be done with 100% free-software. For example, you could use Debian Gnu/Linux[2],, Gimp, Inkscape, OpenCRX with a Java[3] runtime installation or ERP5 with a Python/Zope installation, anApache web server (of course), and project management using GForge. With the exception of the ERP/CRM software (which will require some special installation for either proprietary or free versions), the whole system can be installed with a set of Debian DVDs costing perhaps $15.00, an automated install, and a single apt-get instruction.

This comparison is particularly favorable to proprietary software because I have not figured in the effect of multiple licensing. Proprietary software usually insists on a license fee per CPU or per user, which means that the minute you need more than one computer or hire an employee, you will have to pay more still—another expense that free software eliminates.

Controlling risks

The real benefits of free software, though, are not in the initial cost savings, but in the greater control and flexibility that the user has.

The real benefits of free software, though, are not in the initial cost savings, but in the greater control and flexibility that the user has

Since free-software projects aren't managed by massive, centrally-controlled organizations, projects must rely on standard communications protocols and file formats to hold everything together. The advantage to the final integrator is that this means a lot fewer headaches when trying to fit together software that wasn't originally intended to go together: it's much easier to “mix and match” software as needed.

Later on, when pieces of that software have to be changed or upgraded for whatever reason, there will tend to be much less breakage. Furthermore, if pieces of a software toolchain prove inadequate, there is always the possibility of improving and customizing them for your own purposes. With free software, there is no problem with some outsider telling you that you must upgrade “or else”. If software remains useful, it will continue to be supported. There's no conflict of interest when software is supported primarily by the people who need to use it, instead of the people who need to sell upgrades to survive.

In this way, free software eliminates not only financial risk, but also technical operations risk and other problems that could bring your business down, when starting up, trying to expand, or trying to adapt to new business clients and/or models.

Leveraging development

When developing your own customized software, free-licensing may also be a big money-saver and risk-reducer. If you can afford to free-license your own software, this makes an enormous amount of free-software libraries readily available without legal encumberments or license fees to worry about.

You will find that it is easier to interest and hire competent programmers if they know their work will be free, since many programmers can see the advantages of free-licensing, both to the project and to themselves. You may even be able to find free help for writing many parts of your project if you can factor out common needs so that other people (or companies) with the same needs can cooperate with you on filling them. Making experimental code available for use by free software users also opens your code up to a much wider and more diverse testing environment, which you basically can't afford in any other way. In this way, it is possible to greatly reduce both costs and risks of software development simply by using a free-license.

Regrettable as any legislation which makes life harder for innovators is, I have no doubt that entrepreneurs will adapt to these new rules as they have in the past, and free software is one tool that should not be overlooked!


1(, September 2005.

2( currently includes over 15,000 free-software packages, available as 2 DVDs.

3( is not free software, although it is zero-cost. There are somefree alternative runtimes such as Kaffe and free native compilers such asGCJ,but Java remains a bit of a problem for the free software purist, as explained in theDebian Java FAQ,which is why I list an alternative solution. Entrepreneurial users may not care about this, though.


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