Dare Obasanjo has written a great post on open source and business models - it's well worth reading the whole thing, but he's focused in on the problems of shrink wrap vendors (games specifically):

For developers of shrinkwrapped software, Open Source only turns piracy from a problem into a benefit if you're willing to forego building consumer software and you have software that is either too complicated to use without handholding OR you can scare a large percentage of your customers into buying traditional software licenses by using the GPL instead of the BSDL.

That last bit is very telling, I think - and it applies to lots of software, not just games. Take the tools space, where we live with Cincom Smalltalk. The market has mostly gone to free tools, with the winner of that race being (huge surprise) IBM, which sells a variety of tools and services around Eclipse. At this point, someone will pop up and point out that "Eclipse isn't owned by IBM". Sure - and I have some great land to sell you in south central Florida, too.

Anyway, the upshot of OSS in the tools space seems to have driven the market into one of two systems:

• The small shop that is willing and able to make its money from consulting, using the tool as their "in the bag" solution
• The large vendor (like IBM), that can use OSS as a weapon to drive smaller vendors out of the arena - all the while wearing the mantle of "the good guys"

Left in a difficult place is anyone who wants to just sell a tool as their primary business. Now, I've said before that no one is entitled to a business model, so I'm not making some kind of call to action here. I'm just pointing out the way things have gone (as I see it), and how that's affected the business I work in.