DARJIX

There have been a number of stories from analysts and companies about how Open Source will thrive in recessionary times. Sun made that argument today.

“We are preconfigured for the downturn,” Schwartz said in an interview with Computerworld last month. He claimed that users will be more inclined to try open-source products such as MySQL, OpenSolaris and Sun’s GlassFish application server during a time of economic stress.

The basic argument is that because OSS is typically cheaper than their proprietary counterparts, that more companies will switch to open source (or choose open source over a proprietary solution.)

The argument is flawed because enterprise software tends to have very high switching costs. In other words, companies don’t tend to rip and replace systems to reduce their operating costs since it requires significant investment. I doubt that companies will want to invest, even to lower operating costs, in the middle of a recession.

Some enterprises will decide to purchase open source solutions, instead of a proprietary solution, to reduce their operating cost. However, since overall IT spending will decrease, it is difficult to ascertain the overall impact of this shift.

Many of the large Open Source vendors actually have mixed-source portfolios. Even if there is an surge in revenues form Open Source, these vendors should really be worried about renewals and sales of proprietary solutions.

I wrote about the Credit Fail and my personal experience with the broken credit card market. It looks like things are bad enough that Paulson is going to come in with his government-sponsored credit card with the 700B limit.

Hey, don’t forget that Visa’s IPO was a MAJOR windfall for the banks that held the company.

… the offering will generate a windfall for Visa’s thousands of member banks, which own the company. JPMorgan Chase is expected to reap about $1.25 billion, while Bank of America, National City, Citigroup, U.S. Bancorp and Wells Fargo are likely to receive several hundred million dollars each.

So essentially, Wall Street banks took Visa public and made a killing off of the shareholders (general public.) Now the government is going to take public funds and bail out Visa. And Mastercard.

American Express is ahead of the curve, they recently won approval to convert to a commercial bank. Essentially, this now gives them access to the Fed’s discount lending facilities. In normal market circumstances, this would be looked down upon as a “bailout”. It’s not like anyone is going to be willing to put a term deposit into AMEX when they are simultaneously borrowing money from the discount window.

This industry is desperately in need of better management. With every single member of the current oligopoly in financial distress, it would make a great time to start up a financially-stable creditcard company.

Sean Michael Kerner writes that Ubuntu is not cash flow positive, despite its massive user base.

“We can’t make money selling the desktop that’s why we focused on a zero licensing cost business model,” Shuttleworth said. “The only way to build a business on Linux is to focus on services.”

Canonical is not a highly-ranked provider of services to the enterprise or to consumers. Like Novell, they are working with partners to build a support ecosystem around their product. However, without major brand-name backing, it is unlikely that large enterprises will want to purchase support services from unknowns.

It would not surprise me to see Canonical announce a large Desktop services deal with a major brand name provider, possibly Sun. Canonical is already tied up with Sun on the server side.

I applied for a credit card the other day and was denied. The reason they gave me is that I do not have enough of a credit history to qualify for their card. Admittedly, I applied for the “highest end” card I could find, so it is probably my fault.

My credit history is spotless. I did another review of my credit history on all three agencies and found nothing wrong. I realize now that a person’s credit history has almost nothing to do with their ability to pay.

I could pay off in cash many times over the limit they would have given to me. If I was someone who was living paycheck to paycheck, but relied on credit extensively to survive, I probably could have gotten that card. So this seems to me to be a ridiculous finance situation.

I believe that the extensive reliance on credit histories and scores, and the disregarding of overall financial situation, is setting up the US for serious credit card problems. Rising unemployment will exacerbate the situation.

The credit-card industry’s default rates are ``all but certain’‘ to surpass post-recession peaks reached in 2003, Moody’s Investors Service said in an Oct. 16 report. Unemployment may rise until the fourth quarter of 2009, pushing the default rate to a peak of about 8.5 percent from 6.82 percent in August, Moody’s said. link

A credit card company, or bank, would outperform if they started looking at an overall financial situation before issuing credit. The process would be similar to the process for applying for a house. The issuing institution gains clients and reduces their risk. And consumers may benefit with lower rates and “safer” credit limits.

I’m sure there are arguments against this, but the current system is nonsensical and broken.

I’m glad that they took my advice and decided to reinforce bank balance sheets rather than trying to purchase bad securities. You can thank me for the 11% recovery today.