How Linux Got To China And The Nordic Open Source Miracle

‘’The markets are on the web, the production power is on the web, both globally available for everyone’’ Mårten Mickos, CEO, Eucalyptus Systems.

Let’s do a small intellectual play: Web 2.0 services, or the current generation’s internet companies globally, are built for the most part on top of the so-called LAMP-stack. In other words their infrastructure is based on Linux, Apache, MySQL and PHP – a selection of open source software programs.

The ventures started today differ from the ones in the -99 era in a way that a growing number of them have managed to create very big global business in a unbelievably short amount of time. They have managed to create hundreds of millions of profitable business in a span of just a few years, and new ones seem to emerge on a daily basis.

"Open source, in other words, is not an end in itself. It is a means to an end, and that end is collaborative innovation’’ Matt Asay, COO of Canonical

The other differating factor is that using open source and collaborative work methods has made possible an extremely cost-efficient way of testing new ideas and concepts. If "it" does not work, a different approach is tried right away. Unlike in the days before when writing a business plan might take a year (literally).

Most of the building blocks are from the Nordics

Linux (Linus Torvalds) and MySQL (Monty Widenius) are Finnish born ventures (while Swedish David Axmark played a key role in MySQL as well). PHP, on the other hand, originates from Denmark (Rasmus Lerdorf). So half of the building blocks are from Finland, with a quarter from Denmark, meaning 75% comes from the Nordics.

But Finland’s and Finns' accomplishments don’t end here. As I was sharing the observation with my former colleague Tere Vaden, he reminded me that the discussions around the open source development more or less all happen online and more specifically in IRC (Internet Relay Chat). And you guessed right, IRC was developed in Finland by Jarkko Oikarinen out of Oulu, around 1988.

One explaining factor for this success could be contributed to the way Nordic society has been structured as several proofreaders of this article duly noted. Nordics are a safe, neutral place to try out new things without (too much) having to fear someone will take advantage of you but rather you will be recognized by principle of meritocracy.

China’s and other emerging, or rather growth, countries' efforts around open source have made a lot of headlines in recent years. But how did, for example, Linux make its way to China? The story that should be told more often is that Helsinki University’s doctoral student Dr. Gong Min upon returning to China in 1996 had 20 diskettes in his luggage containing that moment’s version of Linux. Shortly after that first Linux distro (collection of software) was available in China.

A new, higher ambition-level is needed

Now that even Venture Capitalists have seen the proof of making money around open source, both revenue-wise and exit wise (I was fortunate enough to be part of a team that made the seed investment into MySQL ten years ago and enjoy the 1 Billion USD exit in 2008) as seen in all parts of the globe, it is time to think of next steps. We need to take steps where, for instance, entrepreneurial open innovation and the practices of the open source world would be embraced. We should operate and create both cooperation and collaboration possibilities utilizing international talent networks in a global market place. One way could be a new type of an investment vehicle, which through active ‘open innovation’ guidance (freedom to test and fail easily and quickly) would capture value by retaining part of the ownership in new companies. At the same time it would work as a network serving both industrial and academic worlds.

This kind of new and higher ambition-level is needed. Otherwise the Finnish and Nordic innovation activities especially the kind that is looking for high growth internationally via Venture Capital will wither in our too small home markets and will endanger our future competitiveness.

Big opportunities must be embraced

Open source and its way of working and building community built and driven businesses must be one of the biggest things to impact software and software based businesses in decades. The disruption is not limited, however, only to open source software but to the growing amounts to open content, open data and open substance.

Based on our history I dare to predict we have yet again in the next few years a big opportunity in front of us. The global markets are waiting for our leadership just as Nokia did in the mobile business – we must not let this opportunity pass us by.

Thank you for proofreading and comments to Valto Loikkanen, Jouko Ahvenainen, Peter Kelly, Aape Pohjavirta, Ossi Pöllänen, Karri Hautanen, and Peter Cheng.

About the Author:

Mikko Puhakka: I am Amateur consultant and investor rather than a professional. What? – You may ask. With more than 15 years of noted track record, why an Amateur? 

 Amateurs in sports are - or at least used to be - in highest regard. Amateurs do what they do because of love, inspiration and passion for their specialty. Amateurs don’t do their business for quick and easy money. Instead of living my life from paycheck to pay check or project to project, I live from adventure to adventure. As Hugh McLeod states ‘treat it like and adventure. An adventure worth sharing’ If this thinking strikes a chord, get in touch and share your thoughts and initiatives. In return, I promise at least an opinion, sometimes a good discussion or possibly even a new business relationship. 
Amateur career specialties: 
Start-ups, Venture Capital, community driven businesses, mainly in Europe and China. I am available as a mentor, advisor or a board member.
Connect to me on LinkedIn, or follow me on Twitter.

Photos CC:
opensourceway, kevinpoh

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Jeroen Carelse September 06, 2010

Excellent summary Mikko. I wonder what your ideas are about the differences in market situation then and now and how this affects e.g. financing a project.

I agree with you about opportunities and this is a good time to try new ideas. But I am also a bit skeptical about the Finnish innovation system and their methods of seed financing new ideas. This makes it rather challenging for startups to really get going, especially if you only have parts of the skills needed in-house and need to buy services from elsewhere.

Many opportunities...

mikko September 06, 2010

Thank you for the reply. I am actually working on a article to answer your questions (maybe this public statement will force me to write it;)).

Anyway initial answers:

I believe financing situation is now better than it was when these OS ventures sought money, before the bubble there was no money, then for a brief period you could get funding for 'anything' and then things died for several years.

While it might not always seem that way to the entrepreneur with ''the best idea anyone has ever come up with'' that the financing ecosystem does not work, it is actually working reasonably well.

Funding for buying services has been funded by TEKES et al for a long time and it is quite easy to do, whether it is the best way to incentivize your advisors can be debated (maybe a combination of some money and sweat equity is the best).

Growth funding for best of breed startups looking for million + is also available for many, some deserving ones get left out though.

The biggest gap I see is somewhere in the 100k-500k region, there are some active business angels and crowfunding groups like GrowVC and Venture Bonsai that are looking to fill this space, how well they will workout remains to be seen, it is still a market that is taking shape.

I hope this addresses your questions.


pete k September 06, 2010


I like the core message of your post. A great opportunity currently exist with the nascent open source business model. I say nascent because the only exits have been acquisition and not by a significant public offering. But the the opportunity is currently vast and obvious to anyone paying attention.

The other major factor in open source is the F500 companies who are applying massive resources in developing and contributing code. Almost 10 years ago I presented to a group of executives that competitive forces would increase open source contributions.

I do have one question about your article. Do you have data to back up the statement: "They have managed to create hundreds of millions of profitable business in a span of just a few years, and new ones seem to emerge on a daily basis." By "hundreds of millions" maybe you mean revenue? :-)

mikko September 07, 2010

Thanks Pete, I guess one thing to ask is to ask the old question ''What is an open source business?''. I remember first discussing this with Mårten (Mickos) back in 2004 when I was defining some research questions.

His question to me was do I consider e.g. Google or Amazon open source businesses? To me the question seemed a bit odd and I more or less ignored the question at the time.

Nowadays I use a definition ''Community Driven Business'' which is of course much wider definition, but I feel the businesses that fit in within that definition pretty much follow the ''rules''.

So to get to your question the answer is that if we use the more traditional description of open source business it means revenue and if we use my preferred definition we can say profits, and examples are bountiful both in the west and east (I just won't admit that I misspelt in the article;)).