Matt Asay responds to Tim O'Reilly's prediction that proprietary firms will inevitably buy up FOSS firms.

O'Reilly: "I will predict that virtually every open-source company (including Red Hat) will eventually be acquired by a big proprietary software company."

Asay: "I actually believe that open source, not proprietary software, is the natural state of the industry, and that Tim's proprietary world is anomalous.
...
Over time, the money is going to shift to those that focus on customer needs, not vendor needs. In other words, it's going to shift to open source and SaaS."

While consolidation will likely occur in FOSS markets, I'm dubious of O'Reilly's claim that FOSS will be absorbed by proprietary players. FOSS markets and firms have matured over the past several years. Scrutiny of FOSS has also improved, with standard economic and business analysis applied to FOSS, rather than messianic romanticism. FOSS business models and technologies may not live up to the fanatical banter of its supporters, but there are indications that as FOSS adopts more formal organizational and capital structures, it will become stronger.

I'm also dubious of Asay's reply. Does he mind that FOSS is often a small P&L inside traditionally proprietary firms that still push their patent based revenue streams? What would happen to FOSS if it lost the backing of corporations like IBM and Intel? Would Asay argue that IBM's FOSS P&L does more to protect free culture than its patent licensing office? And exactly how are volunteer developers more in tune with consumers than firms that bet their wallets on catering to consumer demand? Asay displays the kind of defiance to scrutiny FOSS supporters commonly show, which has little served their cause.

It is unlikely FOSS will fail to exist as stand-alone firms. Still, the only thing that will hold FOSS back is the inability of supporters to assess and address immediate pressures. If FOSS firms fail to do so, it may actually help that they be scooped up by proprietary firms.