The seven years from 1998 through 2004 saw the free software movement split into two camps — free software and open source — and the open source framing briefly achieve spectacular commercial success before the dot-com crash revealed how much of that success was speculative. This era forged the institutional structure of the modern FOSS ecosystem and established the tensions between community values and corporate exploitation that remain live today.
The Netscape Catalyst (January 1998)
The netscape-source-release-1998 on January 22, 1998 was the pivot. Netscape Communications, facing existential pressure from Microsoft's Internet Explorer, announced it would release the source code of Netscape Navigator. The decision was influenced by eric-raymond's cathedral-and-the-bazaar-1997, which Navigator's developers had circulated internally. The release — and the organizational meeting it triggered — transformed free software from a subcultural phenomenon into a business strategy worth discussing in corporate boardrooms.
"Open Source" Coined and the OSI Founded (February 1998)
christine-peterson proposed the term "open source" on February 3, 1998 at a strategy meeting held at the Foresight Institute offices in Los Altos, California — the foresight-open-source-meeting-1998. The meeting had been convened by eric-raymond and others to discuss how to leverage the Netscape moment. Peterson's term was intended to sidestep the ideological connotations of "free software" (the English word "free" being ambiguous between "free as in freedom" and "free as in beer") and to make the concept legible to business audiences.
The open-source-initiative was formally founded in late February 1998 by eric-raymond and bruce-perens — the osi-founding-1998. Perens adapted Debian's Free Software Guidelines (which he had drafted) into the open-source-definition, giving the OSI a principled basis for certifying licenses as "open source." The terminological split was also a philosophical one: richard-stallman rejected "open source" precisely because it omitted the ethical dimension, reducing software freedom to a development methodology. This is the core of the software-freedom-vs-open-source tension.
O'Reilly held an "Open Source Summit" in spring/early 1998 — organized by tim-oreilly — that brought together key figures and helped establish "open source" as the movement's public-facing term in business contexts.
Dot-Com Boom and the VA Linux IPO (1999)
SourceForge, the first major open source project hosting platform (later associated with sourceforge), launched November 17, 1999. VA Linux Systems went public on December 9, 1999, achieving a 698% first-day gain — the largest first-day IPO gain in US market history at that point. The valuation was premised on the belief that Linux-based businesses would dominate the emerging internet economy.
The apache-founding-1999 on March 25, 1999 institutionalized the Apache HTTP Server community with a membership-based governance model that would become a template for other foundations. The Apache Software Foundation's governance structure — meritocratic, foundation-held IP, consensus-based — offered a distinct alternative to both the FSF model and the Torvalds kernel model.
The Dot-Com Crash and Its Aftermath (2000–2001)
The dot-com crash of 2000-2001 bankrupted many of the companies that had been built on the premise of open source as a business model. VA Linux survived but pivoted. The crash demonstrated that "open source" as a business strategy required more than simply releasing code: it required a sustainable model for converting community contribution into commercial value. The open-core-business-model and other hybrid approaches would be developed in response.
The Revolution OS documentary (2001) captured this era — interviewing Torvalds, Raymond, Stallman, Perens, and others — and became an accessible introduction to the movement's history and tensions for a broader audience.
SCO Lawsuits (2003)
The SCO Group's 2003 lawsuit against IBM (and related actions against Linux users) claimed that proprietary Unix code had been incorporated into the Linux kernel. The lawsuits were widely seen as a FUD (fear, uncertainty, and doubt) campaign against Linux adoption in enterprise computing, and they ultimately failed — but they took years to resolve and represented a significant legal threat to the ecosystem. The Linux Foundation's later legal defense infrastructure was partly shaped by the SCO experience.
What This Era Established
By 2004, the open source framing had won the public battle for terminology — "open source" was the phrase used in business and journalism, while "free software" retained its philosophical primacy within the FSF's community. The institutional infrastructure of modern FOSS — the OSI, the Apache Software Foundation, the proliferating hosting platforms — was in place. The commons-based-peer-production model had been demonstrated at scale by Linux and Apache.
The era also established the recurring tension that would define subsequent periods: between community values (the four-freedoms, copyleft, contributor autonomy) and corporate interests (cost reduction, talent acquisition, avoiding GPL obligations). The mainstream-adoption-and-corporate-embrace-2005-2014 era would be defined by managing that tension as open source became the default substrate for commercial computing.