The proprietary model thrives in hardware
Hardware.
The Microsoft Milan Table is more than a nifty interface solution. Like the iPod, it's an expression of software in hardware form.
Open source has yet to get far in hardware. Cisco reluctantly released some Linux WiFi routers, but did not really market them. The One Laptop Per Child initiative became Windows. Is Palm still in the game? And we keep hearing rumors of Linux phones coming out of China, but no one seems able to get me one.
That's because hardware makers see software as the best way to hold value. I recently got a 40 GByte iPod for a friend, at a rock-bottom sale price of $240, plus tax. You can get hard drives at Fry's now for under 40 cents a gigabyte.
Heck you can now get all of The New Yorker, all 80 years of it, on an 80 Gigabyte removable hard drive for less than the cost of a 40 GByte iPod.
It's a symbiotic relationship. Software defines hardware, makes it special, makes it valuable, while hardware in turn protects software from the open source process.
I don't have a solution for this. I don't see hardware makers embracing open source any time soon. My guess is that Microsoft's hardware revenues are now headed on a steady upward trajectory, and Windows software is in a permanent holding action.