21/05/13 Source: Stephen O ’ Grady ’ s “ Bottom-up Marketing ” presentation.
21/05/13 Source: Stephen O ’ Grady ’ s “ Bottom-up Marketing ” presentation.
Open Source: Lessons Learned (2006)
1Open Source: LessonsLearnedMatt Asay VP,Business Development
225 Jan 2006Decades of disruption:Learning from the entertainment industry“At present…severe economic damage [is being done] to the property rightsof owners of copyrights in sound recordings and musical composition.…Unlesssomething meaningful is done to respond to the…problem, the industry itselfis at risk.”Alan Greenspan. Testimony before Congress, 1983.“The VCR is to the American film producer and theAmerican public as the Boston Strangler isto a woman alone.”Jack Valenti, President of the MPAA. Testimony before Congress, 1982.“As the majority of hobbyists must be aware, most ofyou steal your software…. [Y]ou…prevent good softwarefrom being written…. I would appreciate letters fromany one who wants to pay up.”Bill Gates, “An Open Letter to Hobbyists,” 1976.
325 Jan 2006What we’ve learned:How does open source work?
525 Jan 2006How open source works The Internet: A network of networks Open Source– A community of communities~ Small core development team (10-15 people do 80% ofdevelopment) Note: Most projects are much smaller than this - 84% have fewerthan 10 developers 73% have only one active developer (85% not actively developed);80% have less than 10 active users (downloads)~ Larger circle of bug fixers and still larger group of bugfinders/beta users (Big value)– Facilitated by licensing that generally requires:~ Right to access the source code (plus the right to modify it)~ Right to distribute modified code (“derivatives”)~ Requirement to distribute derivative works under same license[NOTE: This is only triggered if you distribute the code]Sources: Andrea Capiluppi et al., 2003; Mockus et al., 2004.
625 Jan 2006Recipe for open source (comm/unity/ercial) success Code attributes– Modularity - Easier to build plug-ins, facilitates casual, drive-by development/bug fixes (Lowers the bar to contribution, asdoes good documentation)– Great initial code base– Degree of applicability - Need a large user/developerpopulation from which to draw Market attributes– Significant consolidation around 2-3 “gorillas”– Multi-billion dollar ($2B+ industry with~ Steep license costs~ Trend toward services/maintenance revenues (50%+)– Feature creep - Small subset of features actually required– Complex technology such that buyers will pay for open source
725 Jan 2006Reasons for involvement:Pragmatics over religionPercent of respondentsNote: Question asked for top three motivators of F/OSS participation, n=684Source: Boston Consulting Group, 2003Intellectually stimulatingNon-work functionalityObligation from useWork with teamProfessional statusOtherOpen Source reputationBeat proprietary softwareWork functionalityCode should be openImproves skillLicense forces me to 0.211.111.016.317.520.328.529.733.133.841.344.90 10 20 30 40 50
825 Jan 2006Developers rule in open source……but how do you engage with them? The developer imperative:– Developers are critically important– Developers will play a major if not determiningrole in the success or failure of your products– Developers, like any audience, will have things tosay about your products Are you engaging with them?Source: Stephen O’Grady’s “Bottom-up Marketing” presentation.
925 Jan 2006The reality of marketing to developers Developers have become nearly immune to traditionalmarketing (Haven’t you?) Developers spend far more time online than they dowith print publications Developers would rather talk with someone than betalked at by something, and developers would rathertouch the code than to hear about it Developers are starting their own mini communitiesvia blogs Developers dont just code at the office Developers are not content to sit back and wait forupdates or news; they can make their ownSource: Stephen O’Grady’s “Bottom-up Marketing” presentation.
1025 Jan 2006No one cares about source code……or do they? Microsoft survey of their customers– >60% felt access to source code was “Critical”– Yet only 5% said they planned to look at it, and a mere 1% expected tomodify it– This is not Microsoft FUD - this is analogous to MySQL, Novell, JBoss, etc. Modify the source and you violate your support contract withNovell, Red Hat, JBoss, MySQL, IBM, HP, etc. So, why the interest in open source/access to the source?– You can’t do anything with it (without taking on the full support burden)– You don’t have interest or time to do anything with it (That’s what you’repaying the vendor to do for you - deliver value)– What’s the point? Trust and flexibility (but mostly trust), and it’s the relevant“currency” for developers
1225 Jan 2006The choice continuum:Maximize choice by founding on open platformsOperating SystemDatabaseEnd-User ApplicationsApplication FrameworkMiddlewareGPLClosed, BSD, GPLClosed, BSDClosed, BSDClosedFile FormatsClosedOpenOpenClosed
1325 Jan 2006Open source stops reinvention of the wheel:driving innovation up the stack
1425 Jan 2006What We’ve Learned:How do you monetize communities?
1525 Jan 2006Disruptive technologies:Disrupt adjacent markets, rather than cannibalizing your ownPerformanceTimePerformance that customerscan utilize or absorbPace ofTechnologicalProgressSustaining innovationsDisruptivetechnologiesIncumbents nearly always winEntrants nearly always winSource: Clayton Christensen, OSBC2004
1625 Jan 2006Important business considerations The Internet grew because– Open at the core, providing an open foundation upon whichto build and– Closed at the edge of the network (promoting copyright-induced innovation)– Open source commercial growth can be the same. But:– First mover advantage is huge in open source– You don’t need to attract THE Community - you need to builda vibrant user community– Open source requires a different mindset, a different culture– Use open source licenses as a valuable weapon - they are anopportunity to you, and a threat to your competitors
1725 Jan 2006Some rules of thumb Support is a weak business model– Hard to scale– Hard to monetize A dual-tiered model works– Either open + less open (Fedora + RHEL) or– Open + closed (Alfresco Community vs. Enterprise)~ Why? Gives would-be customers a clear reason to pay (You donot want to confuse them on this)~ Ways to close off code: Certification Providing source (but not binaries - helps if the code is complex,like an OS) Copyright GPL is closest to traditional copyright regime, andmakes it hard for competitors to rip you off
1825 Jan 2006Option 1:Run the IP race Innovation still pays…but where you innovate is paramount– Cool new technology will find a paying audience– Open source generally lags closed source in features– Open source, definitionally, may not compete well with innovation~ Open source depends upon a large population of developers withaptitude and interest~ Such a group cannot form until an innovation is established and widelyadopted– You want to innovate at the edges Open source’s glass ceiling?– Some code is less likely to be replicated in the open sourcecommunity– Open source community may lack skillsets (high-end databases?),incentive (TurboTax), or equipment to create an open sourcealternative (NOTE: This does not apply to commercial open source)– Remember: most open source developers participate because theyfind it “intellectually stimulating” - create IP in unsexy areas
1925 Jan 2006Option 2:Embrace and drive commoditization The software industry may be maturing into a commodityindustry In commodity markets, there are three competitivedifferentiation points:– Price~ Use open source to lower your costs, then sell for a lower price Sales, marketing, distribution, and QA costs lowered through open source Development generally not)~ Price as a loss-leader for other, value-adding IP– Service (“Professional Open Source”)~ Huge need for open source software support~ Risk mitigation services– Brand~ Source of code vs. source code (“Owning” project ‘committers’ gives influence/control,which translates into margin)~ Likely that users will pay for a trusted brand (certified, etc.)***~ ***Red Hat has an ingenious model whereby they provide source but not binaries for free -not sure this works in the embedded world, though….
2025 Jan 2006Option 2.5:Dual licensing strategies If you own the copyright, you can dual license– Provide the same body of code under two licenses, generally both open andclosed– Outside contributors (if any) assign copyright for their modifications back toMySQL, Sleepycat, Trolltech Why this works– Developers have an incentive to contribute– Companies have an incentive to purchase Competitive advantage– Give customers increased control, while preventing competitors from hijackingyour code– Dramatically lower sales, marketing, distribution, and QA costs– Undermine higher-priced, closed source competitors by providing a good enough,cheap product that insidiously works its way into the enterprise, pastProcurement)
2125 Jan 2006Option 3:Change the rules of the game (soft(er)ware) Digital media entertainment and open source: Commonalities?– Both involve industries based on intellectual property struggling todeal with an apparent devaluing of IP– Both have failed to innovate payment mechanisms (focusing insteadon protection of property) Salesforce.com and “The End of Software” (ASP/Utility model)– Removes the open source licensing quandary (Open source licensingrestrictions are triggered by distribution, not use - so, if you’redistributing a service, not software, you’re fine)– Removes the problem of protecting property– Refocuses the emphasis: solving business problems– Facilitates support, scalability, application development (I.e.,overcomes the top barriers to open source adoption)– Maximizes choice (and Salesforce.com still gets paid)
2225 Jan 2006Summary and conclusion Open source software– The market’s response to vendor lock-in, inflexible & costly IT– Imposing dramatic changes in the way software is developed andsold– Part of the emerging “upload economy” Have your cake. Eat it, too.– Third wave business models compatible with free culture– Where there is customer value, there will be someone willing topay The world is “flattening”…. Are you ready?