Reconciling “Free” with “Profit”
<ul><li>What Business models will take advantage of Open Source?  </li></ul>
<ul><li>Use Value (value as an intermediate good)  </li></ul><ul><li>Sale Value (value as a final good) </li></ul>The Over...
<ul><li>Device Drivers  </li></ul><ul><li>Software bundled with hardware  </li></ul><ul><li>Business specific applications...
<ul><li>Vendor has gone burst …is there a market for the company’s product ?  </li></ul><ul><li>Vendor has discontinued su...
<ul><li>Software need not be a factory business  </li></ul><ul><li>But a services model based on exchange of continuous va...
<ul><li>If you are working in a ISV struggling with support calls and low customer satisfaction scores ask yourself: </li>...
<ul><li>Reduce Testing efforts </li></ul><ul><li>Reduce Bug Fixing efforts  </li></ul><ul><li>Augment Feature Development ...
<ul><li>Use Open source software to maintain/gain advantage in proprietary software </li></ul><ul><li>Use Open source soft...
<ul><li>Id software’s Doom game:  </li></ul><ul><ul><li>In 1993 really unique in its graphics on low end processors  </li>...
<ul><li>Will I  really  benefit from network effects?  </li></ul><ul><ul><li>Are the key methods common engineering knowle...
<ul><li>“ The Cathedral & The Bazaar” by Eric S Raymond  </li></ul>
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Open Source Software

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Open Source Software

  1. 1. Reconciling “Free” with “Profit”
  2. 2. <ul><li>What Business models will take advantage of Open Source? </li></ul>
  3. 3. <ul><li>Use Value (value as an intermediate good) </li></ul><ul><li>Sale Value (value as a final good) </li></ul>The Overwhelming source software value is use value. Not sale value
  4. 4. <ul><li>Device Drivers </li></ul><ul><li>Software bundled with hardware </li></ul><ul><li>Business specific applications </li></ul>Look at the newspaper hiring pages. Classify jobs that create use value versus sale value
  5. 5. <ul><li>Vendor has gone burst …is there a market for the company’s product ? </li></ul><ul><li>Vendor has discontinued support …is there a market for the company’s product? </li></ul>Price a customer pays is the expected future value of vendor service
  6. 6. <ul><li>Software need not be a factory business </li></ul><ul><li>But a services model based on exchange of continuous value </li></ul>
  7. 7. <ul><li>If you are working in a ISV struggling with support calls and low customer satisfaction scores ask yourself: </li></ul>Is the “20% of license” sufficient investment to supporting increasing usage of the product? Will not my customers be willing to pay more if I could prove that it works for them?
  8. 8. <ul><li>Reduce Testing efforts </li></ul><ul><li>Reduce Bug Fixing efforts </li></ul><ul><li>Augment Feature Development efforts </li></ul>All Bugs are shallow for a thousand eyeballs
  9. 9. <ul><li>Use Open source software to maintain/gain advantage in proprietary software </li></ul><ul><li>Use Open source software to drive gains in your hardware business (for drivers etc.) </li></ul><ul><li>Use Open Source to sell services (eg Red Hat, Zope) </li></ul><ul><li>Use Open Source to sell the content (share trading, education) </li></ul>
  10. 10. <ul><li>Id software’s Doom game: </li></ul><ul><ul><li>In 1993 really unique in its graphics on low end processors </li></ul></ul><ul><ul><li>Competitors appeared </li></ul></ul><ul><ul><li>Markets matured in features, platforms and user base </li></ul></ul><ul><ul><li>In 1997 Doom released full source </li></ul></ul><ul><ul><li>Third party developers added value to the game </li></ul></ul>This non “software” example crystallizes the issues….
  11. 11. <ul><li>Will I really benefit from network effects? </li></ul><ul><ul><li>Are the key methods common engineering knowledge? </li></ul></ul><ul><ul><li>Can correctness be verified without independent reviews? </li></ul></ul><ul><li>How critical it really is? </li></ul><ul><ul><li>For the business of my customers? </li></ul></ul><ul><ul><li>Is reliability/stability/scalability critical? </li></ul></ul>As customers mature the open source does become an option
  12. 12. <ul><li>“ The Cathedral & The Bazaar” by Eric S Raymond </li></ul>
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