Reconciling “Free” with “Profit”

What Business models will take advantage of Open Source?

What Business models will take advantage of Open Source?

Use Value (value as an intermediate good) Sale Value (value as a final good) The Overwhelming source software value is use value. Not sale value

Use Value (value as an intermediate good)

Sale Value (value as a final good)

Device Drivers Software bundled with hardware Business specific applications Look at the newspaper hiring pages. Classify jobs that create use value versus sale value

Device Drivers

Software bundled with hardware

Business specific applications

Vendor has gone burst …is there a market for the company’s product ? Vendor has discontinued support …is there a market for the company’s product? Price a customer pays is the expected future value of vendor service

Vendor has gone burst …is there a market for the company’s product ?

Vendor has discontinued support …is there a market for the company’s product?

Software need not be a factory business But a services model based on exchange of continuous value

Software need not be a factory business

But a services model based on exchange of continuous value

If you are working in a ISV struggling with support calls and low customer satisfaction scores ask yourself: 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?

If you are working in a ISV struggling with support calls and low customer satisfaction scores ask yourself:

Reduce Testing efforts Reduce Bug Fixing efforts Augment Feature Development efforts All Bugs are shallow for a thousand eyeballs

Reduce Testing efforts

Reduce Bug Fixing efforts

Augment Feature Development efforts

Use Open source software to maintain/gain advantage in proprietary software Use Open source software to drive gains in your hardware business (for drivers etc.) Use Open Source to sell services (eg Red Hat, Zope) Use Open Source to sell the content (share trading, education)

Use Open source software to maintain/gain advantage in proprietary software

Use Open source software to drive gains in your hardware business (for drivers etc.)

Use Open Source to sell services (eg Red Hat, Zope)

Use Open Source to sell the content (share trading, education)

Id software’s Doom game: In 1993 really unique in its graphics on low end processors Competitors appeared Markets matured in features, platforms and user base In 1997 Doom released full source Third party developers added value to the game This non “software” example crystallizes the issues….

Id software’s Doom game:

In 1993 really unique in its graphics on low end processors

Competitors appeared

Markets matured in features, platforms and user base

In 1997 Doom released full source

Third party developers added value to the game

Will I really benefit from network effects? Are the key methods common engineering knowledge? Can correctness be verified without independent reviews? How critical it really is? For the business of my customers? Is reliability/stability/scalability critical? As customers mature the open source does become an option

Will I really benefit from network effects?

Are the key methods common engineering knowledge?

Can correctness be verified without independent reviews?

How critical it really is?

For the business of my customers?

Is reliability/stability/scalability critical?

“ The Cathedral & The Bazaar” by Eric S Raymond

“ The Cathedral & The Bazaar” by Eric S Raymond