Open Source SW Business

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Open Source SW Business

  1. 1. Shin, Sanghee(shshin@gaia3d.com) Open Source SW Business?
  2. 2. I.  Introduction of Open Source SW I-1. What is Open Source Software? I-2. Open Source Software Licenses I-3. Benefits of Open Source Software I-4. Growth of Open Source Software II. Current Status of Open Source Business II-1. Comparison between Proprietary and Opens Source Software II-2. Chasm and Barriers II-3. How to Cross the Chasm and Barriers II-4. Chapter Summary III. Proposed Open Source Business Framework III-1. Basic Principles III-2. Proposed Open Source Business Framework III-3. Benefits IV. Conclusions V. References Contents
  3. 3. I. Introduction of Open Source SW
  4. 4. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-1. What is Open Source SW? q  Open source SW(OSS) is the computer SW that is available in source code form under certain licenses. q  Users of OSS are permitted to use, copy, study, change, improve and even redistribute those OSS freely. q  ‘Free’ does not mean ‘Free of Charge’ nor ‘Free Stuff’ but ‘Freedom’ I. Introduction of Open Source SW 4 FREEDOM Of Software Freedom of Redistribute Freedom of Modify Freedom of Copy Freedom of Use
  5. 5. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-1. What is Open Source SW? q  Open Source SW Criteria by OSI(Open Source Initiative) I. Introduction of Open Source SW 5 1.  Free Redistribution 2.  Source Code 3.  Derived Works 4.  Integrity of The Author's Source Code 5.  No Discrimination Against Persons or Groups 6.  No Discrimination Against Fields of Endeavor 7.  Distribution of License 8.  License Must Not Be Specific to a Product 9.  License Must Not Restrict Other Software 10. License Must Be Technology-Neutral
  6. 6. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-1. What is Open Source SW? q  Open Source SW vs. Freeware I. Introduction of Open Source SW 6 •  Users have the right to access & modify th e source codes. •  In case original programmer disappeared, users & developer group of the S/W usuall y keep its support to the S/W. •  OSS usually has the strong users & develo pers group that manage and maintain the project OSS Freeware §  OSS is different from Freeware §  Antonym of OSS would be ‘Closed Source S/W’ or ‘Proprietary S/W’ §  Recently OSS is also regarded as ‘Commercial S/W’ •  Freeware is usually distributed in a form of binary at ‘Free of Charge’, but does not op en source codes itself. •  Developer of freeware could abandon dev elopment at any time and then final versio n will be the last version of the freeware. N o enhancements will be made by others. •  Possibility of changing its licensing policy
  7. 7. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-2. Open Source SW Licenses q  Copyright vs. Licenses 7 I. Introduction of Open Source SW ü Set of exclusive rights granted to the auth or or creator of an original work, including t he right to copy, distribute and adapt the w ork. ü Rights obtained just after create the work without any registration. ü  Without any permissions, others could not use, copy, distribute, adapt the work. ü Permission to use the work under certain agreement. ü A kind of contract agreement like EULA(End User License Agreements) ü If you buy Window7, it means you just buy a permission t o install & use Windows7 S/W in your PC. ü License is different from products buying. Copyright License Copyright Patent Trademark Trade Secret IPR
  8. 8. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-2. Open Source SW Licenses q  Typical OSS Licenses 8 I. Introduction of Open Source SW Free Re-Distribut able Access to Source Code Modification Obligation to Open Derived Works Combining with Proprietary SW GPL O O O O O X LGPL O O O O O O MPL O O O O O O BSD Alike O O O O X O Apache Alike O O O O X O §  GPL : Application need to be licensed under the same GPL if redistributed with the GPL asset. §  LGPL : Modified library need to be licensed under the same licenses as the originating asset. §  BSD/Apache Alike : Much more permissive for combination with proprietary SW.
  9. 9. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-2. Open Source SW Licenses q  Open Source SW License Rate 9 I. Introduction of Open Source SW Sourceforge.net, May, 2006. 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% Black Duck Software Knowledgebase, April, 2008. §  More than 60% of OSS licenses are GPL based license. §  Due to hard condition of OSS licenses, OSS is perceived to be difficult to be commercialized. è How to commercialize the open source SW?
  10. 10. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-3. Benefits of Open Source SW 10 I. Introduction of Open Source SW q  Benefits of Open Source Software purported by OSS Community §  Save money, save resources, increase stability, access to source code, access to skilled community of dev elopers Develop the society by sharing technology & outcomes!! 1. Technological Aspects 2. Economical Aspects 3. Business Aspects 4. Other Aspects Rapid development of high- class SW Increased stability by skilled community review Reduce technological gap t o leading proprietary SW co mpany Internalize outside SW deve loper resources Very low adoption cost Reduce SW development cost Easy to customize Reuse successful story Extend company’s product s portfolio Open up new market by pr oviding diversified services & products Improve brand image of co mpany Reduce energy Self-Satisfaction Help society
  11. 11. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-3. Benefits of Open Source SW 11 I. Introduction of Open Source SW q  Open Source Advantages over Commercial SW §  Open source’s price tag is clearly important driver. OSS is practically cheaper than commercial one. §  57% said that accessibility to source code really matters and 41% cited community code review as an imp ortant benefit over proprietary. 80% 57% 41% 20% 18% 15% 15% 15% 10% 6% 5% 0% 20% 40% 60% 80% 100% Price Source Code Access Community Code Review Don’t Know Bug Fix Turnaround Security Code Quality Best Product Functionality Easier to Adopt in Organization Other IP Protection è Price & opened source code are key factors! * Source : Barracuda Networks
  12. 12. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-3. Benefits of Open Source SW 12 I. Introduction of Open Source SW * Source : Barracuda Networks 65% 47% 44% 35% 28% 23% 17% 9% 7% 4% 3% 0% 10% 20% 30% 40% 50% 60% 70% Vendor Professional Services Easier to Adopt in Organization Automated Updates Reduced IT Support Best Product Functionality Security Code Quality Don't Know IP Protection Other Price q  Commercial Software Advantages over Open Source §  65% cited lack of professional services as a major defect point of open source software. §  47% and 44% said that commercial software is easier to adopt and more automated. Users believe that op en source software is good but lacks professional services and convenience. è Professional services & convenience are key factors!
  13. 13. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-4. Growth of Open Source SW 13 I. Introduction of Open Source SW q  Forecast of Open Source SW Growth §  “By 2012, open-source software's impact on application software will grow to $19 billion, with a fi ve-year compound annual growth rate of 44%.”, 2008 §  “By 2012, 80 per cent of all commercial software will include elements of open-source technolog y”, 2008 §  “Worldwide revenue from open source software will grow at a 22.4 percent compound annual gr owth rate to reach $8.1 billion by 2013.”, 2009 §  “Large software vendors like IBM, Sun, Dell, HP, and Oracle are making significant amounts of i ndirect revenue from their activities with and support of OSS.”, 2009 §  “The notional value of Europe’s investment in FLOSS software today is Euro 22 billion (36 billion in the US) representing 20.5% of total software investment (20% in the US)”, 2007 §  “FLOSS-related services could reach a 32% share of all IT services by 2010, and the FLOSS-re lated share of the economy could reach 4% of European GDP by 2010.”, 2007
  14. 14. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) I-4. Growth of Open Source SW 14 I. Introduction of Open Source SW <FOSS Projects Growth> * Source : Amit Deshpande et al , 2008, “The Total Growth of Open Source”, In Proceedings of the Fourth Conference on Open Source Systems (OSS 2008). <FOSS Source Codes Growth> q  Trends of Open Source Software Growth §  With cumulative growth of open source software, open source software has now reached a turning point or tipping point in terms of adoption of open source software and business.
  15. 15. II. Current Status of Open Source Business
  16. 16. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com)16 q  SW Development Model Comparison Closed Open Developers to Customers Developers to Developers <Proprietary Model> <OSS Model> §  In-house development of SW and ‘Product’ §  Before beta-version, couldn’t review SW and product §  Designed and developed by core programmers §  Community based SW development and no ‘Product’ §  SW reviewed by community members at any time §  Designed and developed by community developers In-House Development Community Development è OSS does not care about customers real needs! II-1. Comparison between Proprietary and OSS II. Current Status of Open Source Business
  17. 17. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-1. Comparison between Proprietary and OSS 17 q  Business Model Comparison : Proprietary Business Model è In-house based development of SW and ‘Whole Product’ Proprietary Company Customers Partners OEMs SW Development Engineering Product Mgmt. ‘Go To Market’ Sales, Marketing, Support, Services, Engineering, Pr oduct Mgmt. Money Whole Product §  Engineering has 2 roles : Development of SW and participate in ‘Go To Market’ program. §  Product Management ‘owns’ the product roadmap and has the responsibility of creating product. §  Sales, Marketing, Support, and Services departments are focused on the customers. §  ‘Go To Market’ program creates the ‘Whole Product’ that mainstream customers require. §  By collecting customers needs and feeding back those needs to company, this model creates and deliver value to customers Resources Software * Source : James Dixon, The Beekeeper II. Current Status of Open Source Business
  18. 18. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-1. Comparison between Proprietary and OSS 18 q  Business Model Comparison : Open Source Business Model è No ’Whole Product’ is the key barriers to adoption of OSS! Core Developers Administrators Engineers * Source : James Dixon, The Beekeepe r Community Contributions Contributions Peer Review Use Cases Testing Documentation Translations Features Forum Help Bug Fixes Roadmap Design Software ‘The Project’ §  Administrators typically design and develop ‘SW’ itself. §  Roadmap is owned by the project administrators. §  Community participate in designing, implementing and testing the software. §  Core developers and community usually focus their resources on ‘Software’ development itself for their use, fun and satisfaction. §  No ‘Go To Market’ process. Community usually does not care about ‘Whole Product’. §  No elaborate marketing strategies. II. Current Status of Open Source Business
  19. 19. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-2. Chasm and Barriers q  Open Source Software in the Chasm 19 §  Innovators and early adopters are very enthusiastic at open source software in spite of its risk and lacking of supp ort, since many of innovators and early adopters are technical person. §  However many pragmatists are still reluctant to use open source software. That’s why OSS is in chasm. ü Open Source Software in the Chasm II. Current Status of Open Source Business
  20. 20. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-2. Chasm and Barriers q  6 Barriers to Open Source Software Adoption 20 6 Barriers Open Source SW Success Story 1. Lack of formal support a nd services 2. Velocity of change 3. Lack of roadmap 4. Functional Gaps 5. License Types 6. Lack of endorsements b y independent ISVs II. Current Status of Open Source Business * Source : Ray Lane, 6 barriers to open source adoption
  21. 21. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-3. How to Cross the Chasm and Barriers? 21 Crossing The Chasm Target the Point of Attack Assemble an Invasion Force Define the Battle Launch the Invasion • Action Items : - Clear target market for ‘Whole Product’ - Focus resource on achieving leadership - Identifying market identifiers - Target customer - Compelling reason to buy ‘Product’ - Customer value proposition • Action Items : - Create the ‘Whole Product’ - Focus on customer’s problem - Job-to-be-done approach - Considering complementary assets - Partnership or In-house approach • Action Items : - Marketing strategy - Distribution channel - Pricing policy - Sales force • Action Items : - Define positioning - Focus the competition within target market - Approach pragmatist with CVP - Share CVP with company employee - Demonstrate the validity of CVP q  How to Cross the Chasm? §  Change paradigm from open source ‘ Software’ to ‘Whole Product’ II. Current Status of Open Source Business
  22. 22. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-3. How to Cross the Chasm and Barriers? 22 q  How to Cross the Barriers? 6 Barriers 1. Lack of formal support a nd services 2. Velocity of change 3. Lack of roadmap 4. Functional gaps 5. License types 6. Lack of endorsements b y independent ISVs Solutions 1. Provide professional support and se rvices 2. Provide scheduled upgrade and pat ch via subscriptions 3. Increase communication between c ustomers & developer community 4. Critical functional gaps are narrowin g down gradually 5. Offer hybrid licensing models or pro vide solution instead of SW 6. Endorsement by standards Risk related issues Risk related issues Feature issues Change Open Source Software to ‘Whole Product’ II. Current Status of Open Source Business
  23. 23. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-4. Chapter Summary 23 q  Need to Change Paradigm from Open Source ‘Software’ to ‘Whole Product’ II. Current Status of Open Source Business Software Integration Software Services Installation Training VARs Other SW/HW Certification Support <Whole Product> <Open Source SW> §  Open source ‘software’ itself is mainly for developers not for real customers. §  Customers unmet needs could not be met with ‘software’ alone. §  To monetize open source ‘software’, ‘Whole Product’ should be offered to customers. è OSS model is great at producing SW, but it doesn’t produce ‘Whole Product’ for customers!
  24. 24. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) II-4. Chapter Summary 24 q  Need to Target the Clear Market II. Current Status of Open Source Business è To offer ‘Whole Product’ to customers, OSS compan y need to focus on clear target market
  25. 25. III. Proposed Open Source Business Framework
  26. 26. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) III-1. Basic Principles III. Proposed Open Source Business Framework 26 q  Combining Advantages of Proprietary and Open Source Model into ‘Commercial’ Model Advantages of Proprietary 1. Professional service 2. Continuous support 3. Easy to use 4. Reliability 5. Functionalities Advantages of Open Source 1.  Cheaper price 2.  Source code access 3.  Community review 4.  Quicker bug fix 5.  More standard based Commercial Open Source Software ‘Whole Product’ è Commercial open source company can exist to create ‘Whole Product’ around a n open source project (software + community) and can deliver it to a mainstrea m market.
  27. 27. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) III-1. Basic Principles III. Proposed Open Source Business Framework 27 q  ‘Commercial’ Open Source Business Model as Platform Business Customers Partners OEMs Open Source Software Community Commercial Open Source Company ‘Go To Market’ Sales, Marketing, Support, Services, Engineering, Pr oduct Mgmt. + + + Community can hear more functionalities & requests Customers can gain higher quality software at a better price The bigger community the more resources
  28. 28. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) High quality open source SW High quality open source ‘Whole Product’ Attract more customers Business growth & Contribution to community Growth Of Community III-1. Basic Principles III. Proposed Open Source Business Framework 28 q  Ecosystem of ‘Commercial’ Open Source Business Model Commercial Open Source Business Model
  29. 29. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) III-1. Basic Principles III. Proposed Open Source Business Framework 29 q  Respect Open Source Principles "   Freedom of participation "   Accepting feedback from members "   Review/criticize design & code "   Various contribution "   Let community members know what ’s going on "   Communication about schedules an d hurdles "   Public defect tracking system "   Earliest draft version and updating it often "   Release of source code "   Release of software design "   Release of software roadmap "   Do not treat community members a s potential customers "   Respect autonomy & activities of co mmunity "   Community is not the part of compa ny Openness Transparency Early & Often Respect Community
  30. 30. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) III-2. Proposed Open Source Business Framework III. Proposed Open Source Business Framework 30 q  Commercial Open Source Business Model Commercial OSS C ompany Customers Partners OEMs SW Development Eng. Product Mgmt. Ecosystem Develop ‘Go To Market’ Sales, Marketing, Support, Services, Engineering, Pr oduct Mgmt. Money Whole Product Resources Software * Source : James Dixon, The Beekeeper Community Contributions Contributions Peer Review Use Cases Testing Documentation Translations Features Forum Help Bug Fixes Configuration Matrix Quotes & News Roadmap Design Software ‘The Project’ §  Community : Development of SW §  Company : Making ‘Whole Product’ and deliver it to customers §  Customers : Buy product from the company
  31. 31. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) III-2. Proposed Open Source Business Framework III. Proposed Open Source Business Framework 31 q  Value Chain Change ‘Whole Product’ Software 1 Software 2 Software 3 Software Current Proprietary Model Channel Customer 1 Customer 2 Customer 3 Whole Product Channel Customers In-house In-house & partners Outside Cost Side Money SideCost Side
  32. 32. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) III-2. Proposed Open Source Business Framework III. Proposed Open Source Business Framework 32 q  Value Chain Change ‘Whole Product’ VA Software Software Commercial Open Source Model Channel Customer 1 Customer 2 Customer 3 Whole Product Channel Customers Community In-house & partners Outside Money Side Money SideCost Side Community In-house Cost Side
  33. 33. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) III-3. Benefits III. Proposed Open Source Business Framework 33 q  Benefits of Commercial Open Source Business Framework Open Source Proprietary Commercial Open Source Rate of innovation Higher Lower Higher Visibility into product design/implementation Higher Lower Higher Quality of software Higher Lower Higher Reliability of support Lower Higher Higher Reliability of roadmap Lower Higher Higher Ownership of solution Higher Lower Higher Availability of professional services Lower Higher Higher Availability of references and case studies Lower Higher Higher Ability to prototype and ‘try before you buy’ Higher Lower Higher Cost of license or subscription Lower Higher Lower Ability to customize software Higher Lower Higher
  34. 34. IV. Conclusions
  35. 35. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) IV. Conclusions IV. Conclusions 35 q  Approach Customers with ‘Whole Product’ to Cross the Chasm & Barriers Weakness of Open Source Model • Lack of professional services • Reliabilities • Not to meet customers real job • Focused on software itself • Inconvenience Strategy for Success • Approach customers with ‘Whole Product’ • ‘Whole Product’ includes support, service, integ ration, additional SW/HW • Combining advantages of proprietary and open source model into ‘Commercial’ • Focus on CVP rather than ‘Software’
  36. 36. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) IV. Conclusions IV. Conclusions 36 q  ‘Commercial’ Open Source Model as Robust One Community :Benefit from com pany & customers Customers :High quality SW & professional ser vices Company :Reduce product dev elopment cost & incre ase its valuation ‘Commercial’ Open Source Model §  The open source community benefits directly from the full-time engineering staff that exist because of the fee- paying customers. §  The customers benefit from the increased quality of the software, quality of design, and increased traction enabled by the open source community. And they could expect professional services & support from the ‘commercial’ open source company. §  The ‘Commercial’ open source company benefits by increasing its valuation when it meets the needs of both customers and open source community. Meet the unmet needs of customers by offering core value proposition with open so urce ‘Whole Product’, that is the key success point of open source business
  37. 37. V. References
  38. 38. Open Source SW Business? Shin, Sanghee(shshin@gaia3d.com) V. References V. References 38 —  강형구, “오픈 소스 비즈니스 모델 혁신 실증 연구 : 레드햇 사례를 중심으로”, 포항공대 기술경영대학원 석사학위 논문, 2010. —  김진우, “오픈 소스 사회 현상에 대한 마케팅적 고찰”, 고려대학교 경영대학 석사학위 논문, 2008. —  권순선, “오픈 소스의 비지니스 모델”, http://kldp.org/node/80381 —  Dixon, J., “The Honey-Gatherer Model for Service/Support Commercial Open Source”, http://jamesdixon.wordpress.com/the-bees-and-the-trees/servicesupport-model/ —  Dixon, J., “The Maple Syrup Farm Model for Proprietary Software Companies”, http://jamesdixon.wordpress.com/the-bees-and-the-trees/proprietary-model/ —  Dixon, J., The Beekeeper I, II, http://wiki.pentaho.com/display/BEEKEEPER/The+Beekeeper —  Sanghee Shin, “Open source does matter”, KAIST Business School IT Strategy Class Presentation, 2010. —  Dan Farber, Summary of a Ray Lane’s Keynote, “Six barriers to open source adoption”, ZDNet, http://techupdate.zdnet.com/techupdate/stories/main/Six_barriers_to_open_source_adoption.html —  Goeffrey Moore, Crossing the Chasm, http://en.wikipedia.org/wiki/Crossing_the_Chasm —  신상희, “오픈 소스 라이선스의 이해”, 2009년 GIS 추계 공동학술대회, 2009. —  Interview with Barracuda Networks : http://news.cnet.com/8301-13505_3-9789246-16.html?tag=mncol;txt —  Amit Deshpande et al, “The Total Growth of Open Source”, In Proceedings of the Fourth Conference on Open Source Systems (OSS 2008), 2008. —  OSI(Open Source Initiative), http://www.opensource.org —  Paul Ramsey, ”Beyond Nerds Bearing Gifts”, FOSS4G 2009 Keynote address, http://2009.foss4g.org/speakers/#Paul_Ramsey

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