Business models


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Business Models using FOSS technology

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Business models

  1. 1. Open SourceBusiness Models Manuela Aparicio Carlos J. Costa ISCTE-IUL
  2. 2. Index 1. BM - Definition 2. BM - Open Source 3. Typologies 4. Dimensions 5. Players/stakeholders 6. Challenges Manuela Aparicio & Carlos Costa 2
  3. 3. Context of BMMany people confuse strategy with business modelThe expression business model appeared in the late 1980´s – People were gaining experience with pc´s and spreadsheets software – People found easy to modulate a business associating the costs and revenues of an economic activityScholars define business model as an economic underpinning of an enterprise strategy Manuela Aparicio & Carlos Costa 3
  4. 4. Strategy vs Business Model“Business model isn´t a strategy” (Harvard Business Essentials, 2005)Strategy is on a long term level planning● (Organizational, Business Level & Opwerational)A BM describes how the pieces of a business fit together● to produce profit● A BM do not describe a critical dimension of performance: competition Manuela Aparicio & Carlos Costa 4
  5. 5. Business Logic Triangle Osterwalder & Pigneur (2002, p. 2); Osterwalder (2004, p. 148) Manuela Aparicio & Carlos Costa 5
  6. 6. 1. Business Model- Definition(1/5)“A business model describes a variation of the value chain that supports every business.(...) this chain has two parts.” – “Part one includes all the activities associated with making something:designing it, purchasing raw materials, manufacturing and so on.” – “Part two includes all the activities associated with selling something: finding and reaching customers, transacting a sale, distributing the product or delivering the service”(Magretta, J.(2002), “Why Business Models Matter”, Harvard Business Review, May 2002) Manuela Aparicio & Carlos Costa 6
  7. 7. 1. Business Model- Definition(2/5)● A BM answers the following questions: ● “How does this thing work?” ● “What underlying economic logic explains how we can deliver value to customers at an appropriate cost?” (Harvard Business Essentials, Strategy, 2005) Manuela Aparicio & Carlos Costa 7
  8. 8. 1. Business Model- Definition(3/5)● “A good BM answers Peter Drucker´s age-old questions: ● “Who is the customer?” ● “And what does the customer value?”● “It also answers the fundamental questions every manager must ask:” ● “How to make money in this business?” ● “How we can deliver value to the customer at an appropriate cost?” [Magretta, J.(2002)]● Value /Versus/ Cost Manuela Aparicio & Carlos Costa 8
  9. 9. 1. Business Model- Definition(4/5)“why, how, and what means for a business to generate revenues and achieve profit objectives.” (H. Chesbrough and R.S. Rosenbloom, 2002)WhyHow Business Revenue ProfitWhat Manuela Aparicio & Carlos Costa 9
  10. 10. 1. Business Model- Definition(5/5)”A business model describes the rationale of how an organization creates, delivers and captures value” (Osterwald, 2009) Manuela Aparicio & Carlos Costa 10
  11. 11. Business Plan“A business plan includes both an explication of the business strategies and the business models underlying the business. A company’s business models, of which there may be a few, combine as a means to achieve profitability goals under the direction of an overall strategy, which itself also concerns itself with positioning and the competition.” (Tapscott, 2000) Manuela Aparicio & Carlos Costa 11
  12. 12. 2. BM(1/4) – Grátis 1- Subsídios Cruzados Anderson (2009) Produtor Produto 1 €€€ Produto 2 Pago Gartis Amostras gratis Consumidor Aulas Apple store Periodo experimentalO que é grátis: Qualquer produto que incite a que se pague poroutra coisa qualquerPara quem: Qualquer um que esteja disposto a pagar de umamaneira ou de outra Manuela Aparicio & Carlos Costa 12
  13. 13. 2. BM(2/4) – Grátis 2- Mercado das 3 Partes Anderson (2009)Espaço Publicitário Produtor €€€ Conteúdo Pago Gartis €€€ mkt Produtos Anunciante Pagos Consumidor O que é grátis: Conteúdos, serviços, software e mais Para quem: Todos Nº 800 Free E-mails gratis/lembrete Popularity Dealer/fake calls Manuela Aparicio & Carlos Costa 13
  14. 14. 2. BM(3/4) – Grátis 3- Freemium Anderson (2009) Produtor Produto Básico Produto Preemium Grátis Pago €€€ Muitos Consumidores ConsumidorO que é grátis: Tudo o que é combinado com uma versãopreemium paga SkypePara quem: Utilizadores básicos Bilhetes gratis crianças/pago o adulto Manuela Aparicio & Carlos Costa 14
  15. 15. 2. BM(4/4) – Grátis 4 Mercados não Monetários Anderson (2009) Atenção Produtor Reputação Artigos Gartis ConsumidorO que é grátis: Tudo o que as pessoas optam por oferecer semexpectativa de pagamento MIT OpenCourseWarePara quem: Todos Wikipedia Google Manuela Aparicio & Carlos Costa 15
  16. 16. 3. Typologies (Schiff, 2002) (1/2) Name Business Model ExampleLoss-leader Use open source software to maintain Netscape´s openMarket Positioner a market position for a related source Proprietary Software product. Mozilla web browser and proprietary server softwareWidget frosting Sell hardware with open source driver Apple´s MacOs X softwareAccessorising Sell accessories for open source O´Reilly and software such as documentation Associates Manuela Aparicio & Carlos Costa 16
  17. 17. 3. Typologies (Schiff, 2002) (2/2) Name Business Model ExampleFree the future, Sell closed source software with a Alladin´s Ghostscriptsell the present license that makes it open source after a specified time periodFree the software, Sell other developers a brand that Oracle (Sun StarOffice)sell the brand certifies their implementation of the open source technologies compatibility with othersFree the Develop an open source product that N/Asoftware, sell the receives proprietary content that thecontent sells Manuela Aparicio & Carlos Costa 17
  18. 18. 3. Typologies (Koenig, 2004) (1/3) Name Business Model ExampleOptimizing Optimizing the adjacent software Oracle(license based) layers, where applications are optimized to achieve greater value to the customerDual License The offer of free use of the software My SQL(license based) with some limitations included, or alternatively offers for free commercial distribution rights and a larger set of features. The free version do not allow code use for commercial applicationsConsulting Removing nearly all licensing costs Systems Integrator from a proposed solution and had 10X integration and maintenance consulting fees. Manuela Aparicio & Carlos Costa 18
  19. 19. 3. Typologies (Koenig, 2004) (2/3) Name Business Model Example Need leadership and consistency. Objectives are to drive standards adoption and enter in entrenched markets. It´s expected that a de-facto standard and supporting community will converge around that contribution. Other objective is to commoditize a particular layer of the software stack, Patronage eliminate competitors that are IBM extracting revenue from that layer (Microsoft with Windows for instance). This creates an opportunity to offer above the Open Source Software a value higher up the stack through clustering, availability, provisioning, security, and all management software. Manuela Aparicio & Carlos Costa 19
  20. 20. 3. Typologies (Koenig, 2004) (3/3) Name Business Model Example Using open source software to keep infrastructure costs low and custom adaptable. “The GPL license allows them to own and keep secret the intellectual property modifications they create, and Hosting as long as they don´t distribute the software, they don´t have to publicly share the modifications” Google .com keeping their competitive advantage. Present in service offers like Application Service Provider, Transactions or Advertising. Subscription fees of technical support andSubscription maintenance that include configuration support Red Hat and updates and upgrades of technology. Using Open Source Software like Linux Operating System in several kinds of systems like TV set-top boxes, cells, servers, etc. and TivoEmbedded developing software over it that creates the real Netscreen value for the customer Manuela Aparicio & Carlos Costa 20
  21. 21. 4. DimensionsMain license model – Twin licensing – OSS and Commercial Versions – Badgeware – Pure OSSMain revenue Generation – Selection – ITSC – Subscription – Licensing Manuela Aparicio & Carlos Costa 21
  22. 22. Main License ModelTwin licensing- the same software code distributed under the GPL and a commercial license.OSS and Commercial Versions- this model distinguish between a basic FLOSS software and a commercial version, based on the libre one but with the addition of proprietary plugins.Badgeware- Common Public Attribution License ("CPAL") the Original Developer may include […] a requirement that each time an Executable and Source Code or a Larger Work is launched or initially run […] a prominent display of the Original Developers Attribution InformationPure OSS- companies that created, or maintain a specific software project, and use a pure FLOSS license to distribute it. The main revenues are provided from services like training and consulting Manuela Aparicio & Carlos Costa 22
  23. 23. Main Revenue GenerationSelection- companies in this class are not strictly developers, but provide consulting and selection/evaluation services on a wide range of projectITSC- The main revenues are provided from services like training and consultingSubscription- Fee payment to access servicesLicensing- Fee payment to use the software, sometimes there are two licenses one that is free and another that is payed (premium versions for example) Manuela Aparicio & Carlos Costa 23
  24. 24. Examples- Twin License Manuela Aparicio & Carlos Costa 24
  25. 25. Examples- OSS/Commercial Manuela Aparicio & Carlos Costa 25
  26. 26. Examples- Badgware Manuela Aparicio & Carlos Costa 26
  27. 27. Examples- Product Specialists Manuela Aparicio & Carlos Costa 27
  28. 28. Examples- Platform Providers/selection/ Consulting/ Others Manuela Aparicio & Carlos Costa 28
  29. 29. 5. Players/Stakeholders (Costa, 2009) Government IT Suppliers Users/customers Education Manuela Aparicio & Carlos Costa 29
  30. 30. 5. Players/Stakeholders GovernmentUser Customers IT Suppliers Users/ customers – fee Education (Costa, 2009) Manuela Aparicio & Carlos Costa 30
  31. 31. 5. Players/Stakeholders GovernmentGovernment IT Suppliers Users/ customers – Government Education – Local governmentGovernment – Financial perspective • Budget (Costa, 2009) – Economic perspective • Economical growth • Imports/exports Manuela Aparicio & Carlos Costa 31
  32. 32. 5. Players/Stakeholders GovernmentIT Supplyers IT Suppliers Users/ customers – Already mentioned Education (Costa, 2009) Manuela Aparicio & Carlos Costa 32
  33. 33. 5. Players/Stakeholders Government Education Users/ – Level IT Suppliers customers • Universities Education • Professional Education • ... – Type • End users education • Developers education • .. (Costa, 2009) Manuela Aparicio & Carlos Costa 33
  34. 34. 5. Players/Stakeholders Internal Players – Users – Technical Support – Developers – Decisors – ... (Costa, 2009) Manuela Aparicio & Carlos Costa 34
  35. 35. 6. ChallengesOpen Source Business Models – Mapping Portuguese EconomyOpen Source - Impact Evaluation of Political DecisionsOpen Source Business Models – Case studies (Costa, 2009) Manuela Aparicio & Carlos Costa 35
  36. 36. Osterwalds´ 9 BM BuildingBlocks (1/4) Manuela Aparicio & Carlos Costa 36
  37. 37. Osterwalds´ 9 BM BuildingBlocks (2/4) Manuela Aparicio & Carlos Costa 37
  38. 38. Osterwalds´ 9 BM BuildingBlocks (3/4) Manuela Aparicio & Carlos Costa 38
  39. 39. Osterwalds´ 9 BM BuildingBlocks (4/4) Manuela Aparicio & Carlos Costa 39
  40. 40. Creating Value to the Customer(Osterwalder, 2009)Value Creation: – Newness Types of Customer – Performance Segments: – Customization – Mass Market – Getting the job done – Niche Market – Design – Segmented – Brand/ status – Diversified – Price – Cost Reduction – Risk Reduction – Accessibility – Convenience Manuela Aparicio & Carlos Costa 40
  41. 41. Channels (1/2) (Osterwalder,2009)Functions: – Raising awareness among customers about a company’s – products and services – Helping customers evaluate a company’s Value Proposition – Allowing customers to purchase specific products and services – Delivering a Value Proposition to customers – Providing post-purchase customer support Manuela Aparicio & Carlos Costa 41
  42. 42. Channels (2/2) (Osterwalder,2009) Manuela Aparicio & Carlos Costa 42
  43. 43. Relationship (1/2) (Osterwalder,2009) Objectives: ● Customer acquisition • Customer retention • Boosting sales (upselling) Manuela Aparicio & Carlos Costa 43
  44. 44. Relationship (2/2) (Osterwalder,2009) Types of Relationships: ● Personnal Assistance ● Dedicated Personnal Assistence ● Self-Service ● Automated service ● Communities ● Co-Creation Manuela Aparicio & Carlos Costa 44
  45. 45. Revenue (2/2) (Osterwalder,2009) Types of Revenues:● Asset sale●Services●Licensing●Advertising Manuela Aparicio & Carlos Costa 45
  46. 46. Manuela Aparicio & Carlos Costa 46
  47. 47. ReferencesCarlos Costa, Professor and Reseacher at Iscte - Iul | SlideShare N.d., Manuela Aparicio & Carlos Costa 47