Open Source Software
How and Why IT User Companies Sponsor Open Source
- Abstract: Open source is not only a type of software, it is also a novel development and inter-firm collaboration model. IT user companies can use this collaboration model to counter increasing costs and undesired vendor lock-in. An increasing number of IT user companies in various industries are sponsoring open source and are creating open source user foundations to achieve these goals. This talk introduces the concept of open source user foundations and, using current examples, explains how existing IT user companies are working towards the goal of better controlling their IT destiny.
The Single-Vendor Commercial Open Source Business Model
- Open source is changing how software is built and how money is made. Software firms have found that open source can be used as a disruptive business strategy to win new or existing markets.
- Commercial software vendors employing open source strategies need to understand new revenue models and follow a new intellectual rights practice. Most importantly, vendors need to learn new skills of open source community engagement and management. This talk explains the single-vendor commercial open source business model, including dual-licensing and the open core model. The talk explains business processes, business functions, best practices and how they form a coherent whole to win in the market place.
- Abstract (500 characters): Open source is changing how software is built and how money is made.
- Software firms have found that open source can be used as a disruptive business strategy to win new or existing markets. This talk explains the single-vendor commercial open source business model, including dual-licensing and the open core model. The talk explains business processes, business functions, best practices and how they form a coherent whole to win in the market place.
Open source has become commercial. With commercial interests, it has become important to understand how for-profit entities steer or control projects in support of their business model. First, this talk describes the main control points and steering mechanisms in open source software projects. Next, it summarizes the main open source business models and their benefits. Finally, it describes patterns of combining and utilizing control points and steering mechanisms in support of these business models.
The Profit in Funding Open
Open source serves a purpose for the company sponsoring it.
1) Win sales more easily (the single-vendor open source business model). Here, a for-profit software vendor open sources some or all of its software to get potential customers to use the software. Once the customer realizes they need warranties and services, the vendor will already be known to the customer, have created trust, and is more likely to win in a competitive sales situation.
- The canonical example is MySQL the company, with the product of the same name. By providing its database to the world for free, MySQL was able to get its foot in the door in an otherwise highly conservative market. This foot in the door helped MySQL to sell more effectively by building on the early trust it had gained. MySQL was bought by Sun Microsystems for $1B.
2) Prevent a monopolist from taking the market (open source developer foundations). Here software vendors join forces to build a viable alternative to the software of a budding monopolist. They create an open source (developer) foundation, because it has proved to be a well-working tool for working together effectively, establishing good project governance, and managing conflicts of interest.
- An example is the OpenStack Foundation. Amazon has been leading the charge in cloud computing, trailed only by Google and Microsoft, with everyone else being left behind. OpenStack is an attempt by everyone but Amazon to build software that can run data-centers of any size, irrespective of capitalization of the provider. This way, there will be viable alternatives to an otherwise dominant Amazon.
3) Take charge of your software destiny (IT user foundations). Here, users of software join forces to sponsor the development of a viable alternative to the software of their current software supplier. They create an IT user foundation (consortium), similar to how software vendors join forces to create a developer foundation.
- An example is the OpenKonsequenz consortium of energy companies that I helped found. Through the open source software this consortium sponsors, its member will be able to avoid or keep down license fees, innovate faster than possible before, and procure services from suppliers of their choice.