open source business models rafael de albuquerque ribeiro in953 – software engineering 2007.1 july...

Open Source Business ModelsRafael de Albuquerque Ribeiro <[email protected]>IN953 – Software Engineering 2007.1July 23, 2007 :: Recife – PE

What is a business model?

• ‘Business model’ is a term often used to describe the key components of a given business.

• [...] unite finer aspects of strategy, such as resource-bases, activities, structure, products and external factors.

Hedman, J. and Kalling, T. 2003. The business model concept: theoretical underpinnings and empirical illustrations.

Key points for Open Source Business Models

• IPR, Copyright and product lifecycle control• Harnessing community workforce• Tailor revenue sources according to

licensing model• Location in the value chain

“Boss, let‘s start an Open Source group”

“OK”

Him: - But it must make economic sense

Me: - Sure – no problem

*gulp*

Langham (2005) Surviving the five year itch: A tale from the trenches of European Open Source business models

Innovation Happens Elsewhere

• Lessons from the experience of setting up the an open source like project at Sun

• The JINI Project served as base for NetBeans, OpenOffice, Project JXTA, and java.net.

• “[...] Sun did not have the expertise to define Jini services in areas like printing, digital photography, [...]”

The community

6. Treating your users as co-developers7. Release early. Release often.10. treat your beta-testers as if they're

your most valuable resource11. The next best thing to having good

ideas is recognizing good ideas from your users.

Raymond, E. S. 1999 The Cathedral and the Bazaar. 1st. O'Reilly & Associates, Inc.

Open Source Paradigm Shift

• Commoditization of software

• Network-enabled collaboration

• Customizability and Software-as-Service

O’Reilly (2005) The Open Source Paradigm Shift. In Perspectives on Free and Open Source Software, eds. Feller et al., MIT Press

OSS Licenses

• Licensing is such a complex subject that we can find books about it *

• New Zealand government has developed a research in where the licenses where categorized as:– strongly infectious– weakly infectious– permissive

*Laurent, Andrew M. St. 2004. Understanding Open Source and Free Software Licensing. O'Reilly Media,Inc.State Services Commission (2006) Guide to Legal Issues in Using Open Source Software. New Zealand Government Policy. [

http://www.e.govt.nz/policy/open-source/open-source-legal/guide-to-legal-issues-in-using-open-source-software.pdf ]

Strongly infectious licensing

• Problem:– How to estimulate the return of the

enhancements of an open source software to the community or author.

• Solution: – Have the software or product licensed using

the GNU General Public License (GPL)• Known uses:

– MySQL SGBD, Cyclades products

Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

Weakly infectious licensing

• Problem:– How to estimulate the return of the

enhancements of an open source software to the community or author without the huge impositions of the GNU GPL


the GNU Lesser General Public License (LGPL) or Mozilla Public License (MPL)

• Known uses:– OpenOffice.org uses LGPL and Mozilla Firefox

uses MPL


Permissive licensing

• Problem:– How to protect the copyrights of the original

author of a software and impose that any derivative work promotes the original software


the Apache License (APL) or Berkeley Software Distribution (BSD) License

• Known uses:– PostgreSQL uses BSD and Apache HTTP

Server uses APL


Apache chairman: Days numbered for commercial software

• A license can ruin a perfectly good piece of software […] A bad license can make it so restrictive that nobody wants to use the software

Krill (2006) http://www.macworld.co.uk/news/index.cfm?RSS&NewsID=14172

Licensing and Sponsorship

• Several project characteristics may be important to OSS success including – project age– project development status– programming language– type of software developed – intended audience– reputation of participants– licensing issues– organizational involvement in the project

Stewart et al. (2005) A Preliminary Analysis of the Influences of Licensing and Organizational Sponsorship on Success in Open Source Projects. In Proceedings of the 38th Annual Hawaii International Conference on System Sciences (HICSS'05)


• 147 projects on Freshmeat.net• Dependent variables:

– Change in subscribers (popularity)– New releases (vitality)

• Independent variables– License restrictiveness– Is the project sponsored?– Initial popularity

• Control variables– Project category– Project age




• Hypothesis 1: OSS projects that use a nonrestrictive license will become more popular over time than those that use a restrictive license.

• Hypothesis 2: Sponsored OSS projects will become more popular over time than non-sponsored OSS projects.

• Hypothesis 3: OSS projects using a restrictive license will experience higher levels of vitality than those using a non-restrictive license.

• Hypothesis 4: OSS project popularity will have a positive effect on OSS project vitality.

Guide to Legal Issues in Using Open Source Software

• A guide to help New Zealand government departments assess and mitigate the legal risks of using open source software.

New Zealand’s State Services Commission (2006) [http://www.e.govt.nz/policy/open-source/open-source-legal/guide-to-legal-issues-in-using-open-source-software.pdf]

Guide to Legal Issues in Using Open Source Software

New Zealand’s State Services Commission (2006) [http://www.e.govt.nz/policy/open-source/open-source-legal/guide-to-legal-issues-in-using-open-source-software.pdf]

How open is open enough?

• Leveraging openness while keeping differentiation– Apple

• Reuse and leverage

– IBM• from platforms to applications

– Sun• opening new platforms

J. West. How open is open enough? melding proprietary and open source platform strategies. Research Policy, 32, 7 (July 2003), 1259--1285.

Towards a Product Model of Open Source Software in a Commercial Environment

Deng et al. (2003). Towards a Product Model of Open Source Software in a Commercial Environment. In 3rd International Workshop on Open Source Software Engineering. ICSE 03.

OSS Business models

• Based on the seven business models identified on (Koenig, 2004), seven business patterns were proposed

Koenig (2004) Seven open source business strategies for competitive advantage. IT Manager’s Journal

Patronage

• Problem:– Share the cost of developing a common kernel

for an specialized software accross several companies

• Solution: – Foster the development of an open source

product on top of which you can derive your specialized software

• Known uses:– IBM incentive to Eclipse Foundation


Optimization

• Problem:– Have a software which has optimal

performance in relation to the commodity layers that it runs on top

• Solution: – Adjust the software to have optimal

performance when running on top of an open source software

• Known uses:– Oracle SGBD and Linux


Dual Licensing

• Problem:– Increase installed base for a software without

loosing revenue from licensing• Solution:

– Offer the same software with two possible licensing options depending of its usage.

• Known uses:– MySQL


Embedded

• Problem:– Develop a multi-platform embedded solution

minimizing the costs • Solution:

– Develop the product on top of an existing open source solution

• Known uses:– Cyclades


Subscription

• Problem:– Have a business based on the new

perspective of the software industry where the revenues are mainly based on services

• Solution: – Give the software away for free and charge for

value added services• Known uses:

– Redhat


Hosted

• Problem:– How to offer a services platform that is

platform independent• Solution:

– Implement the services platform on top of open source software in order to reduce costs and increase interoperability

• Known uses:– Google and Amazon


Consulting

• Problem:– How to offer services for a software market

• Solution: – Implement the services platform on top of

open source software in order to reduce costs and increase interoperability

• Known uses:– Google and Amazon


Food for thought

• Questionings....

The Transformation of Open Source Software

• Open Source is shifting from community driven to business driven

• Presence of concepts such as product roadmap

• Cathedral like design and development and bazaar like distribution

Brian Fitzgerald (2006)The Transformation of Open Source Software. MIS Quarterly, Vol. 30, No. 3, 2006

The real development community?

• The myth of a global, expansive open source development community is just that: a myth.

• Even JBoss and MySQL are overwhelmingly developed by those respective companies, and not by a crowd of outside developers (95% and 85%, respectively, I believe) [Asay 2005]

• Between 80 percent and 85 percent of people working on Eclipse projects are paid salaries by their employers who send them to work for Eclipse.

Asay (2005) So you want to build an open source community... [http://asay.blogspot.com/2005_09_01_asay_archive.html]Krill (2006) Death of the software salesman? http://www.infoworld.com/article/06/02/16/75460_HNdeath_2.html

In the end…

• There is no “right” business model for Open Source– Whatever works for you, your customers and

the community you participate in, is right.

–SURE?• What should be a business model for

open source software factories?

Langham (2005) Surviving the five year itch: A tale from the trenches of European Open Source business models

Open Source Business ModelsRafael de Albuquerque Ribeiro <[email protected]>IN953 – Software Engineering 2007.1July 23, 2007 :: Recife – PE

open source business models rafael de albuquerque ribeiro in953 – software engineering 2007.1 july...

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