selasturkiye open source research report by sari viskari
TRANSCRIPT
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Jarno Huurinainen, Marko Torkkeli,
Sari Viskari & Pekka Salmi
TEKNISTALOUDELLINEN TIEDEKUNTA
TUOTANTOTALOUDEN OSASTO
FACULTY OF TECHNOLOGY MANAGEMENTDEPARTMENT OF INDUSTRIAL MANAGEMENT
TUTKIMUSRAPORTTI 174
RESEARCH REPORT
LAPPEENRANNAN
TEKNILLINEN YLIOPISTO
LAPPEENRANTA
UNIVERSITY OF TECHNOLOGY
Motives, Circumstances and
Driving Forces for Open Innovation:
Using Open Source to run profitable business
CASE: Nokia 770 (analysis at product level)
CASE: IBM (analysis at company level)
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TUTKIMUSRAPORTTI RESEARCH REPOR
Jarno Huurinainen, Marko Torkkeli, Sari Viskari & Pe
Motives, Circumstances and
Driving Forces for Open Innovation:Using Open Source to run profitable busine
CASE: Nokia 770 (analysis at product level
CASE: IBM (analysis at company level)
Tuotantotalouden osastoDepartment of Industrial Engineering and Management
Lappeenrannan teknillinen yliopistoLappeenranta University of Technology
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Abstract
The open innovation model highlights the importance of using a wid
knowledge for a companys innovation activities, including customers, co
and academics. Research stresses the significance of balancing the use
knowledge in R&D-processes, because critical knowledge can come f
Commercial companies have to invest in basic research (exploration)
information better, and exploit this knowledge better in their business (expl
called the companys absorptive capacity. Todays companies need this cap
several tied factors which erode the viability of the old closed innovation mo
For many years now, the dominant business approach employed by th
industry has been proprietary software. Now this traditional approach is cha
develop software is appearing. Open source development is the most prom
external sources in R&D. Companies are encouraging this new way of devel
when simultaneously building profitable business models around it. Th
companies (Nokia, IBM), which use the open source in their business.
cycles, low costs of new releases, and a great number of ideas are com
commercial companies near to open source communities. There are als
including technological convergence, growing product complexity, and
software, which push companies to consider the open innovation model an
part of this new approach.
Open source development is also an interesting territory from the business p
competitive advantage around open source business is very challenging, bu
venture capitalist, the most famous model is the open architecture (stand
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Tiivistelm
Avoimen innovaation malli korostaa erilaisten ulkoisten tiedonlhteid
kilpailijoiden, yliopistojen ja yhteistyyritysten kytt yrityksen innovaati
korostaa sisisten ja ulkoisten tiedonlhteiden kytn tasapain
innovaatiotoiminnassa, koska kriittinen tietopoma voidaan saavuttaa eri
tulee investoida edelleen perustutkimukseen ymmrtkseen paremmin yr
tietopoman merkityksen. Hydyntkseen ulkopuolista tietoa omassa lii
yrityksen kehitt omaa absorptiokykyn. Yritykset tarvitsevat tt
innovaatiomallin elinkelpoisuutta heikentvt tekijt korostuvat entisestn.
Suljettuun lhdekoodiin perustuvat ohjelmistot ovat hallinneet kaupallist
useiden vuosien ajan. Nyt perinteinen lhestymistapa on muuttumassa. A
perustuva kehittminen on tunnetuin esimerkki ulkoisten tietolht
ohjelmistojen kehitystyss. Yritykset ovat edistmss tt lhestym
rakentaen samalla tuottavia liiketoimintamalleja avoimen lhdekoodin ymp
kaksi yrityst (Nokia, IBM), jotka kyttvt avointa lhdekoodia oma
Lyhyemmt tuotekehityssyklit, alhaisemmat kustannukset ja monipuolise
yleisi syit siirty kohti avoimen lhdekoodin yhteisj. Niden hytyj
markkinatekijit, kuten teknologinen konvergenssi, kasvavat tuotevaatimuk
lisntyminen) ja ohjelmistojen yhteensopivuusvaatimukset, jotka
harkitsemaan avoimen innovaation mallia ja avoimen lhdekoodin k
lhestymistapaa. Avoimen lhdekoodin kytt on kiinnostava tutkimusa
nkkulmasta. Kilpailuedun rakentaminen avoimeen lhdekoodiin per
ymprille on haastavaa, muttei mahdotonta. Riskipomasijoittajien mukaan
kehittmismalli on avoimeen arkkitehtuuriin ja standardeihin perustuva
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TABLE OF CONTENTS
1 INTRODUCTION..............................................................................
1.1 Motives and background...............................................................1.2 Research strategy..........................................................................1.3 Key concepts of the study.............................................................
1.3.1 Closed and open innovation paradigms .................................1.3.2 Open source and open architecture........................................
2 MOTIVES FOR OPEN INNOVATION STRATEGY .....................
2.1 Balance between internal and external knowledge ........................2.2 Viability of the closed innovation paradigm..................................2.3 Benefits and risks of open innovation ...........................................2.4 Motives for open source development...........................................
3 MARKET FACTORS IN THE ICT-INDUSTRY.............................3.1 The evolution of the ICT-industry.................................................3.2 Driving forces...............................................................................
4 GUIDING MODEL OF OS DEVELOPMENT ................................4.1 Guiding model for creating an effective OS environment..............4.2 Significance of the OS platform group..........................................
5 THE INFLUENCE OF OS DEVELOPMENT ON BUSINESS MO5.1 Definitions of the business model .................................................5.2 Components of the business model ...............................................5.3 How openness affects the business model.....................................5.4 Types of OS initiatives .................................................................
6 CASE: NOKIA 770 INTERNET TABLET.......................................6.1 The influence of OI-paradigm in Nokia ........................................6.2 Technology review: Maemo.org & 770s software architecture.....6.3 Nokias motives for OS development............................................6.4 Nokias OS strategy in the 770 project..........................................6.5 Business review: maximal customer value with low R&D costs....
7 CASE: IBM.........................................................................................
7.1 The influence of the OI paradigm in IBM .....................................7.2 Motives, principles & market factors pushing IBM to OS-business7.3 New schizophrenic strategy.......................................................7.4 Benefits and drawbacks for IBM...................................................7.5 How IBM profits from the open source?.......................................
8 CONCLUSIONS ................................................................................
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List of abbreviations
770 Nokia 770 Internet Tablet (www.nokia.com)
ICT Information and Communicat ion Technologies
IP Intellectual Property
IPR Intellectual Property Right
OI Open Innovation
OS Open Source
OSS Open Source Software
R&D Research and Development
VC Venture Capital
Acknowledgements
Funding for this research project was provided by the Finnish Funding Age
Innovation and Nokia Corporation. The authors would like to thank the fol
contribution in the research: Ari Jaaksi from Nokia and Olli-Pekka Hilmola
the Kouvola Research Unit of Lappeenranta University of Technology. Al
responsibility.
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1 INTRODUCTION
1.1 Motives and background
Due to the increased competition in the market and the complex technolog
of uncertainty, the development process for innovations has been challeng
outside the firms boundaries. Several studies have touched this issue fromthe 90s, e.g. Hagedoorn and Shekenraad (1994) from the strategic alliance
and Morris (1999) by presenting the transition to new ways of doing busine
economy that offers new learning opportunities for individuals and new way
resource deployment throughout society, i.e. the fourth generation R&
authors call it. Christensen (1997) found out that established, innovative, companies may ignore or attend belatedly to technological innovation
importance. Established companies are aggressive in their activities to sust
problem lies in their ability to confront downward vision and mobility, in
trajectory. Companies that were once good at finding new applications
become unable to cope with new emerging technologies. March's learningparticular his concepts of exploration and exploitation give a perspec
challenge. Organizations are constantly engaged in conflicting processes tha
efficiency. Exploration (dynamic) is about searching for new option
conducting research. Exploitation (static) is about refining existing proce
things, only better, and reaping value from what is already known. Both
parts of learning are needed for knowledge, but they must be handled
knowledge is transferred within organizational boundaries, the organization
own experience. If, however, knowledge is transferred across organiz
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customers, rivals, academics, and collaborative firms in unrelated industrie
using creative methods to exploit a companys resulting intellectual property
For many years the dominant business approach employed by commercia
been proprietary software. Now the traditional approach is changing and
software is appearing. The industrial giants Nokia and IBM have change
proprietary rights and launched major projects to develop and use open sour
of the open source communities has raised many essential questions.
1.2 Research strategy
This study concerns the motives, circumstances, and driving forces for OI
studies. We take a detailed look at the open innovation model, where we e
as way to create value from new innovations. Our goal is to clarify the imp
on the corporation in the light of the open source and the business mod
research answers these questions by using literature analysis and the case s
our data is from public sources, such as academic and other literature, busine
websites, and other web-sources.
Technology
BusinessSosiology
Open Source Software Management
Open
Innovation
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these two giants use the open source to create new business opportuniti
innovation policy fits into the proposed theoretical framework. We exam
different levels in the case studies. First, we study Nokias new Internet Tab
and second, IBM at the corporate level, focusing on its software busi
corporations on the general level, we can state that IBM is a progressive
whereas Nokia is just an upward newbie.
Chapter two outlines the motives for open innovation and open source
consider the balance between a companys in-house R&D functions and
firms boundaries. In chapter three we take a detailed look at market factors
identify critical driving forces which press companies towards (more)
activities. Chapter four describes underlying factors for creating an
developing environment. Chapter five shows, with case studies and literatu
affects companies business models.
The research questions are:
1. What are the motives to use the open innovation model in innovation
a. Why do companies consider the open source as an option for
model?
2. Which market factors force companies to the OI model and the direc
3. How to create an open source development environment that operate
of the open source code?
4. How does the open source model affect the corporate business mode
a. What are the main components of the business model and how
change?
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Figure 2. Research strategy
1.3 Key concepts of the study
1.3.1 Closed and open innovation paradigms
The closed innovation paradigm is a traditional, fundamentally inwardly
model assumes that ideas (invented inside) flow into the firms innovation
flow out to the market on the right. Projects are filtered during research and
and survived ideas are transferred into development and then taken to th
2003a, xxi). Firms that use the closed innovation model do not rely
innovations. Everything is developed inside the corporate boundaries and in
by intellectual property (IP) rights. The approach is illustrated in figure 3.
Boundary of the Firm
Research
Closed
Innovation
Open
InnovationOpen Source
Research
Questions
Empiric Stu
Nokiaatproduct lev
IBMat
corporate le
Innovation
F
R
AM
E
W
O
R
K
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Open innovation encourages the use of and explores systematically a wid
external sources of knowledge for innovation opportunities, consciously int
with the companys capabilities and resources, and exploiting broadly thes
multiple channels (Chesbrough, 2003b). Open innovation brings in ext
internal ones and uses external business models. It opens new possibilities t
basic idea is described in figure 4.
Figure 4. Open innovation model (Chesbrough, 2003a, xxv)
Figure 4 shows that ideas can still come from the companys research pr
come from outside the firms boundaries. In addition, projects can seep out
research stage or later in the development stage. (Chesbrough, 2003a, xxiv)
Boundary of the Firm
Research Develo ment
Research
Projects
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source code, alter and re-distribute it. In some cases commercial compan
proprietary products based on open source ones.
There are many important terms in the field of the open source. First we wi
source development, which means developing an environment where ev
source development eliminates the ability of vendors to compete with the
the details of implementation are visible to all (West, 2003). The basic ide
(code) in order to ensure maximum effectiveness and innovativeness by the
Open source development is based on communities, which are used to gener
for new software creation, and to improve mature versions. The best known
development is Linux, which has been a contender to proprietary softwa
period of time.
Figure 5. The idea of open architecture
Corp.Patent
Portfolio
Corp.Patent
Portfolio
Corp.Patent
Portfolio
Corp.Patent
Portfolio
Corp.Patent
Portfolio
Openarchitecture- Standards- Platforms
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Figure 6. The difference between open architecture and open source.
Open source code (X%)- standards, platform
Proprietary code (100-X%)- base of competitive advantag
Open architecture:
Open source:
Open source code (100%)- full access to source code, no proprietary rights
Open source rate (appropriate ratio)
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2 MOTIVES FOR OPEN INNOVATION STRATEG
Chapter two focuses on the meaning of internal and external knowledge to
processes, and the significance of exploration and exploitation. Then so
viability of closed innovation paradigm are discussed. Finally the main mot
development for new business opportunity creation are examined.
2.1 Balance between internal and external knowledge
The R&D process needs input from a wide range of sources to ensure th
firm. Critical knowledge can come from very different sources and kLevinthal (1990) argue that the ability of a company to recognize the
knowledge, assimilate it, and apply it to commercial ends is critical to its
They label capability as a firms absorptive capacity, and suggest that it is
firms level of prior related knowledge and diversity of background.
According to March (1991), it is important to achieve a balance be
exploitation. Exploration includes things captured by terms such as search
experimentation, play, flexibility, discovery and innovation. Exploitation
refinement, choice, production, efficiency, selection, implementation and
that lean to exploration instead of exploitation are likely to suffer the c
without gaining many of its benefits. March (1991) also argues that firm
processes, by refining exploitation more rapidly than exploration, are likely
the short run but self-destructive in the long term. According to these arg
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this information is a critical component of innovative capabilities. Comp
own R&D are typically better in using the available external information. In
capacity may be a by-product of the manufacturing operations. The sources
are described in figure 7. The figure illustrates the linkages between abso
major sources of technological knowledge: own R&D, spillovers from c
industry.
Figure 7. Sources of technical knowledge (Cohen & Levinthal, 1990)
In the model, the absorptive capacity determines the extent to which the ex
be utilized, and the absorptive capability itself depends on the companys owexploitation of competitors research findings is realized through the in
absorptive capacity with rivals spillovers. Interaction signifies that a firm
external information passively. Rather, to utilize the accessible R&D outpu
company invests its absorptive capacity by conducting R&D. The learn
learning, quantity of available knowledge) influence the effects of appropria
opportunity conditions on R&D.
It has been argued by many scholars that external and internal sources of k
Own R&D Technic
knowled
Spillovers of competitors knowledgeExtraindustry knowledge
Absorptive Capacity
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(not invented here). Today the problem is that you are not re-inventing t
2003a, 30, 49, 177)
Internal efforts will be multiplied many times through embracing of othe
This can be called a powerful value creation engine. But the engine doe
company is capable of capturing value. Internal R&D activities are needed
information together and to exploit the companys core capabilities w
interdependencies in nascent technologies to create architectures and to
From a commercial point of view, the companys business model will defi
value chain the firm will need to provide internally, and it will link
surrounding value network that creates and delivers that value to the c
2003a, 177-178)
The above way of thinking can also be transferred to software industry. To
for the customers, the company will need mature platforms on which
commercial products. Companies use external sources of knowledg
development and a strong platform, and their own R&D to create valuabl
around these standards. Internal R&D is still very important, only its role h
external sources of knowledge on software development ensures that yo
blocks and you are not re-inventing any wheels.
2.2 Viability of the closed innovation paradigm
What differentiates the closed innovation paradigm from the open one is b
implementing the latter interact with external entities in terms of the efficie
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Cusumano, 2004; Greenemeier, 2005). Several closely tied factors that er
closed innovation paradigm are described in table 1.
Table 1. Four main factors eroding the viability of the closed innovation par
2003a, xii-xxiv, 34-41)
Universities p
professionals
Learning by hAvailability of talent Increasing availability and mobility ofskilled workers
Cannot count
around
Venture CapitalVenture capital -funded start-ups are a
significant source of innovation
Start-ups offe
schemes for to
Faster produc
options for co
driving innovaGetting ideas
off the shelf
Talented professionals find VC funding
to commercialize ideas on the shelf
Ideas put on t
faster
On one hand,
investmentCapability of
external suppliers
External suppliers can increasingly offer
solutions of equal or superior quality to
in-house developmentOn the other h
leveling the pl
We can say that open innovation is a phenomenon which has become mor
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2.3 Benefits and risks of open innovation
The open innovation model offers wider sources of innovation to a com
Chesbrough (2003a, 2003b) presents the key benefits of open innovation:
- Greater effectiveness of R&D
- Cost and time savings in R&D by using external sources of innovatio
- Capitalizing on technologies sitting on the shelf, extra revenues
- Wider source of innovations for new products
- Decreased risk of missing market opportunities
The new method exploits the diffusion of knowledge by external research
markets for a companys own technologies and manages IP proactively. Th
considerable risks and issues in open innovation that will have to be m
2003a). Open innovation requires strategic changes in R&D and business
reward system and recruiting. Usually, the change towards openness is
shock to the system, when the fact that the business as usual is no l
function is noticed (Chesbrough, 2006, 188).
As an example, while alliances are important source of external knowle
complex to manage (Harrigan, 1985; Kogut et al., 1992; Uzzi, 1997; Gom
complexity of relationships, ideas and projects increases significantly
innovation. That requires new capabilities and competences in R&D.
As the role of R&D is changed, it may become short-sighted and the
jeopardized. Due to strict and short cycle times of products R&D projects a
managers try to minimize risks External sources of innovation are much ri
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technologies is increased, even if it is not the case. On the other hand,
technologies are commercialized externally, the fear is that someone e
technology and it means automatically that we have lost.
When companies cooperate with each other in R&D, it usually requires
property and business secrets. Collaboration always containsIPR risks. In
licensing technologies and IP, there is the risk of contamination. The custom
the technology/IP before buying it, but if the seller tells about the tech
technology/IP to customer without any compensation. The emergence
markets of IP (intermediaries) will help to reduce these risks. (Chesbrough,
Even if the Open Innovation has gained a lot of attention lately and man
about it, it is still very new phenomena and implementations of the Open
Many researches have been made about the subject, but the proofs of b
anecdotal.
2.4 Motives for open source development
Open source development is the most prominent example of the revolutioni
innovation process. The open source approach is a rapidly growing phen
software development by independent software programmers. Programmers
where they develop lines of code to add to the initial source code in order tapplicability of a program, or completely new applications. The basic ide
develop software outside company boundaries. The code is available to out
fix bugs or bring new features, as well as create new code to the open softw
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accepted system architecture and language, the communication of which is
and technological solutions, as well as the strong incentive to beat pr
Microsofts products.
In other words, open source development means that a company has to
opening gateways to the external resources, to let valuable knowledge and
the outside in order to create opportunities for co-operative innovation
2003b; Gassman and Enkel, 2004). The whole approach is based on exploita
bring new innovations to the markets faster than the competitors.
Open source communities have been studied with survey instruments in pri
technical problems that developers seek to address, Ghosh et al. (2002)
functions (of their sample) are: trying to improve the products of other dev
a good product idea (27%) and solving problem that could not be solved
(30%).
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3 MARKET FACTORS IN THE ICT-INDUSTRY
After we have defined the key concepts and main motives of open innovati
the factors which push companies to an open innovation strategy. In this s
forces in the ICT industry and also outside the industry boundaries.
3.1 The evolution of the ICT-industry
The trend towards open source software is an example of a bigger develop
dependent industries. It is an emerging approach towards collaboration and
times seems to work around the traditional intellectual property system,
fostered by it.
Some key players in the IT-industry fear that patent rights have swung so far
they risk undermining innovation. In the whole industry, there can be se
indicate that many of the key players in the industry want to move to a
ensure innovativeness and restore the balance between openness and pr
balance goes too far in one direction, the whole industry begins to wither, w
of many companies.
However some factors can be identified that affect the open source -paradFirst it is essential to clarify the term interoperability. Interoperability
systems and software in the market (Forelle, 2006; Mamudi, 2005). Accor
companies are forced to develop wide standards to ensure maximum valu
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interchangeable. Scattering is increasing all the time because of VC-fundin
create open platforms (Cusumano, 2004). Universal platform is needed tha
companies, with small resources, can collaborate and develop universal
which create greater value to customers.
3.2 Driving forces
There are also other factors, which push companies to open development
effect also outside the industry boundaries. These driving forces shape comp
change their innovation strategy.
First, it is essential to step into technological convergence, which a
Customers want services and products as a package deal with maxim
companies to develop products and services with multiple technologies (
These package deals contain also convergence between hardware an
examples are iPod and iTunes). Technological convergence demands c
standards, and the key for many firms is open development and col
academics, suppliers and customers. What will this demand? One possible a
in different sectors have to change their innovation strategies and develop o
products in potential markets.
Another significance force is the growing complexity (The Economist, 20
features in their products and services to maintain their competitive advant
use of innovations developed by other companies. And when different c
together to make their systems work together, open source and open a
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of software is intense, big companies have received a lot ofnegative public
portfolios. To combat this, many companies have released software patents t
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4 GUIDING MODEL OF OS DEVELOPMENT
In this part, we take a look at the critical parts of open source development
interest groups which have a significant meaning in the open source produc
examine the significance of the platform group around OS development.
4.1 Guiding model for creating an effective OS environment
Communities are the core of new innovations, when discussing open source
Capobianco, 2005). When we look at open source development historically,
source initiatives have mainly focused on the developing community,
sponsored the open source initiatives and the open source products deve
Nowadays there can be seen also other interest groups. When we combi
significant groups together, we end up with an integrated framework, describ
Customer
Group
(Products &Solutions)
Open Source
Community
Commercial
O i i
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The framework described in figure 8 is meant as a basic guiding model for i
practice within a commercial organization, based on open source. The main
is that it describes the various interactions which take place between
customers, community, domain experts and technology gurus, and ensu
account when formulating a successful open source strategy with the h
communities. Domain experts are industry experts with a remarkable exper
the perspective of the end user and customer. Their target is to maximiz
developing a high level design of the software. Gurus are technology sta
considerable amount of time working with technology, and have remarkab
significance of technology gurus is emphasized when fixing a critical bug i
new features over an existing code base. (Pal & Madanmohan, 2001)
4.2 Significance of the OS platform group
The most interesting part of the basic guiding model (figure 8) is the
commercial company and the open source community. The interface is s
figure 9.
Part of theOpen SourceCommunityworking onthe platformcomponent
Group working on OS platform component
Group within theOrganizationworking on
Open Sourceplatform
component
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Figure 9 describes the boundaries of the platform component working
divided inside and outside the commercial company. The most important
groups (OS platform group/proprietary end-user group) use the same
environment. When the community and the commercial company use the
environment it is possible to develop coding standards and then more eff
bugs). Complex models and common development tools raise naturally an
is it possible to manage open source platform group effectively? The answer
developing environments. The project management systems provide disc
lists, file download systems, bug tracking systems and news posting systems
When creating an open source strategy and business model, it is fundam
significance of communities. In open source development, the companys s
thing that matters more is the community size and the popularity of th
(Onetti & Capobianco, 2005). A significant part of the activities are actual
inside the community, lowering the cost of producing the software and inc
larger community ensures more ideas and resources, which means more bus
still the community has to be managed effectively, so the benefits do not ris
of the community increases. However, wide open source communities wil
build lean companies, which are quicker to improve and adapt with market s
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5 THE INFLUENCE OF OS DEVELOPMENT ON
MODEL RENEWAL
The open source is an evolving model of development in many commercial
model requires a viewpoint that is different from the proprietary one. The ne
affects also the companys business model. First we have to clarify what about the modern business model and then we can examine the effects of OS
5.1 Definitions of the business model
In the literature the concept of a business the model is often vaguely defined
example the terms strategy and business model interchangeably to r
believe gives them a competitive advantage. One can also often see descript
focusing on cash flows, but forgetting the simple fact of how cash enter
place - from paying customers. One possible explanation for the lack of
business models is that the business model is very much an intrinsic featur
organization, and hence hard to perceive as separate from the business ope
(Gaarder 2003).
There have been many attempts to define the business model. According to
basically two kinds of definitions: 1) definitions that explain what the p
model is in simple but quite comprehensive words, and 2) definitions t
elements of the model, and possibly their interrelationships. Table 2 below
frequently quoted definitions In general all business models seek to addre
22
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Table 2. Some definitions of the business model.
Timmers (1998) An architecture for the product, service and information
description of the various business actors and their roles
potential benefits for the various business actors, and de
revenues.
Magretta (1998, 2002) The business model tells a logical story, explaining who
they value, and how to make money by providing them
model also has to pass the number test: a business mode
assumptions about customers are tied to sound economi
Rappa (2001) The business model is the method of doing business by
sustain itself that is, generate revenue. The business m
company makes money by specifying where it is positio
Amit and Zott (2001) The business model depicts the content, structure, and g
designed to create value through the exploitation of busi
business model includes the design of:
Transaction content: goods/ services; resources
Transaction structure: parties involved; linka
mechanisms
Transaction governance; flow control.
The business model describes the steps that are performe
transactions.
5.2 Components of the business model
Researchers have recently started to decompose business models into th
components have also been referred to as elements, functions, att
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23
Figure 10. Hamel's business model framework
According to Hamel (2001), new business concepts are used to generate n
existing business models. Business concept innovation is the capacity
business models in ways that create new value for customers, rude surpris
new wealth for investors. Firm's boundaries function as a bridge betwee
resources and its value network. This intermediating component refers to
been made about what the firm does and what it contracts out to the value ne
Some authors decompose the business model in a quite a similar way. F
Tucci (2000) define four vertical dimensions of the business model (missi
and revenues) and two horizontal dimensions (technology and legal issues
(2001) in turn specify the following components of the business model: 1) c
3) pricing, 4) revenue source, 5) connected activities, 6) implementation
sustainability. Chesbrough and Rosenbloom (2002), on the other hand, spec
through their operational definition of a business models functions. The fu
model are to (Chesbrough and Rosenbloom 2002, pp. 533-534):
articulate the value preposition, i.e. the value created for users by th
CUSTOMER
INTERFACE
Fulfillment & SupportInformation & InsightRelationship DynamicsPricing Structure
CORE STRATEGY
Business MissionProduct / Market ScopeBasis for Differentiation
STRATEGIC
RESOURCES
Core CompetenciesStrategic AssetsCore Processes
CUSTOMER BENEFITS CONFIGURATION COMPANY BOU
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describe the position of the firm within the value network lin
customers, including identification of potential complementors and c
formulate the competitive strategy by which the innovating fir
advantage over rivals
The above decompositions show that even though each researcher uses hi
bundling the components (differentiating levels, using sub-models, defining
dimensions etc.), they still have many similarities. In particular, these
components usually include some the following elements:
market structure (actors, roles, objectives, capabilities, assets)
value proposition (for customers and partners)
scope (market segment)
activities and processes
core competences (capabilities, assets)
pricing policy and revenue streams,
strategy (alliances, competitive advantage, position in the value chain
regulation
technology
5.3 How openness affects the business model
Companies need to change their business models to create value from open
the actual product (code) is free and does not create direct value to a com
several ways to build a business model around open source software. Che
these alternatives to profit from open source:
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Companies competitive advantage in the software business is often based o
the end-product. From the business point of view, open architecture is the m
model if we use venture capitalists as an indicator (Cusumano, 2004; Gre
may call it mixed-source developing, where the free part of the code i
standards/platforms and the proprietary code is generated to make the en
customer, and thus, profitable to the company.
The open architecture model is not only a way to profit from the open sour
at commercial software based on the open source code (100%) with n
business is often built around complementary goods and supporting servi
source software is based on a shared source code and does not offer com
company has to invest in complementary goods and supporting services. quite simple: the company has to support the existing developing commun
and develop in-house goods and services around this popular software produ
It is difficult to build a profitable business model in long run, if the shared
add-ons) itself is a profit centre. This is because imitation is very easy and entries in the market. Instead, the open source activity has to be complement
remains proprietary. West & Gallagher (2006) see that the economical suc
underlies in the pooled R&D, which can be understood as open architectu
code to test the software, fix bugs, and to get improvements, feedback, an
Bonaccorsi, 2005). In this case, firms can together develop strong and maturbuild proprietary parts, services and features around this OS-platform, g
them.
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Although building the business model around open source is challeng
development and gaining revenues is still increasing its favor. When n
business based on open source, they have to notice some recommendations (
Table 3. Four important recommendations for building a new OS busine
(adapted from Pal & Madanmohan, 2001)
External Sources
Multiple alliances &
communities are the key
It is important that the firm
alliances. Each of the partne
complementary and offer ne
your resources by supportin
Flexibility Adapt flexible strategies
OS firms should be able to m
product areas, be flexible en
conflicting with a superior f
competition
Simple Business
for OS
OS is not a solution for troubled
business
OS projects that are owned a
commercial organizations ar
economic downturns (the pa
kill an OS project). If the ba
company is flawed, having a
improve the cash flow
Building a
business model is
complex
It is very difficult to build a
strong revenue model based on
OS.
Building sustainable compe
in open source business. The
differentiation. Do not build
close to open ones (value to
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the past few years the phenomenon of moving to use open source has conce
firms. Now these start-up software companies relying on open source busin
into the largest business computing segments, and the movement forces l
more open direction (Greenemeier, 2005; Koch, 2006; Cusumano 2004).
5.4 Types of OS initiatives
According to Pal & Madanmohan (2001), there are four ways a comm
constitute its open source practice. These four different ways are illustrated i
Figure 11. Different ways to constitute OS practice (Pal & Madanmohan 20
In box no 1, the company focuses on one market space only, and uses only
the platform for building new solutions. These kinds of companies a
companies, or companies having portfolio-related products for a single ve
typical model for start-up companies because it is simplest to operate and i
Single OSSInitiative
1Single Market
operation
Single OSSInitiative
2Multiple Market
operation
Multiple OSSInitiative
3Multiple Market
operation
Multiple OSSInitiative
4Single Market
operation
Multiplemarkets
Singlemarket
Single OSS Multiple OSS
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large resources (manpower) and intensive collaboration with the O
organizations that have a portfolio of products for multiple markets, with a
are likely to adopt this model.
In the third box the companies are typically large companies that can sustain
and leverage them across multiple markets. These can also be firms that h
other OS initiatives for historical reasons, and now want to constitute addit
can provide technology and platforms for building products to service multip
In the last box (4), the company spends considerable bandwidth and re
manage multiple OS initiatives, and leverages them for its products for o
market. Companies that are likely to adopt this model are world l
product/technology, and dominate the markets.
Choosing the appropriate quadrant is a strategic decision, since it determ
strategy of the firm. It also changes the evolution of the company and
Hence there will be shift from one quadrant to another in a long term. A t
the first quadrant to the second and then to the third one, when the size and b
is growing. The fourth quadrant will remain as a special case, and wi
particular type of companies, as described in the previous sections. (Pal & M
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6 CASE: NOKIA 770 INTERNET TABLET
Nokia Corporation is a public limited liability company incorporated under
of Finland. It is the world largest cell-phone maker, measured by total s
divided its business into four major business groups, which are mobi
networks and enterprise solutions. There is some general information a
(Nokia, 2006)
Table 5. Key parameters of Nokia. (Nokia, 2006)
Net Sales 34 191 EURm
Mobile Phones 20 811 EURm
Networks 6 557 EURm
Multimedia 5 981 EURm
Enterprise Solutions 861 EURm
Net profit 3 616 EURm
R&D 3 825 EURm
R&D Personnel 28 882 person
Personnel 58 874 person
This case discusses a large company's experience in creating a consumer eon Linux and open source software. Nokia encourages external developm
Nokia 770 Internet Tablet. It is the first open source and Linux-based co
Nokia. The company has published open development environment for 7
open source developers can share the code around 770 by the give-and-take
places itself on the market between cellular phones and notebooks. The basiInternet tablet is described in figure 13.
Browsing
Email
File Sharing
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6.1 The influence of OI-paradigm in Nokia
This new way of developing a device in the new market is an interestin
Nokias major strategy shift that began in 2004, when Nokia rejiggered i
into four business groups to gain new markets. Ari Jaaksi (2006b), No
software platforms, has said that company believes that open source is cha
is created, with the new model a community based peer production, wh
shared.
Historically Nokia has relied on Symbian as the operating system for smar
used a Linux-based operating system for a browser type device, such as
(McCourtney, 2005). Normally Nokia has developed the companys main
through in-house-development and Symbian, because the market place in
with strict operator and server requirements (Correia, 2005). In the wide ra
first move to use the open source, but it has historically limited its open sou
based networking products and internal development tools. In the market
first major action to open source development. In the end of the 2005, No
minor open source projects around smartphones (portal: opensource.noki
OS-browser for the S60-platform. But these projects are not at the same l
770 Internet Tablet.
The new tablet is placed on new markets. Using Linux as an operating syst
flexible and mature technology, which will give access to PC technol
protocols. To speed up the development of the open source product, Nokia
development platform, which is a Linux software toolset available to
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movement and the Linux operating system for future non-phone produc
argued that the device itself is not very interesting, but the way of developm
a broader internal interest in the utility of Linux and open source developm
6.2 Technology review: Maemo.org & 770s software archite
Maemo.org is a platform where application user interface, application engin
developed. The platform is composed of mainstream Linux and open
deployed in the most popular Linux distributions. At its core is the Hildon
which is based on GNOME technology. GNOME provides an intuitive an
for end-users based on Linux, and a powerful framework for building ap
into the rest of the PC desktop. Maemo adapts this desktop technology to
extensions and modifications. It provides an easy-to-use development, bui
on Linux workstations. The host development environment runs the sam
available on the target device, Nokia 770, eliminating the need of target har
host and providing a more accurate test environment (Maemo.org, 2006).
development environment around Nokia 770 Internet Tablet.
CustomerGroup
(Products &S l ti )
Development
platform:MAEMO.ORG
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GNOME technologies are the base for the device user interface. The u
enhanced and combined to include Nokias long-term experience with end u
and mobile user interface design. The core non-UI middleware is compose
mainstream open source components (expat XML parser, D-BUS, X
networking, glibc etc.) Some of these components have been modified from
meet better the resource constraints of 770. Above all this, there is a Linux k
which is the core of all activity. (Maemo.org, 2006)
Except for the hardware adaptation layer, certain user interface elements, a
the 770 Internet Tablet is based entirely on open source software (figure
software component of Nokia 770 can be downloaded from maemo.org
filesystem, or managed as a collection of Debian source and binary
enterprise developers and consumers to easily create and test software for th
Application user interfaces
Application and userinterface framework
Application engines
Core software
Hardware adaptation
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Nokia works directly with OS communities to develop parts of the softwa
attempt to connect a commercial company and non-commercial communi
This consolidation is very challenging, but possible. The main problems are
and how to settle the publications of new versions. If the company can me
Nokia in the case of 770, the result will be positive. In the best cases this col
diversified products of good quality without need to go short of orderliness.
6.3 Nokias motives for OS development
It is clear that Nokia wants to follow the path of IBM. The company has ta
model seriously and wants to use external sources also in its software dev
markets. All of Nokias activities in the open software development are foissues (Jaaksi, 2006a):
Not re-inventing the wheel
Working constructively with the open source community with a give
Solving critical issues in the areas of:
o
User interface & usabilityo Power management
o Performance
o Memory management
o Application functionality
o
Cross-development toolso Integration
o Testing
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From the technology view, 770 is a good project to learn more from open s
Linux. Using Linux as a pilot experiment, Nokia can understand its poss
better for further development. It is also building a successful developm
general software platform. If we look at the motives from the business p
opening a path to new markets. Their product is new and it makes possible
family based on open source in the future.
This new way of development offers some concrete benefits for Nokia. O
availability of a good quality code and well-thought architecture and inte
there are also more positive results: (Jaaksi, 2006a)
Licensing rules have been decided by the licensee
o No need to execute complex licensing negotiations
o Saving can be up to 6 - 12 months in projects
The work and credentials of a developer or a subcontractor are open
o The quality of the people and the components can be analyze
o Their willingness to help is easy to verify just ask
o The activity and direction of the component or product can
project discussions
When everything goes wrong it is possible to take the code and run
o Even branch to meet the deadlines
o Worry about the consequences later
Open source enables also the interoperability of devices and software fa
proprietary one (McCourtney, 2005). Interoperability improves the usability
speeds up the diffusion of the new commercial handset. Open source d
t fl ibilit d h ld k it i t t d d i
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6.4 Nokias OS strategy in the 770 project
When we examine the models introduced by Pal & Madanmohan (2001),
look at Nokias OS strategy. Nokias basic strategy can be understood by stu
Figure 16. Nokia is using multiple OSS sources to single market operat
(Quadrant 4).
Nokia uses model 4 in its open source business around 770. It uses multiple
to add value to a product, such as 770 for the Telecom market. Why does thi
Nokia? Nokias Internet Tablet has some requirements for multiple modular
is a best solution to support modular environment.
A module means a self-contained component of a system. Modularity
important for the development of efficient software. Linux is a highly mo
which means that it is composed of a relatively small kernel (the core o
Single OSSInitiative
1.Single Market
operation
Single OSSInitiative
2.Multiple Markets
operation
Multiple OSSInitiatives
3.Multiple Markets
operation
Multiple OSSInitiatives
4.Single Market
operation
Multiplemarkets
Singlemarket
Single OSS Multiple OSS
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directly with open source communities. We can examine these different pos
source with the help of Nokias director of open source software operati
considers this open source business from two different angles (two dimensio
options, but first a decision-maker has to answer some questions:
1. Companys own involvement proxies vs. own involvement
a. Do you as a device manufacturer use commercial L
integrators, or do you rather work directly with open sour
b. Do you get your components from proxies such as M
Trolltechs, and such, or do you grab them yourself fr
GNOME etc.?
c. Do you rather make a business deal with a commercial c
care of the details of open source on your behalf, or do yo
open source work yourself to get what you want?
2. Development environment closed vs. open native development
a. Do you want to open your software for hacking
development, or do you want to keep it closed and s
sandboxes, such as Java, on top of your software?
After studying questions, there can be seen four different options to a com
the use of the open source. These options can be described with the assistanc
Use commercial Linux
distros & integrators,
enable native application
development and system
hacking
Operate directly in open
source communities,
enable native application
development and system
hacking
Nokia 770
Open & native
development
Development
environment
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The differences can be examined by two examples: Nokia 770 and Mo
Motorola uses the MontaVista kernel and Trolltechs Qt embedded in its p
developer platform. Nokia does not use any commercial Linux distributions
packages, but it has gone directly to GNOME and Kernel.org. They also
development. The reason behind these actions is that Nokia wants to us
components as soon they can. This goal is much more difficult to achieve
(Jaaksi 2006b)
Proxy solutions are chosen when companies do not want to worry too m
stuff. The proxy companies hide the open source aspect of the work and t
simple old component vendors. If you consider the openness of your deve
choice depends on your goals and targets. Supporting a sandbox as an a
environment may be a good idea in cases where you need more control, po
things. There are no right and wrong options, but it is essential to know w
the map. (Jaaksi 2006b)
Why is it important to present the different options? The catch is that by
(Linux logo) on the commercial software does not always mean pure open s
product can be based on open source stuff, but the development process can
open source development. Nokia is moving now to the direction the origi
and pioneers like Richard Stallman have pointed out.
6.5 Business review: maximal customer value with low R&D
The study has shown how Nokia uses communities and gatekeepers to creat
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new OS 2006 upgrade for 770, which includes new firmware but also
VoIP and Google Talk. The value of the new product increases after buyin
increasing value often means increasing speed of diffusion as well.
Nokia has also found a new market segment. The 770 Internet Tablet i
purposes than the companys cellular phones. The markets are quite new a
develop a new product family based on the mature platform. The strong sof
on flexibility in software sourcing, architecture and features as well as
processes. The open source affects also the value chain, because of the
sourcing. Nokia has a wider access to available technology providers and su
The last essential aspect is the cost structure. The OS offers larger res
products and features. Nokia can get free components, which it can
product development. The maintenance costs are shared with the industry.
For a commercial product, such as Nokias 770, it is vital that open sou
mixing of open source and commercial components. It is important that the
use the open source for any purpose with no restrictions. Flexibility
introduction of new technologies and features, as well as architectural
companys future needs.
There is no reason to believe, however that the open development model is
will eventually replace many closed ones, but these closed solutions are
cases. Reduced costs and new business opportunities will make the open s
adaptive for change and new business challenges.
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7 CASE: IBM
International Business Machine Corporation is the worlds largest IT-comp
industry since its birth (IBM 2006a). It has 329 000 employees in 75 coun
2005 was $91 billion and the total assets were $105.7 billion (IBM, 2006
2005 (IBM, 2006c, 14, 17) IBM announces that it has two ultimate goals: to
to the shareholders and help customers to become more efficient thro
operates in three segments: systems and financing (28 % from pre-tax incom
services (35 %) (IBM, 2006c, 5).
Table 6. Key parameters of IBM (EUR). (IBM, 2006c, used exchange rate 1
Net Sales 73 193 EURm
Systems & Financing 22 416 EURm
Software 12 694 EURm
Services 38 083 EURm
Net profit 6 347 EURm
R&D 4 660 EURm
R&D Personnel person
Personnel 329 000 person
IBM tries to maintain its business leader position by focusing on high-valu
solutions and services. As the implementation of this strategy, IBM sold
Business to Levano Group Limited, the largest manufacturer of personal
2005, and acquired 16 software and service companies in the same year (IB
is moving strongly from hardware to software, towards more sophisticated p
To support this innovation strategy IBM has the worlds largest IT research
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7.1 The influence of the OI paradigm in IBM
IBM has made a huge change from the closed company to the company wi
Before 1993, IBM functioned with a very different business model.
manufactured, sold, serviced and financed everything through its own orga
this strategy brought enormous success and nearly monopoly position to t
this business model caused a financial crisis to IBM in 1992. The new rise
on hunting new revenues from semiconductor business, IP licensing and m
IBMs open source software initiative. ( Chesbrough, 2006, 189-190)
IBM is a good example of exploiting open innovation in practice, when s
from its intellectual property rights. IBM is now one of the leading corporat
open innovation paradigm. IBM is famous also from receiving revenue f
2001 it received $1.9 billion in royalty payments for its licensing actions (I
of licensing is even bigger considered also the cross-licensing the company
does not show in the income statement. One reason for this good result
leader. It has more patents than any other company in the world. So i
technologies widely. Besides patents IBM licenses its know-how, trade sec
technology. (IBM, 2006c, 20)
IBM supports the patenting culture widely. Strong patenting protects IBM
gives the company freedom of action and drives innovativeness. IBM
licensing strategy on purpose. It includes aggressive patent licensing w
manufacturing joint ventures, strategic joint development alliances and
technology (Ehrlickman, 2006). To speed up its licensing strategy, IBM
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The company is changing the way it handles its IP, opening up a large par
At the same time the company warns that its rivals have to adapt to this cha
of recent interviews and research, IBMs new IP strategy is changing the in
a wide sector. IBM has received attention by releasing 500 patents for free
that this was only the first step in the new IP-strategy. Never before has
much on its patents willingly released so many patents at one time. They
the portfolio are best served as open technology. The idea behind th
technological foundations that will bring ultimate benefits to consumers. (
2005)
Simultaneously, IBM tries to accelerate the diffusion of its software. The
deeply to the software business by using open source. IBM devotes more
supporting Linux than any other organization in the world. By linking Lin
system, which code is available to anybody) to own business model, IBM
leading position in software operating systems, which it had lost to Unix an
the whole new business model, though. Since Linux is based on freely avail
generate direct profits to IBM. (Chesbrough, 2006, 45, 192-195)
7.2 Motives, principles & market factors pushing IBM to OS
IBM thinks that this patent pledge will repeat itself in the future. The rea
cause a commotion in the market. The company announces that it was very
and that it all centred on this open, flexible architecture that the customers
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The crux of IBMs new strategy is the idea that when the basic technologies
and shared, there will be an increased innovation rate. The argument is th
technology (source code) companies will have more time to devote to inno
of technology. David Kappos from IBM (Vice President & Assistant Gener
has said that What will happen is that by having a base that provides less ne
basic rudiments of getting systems connected, more opportunities will be c
top of that, therefore more licensing opportunities and of course more
(Mamudi, 2005)
If we gather these comments in the form of a figure, the result would b
technological capability rises in the whole industry, it also develops the ba
the border between common technologies and unique innovation higher.
exploit the knowledge of the basic platform and focus on developing new
companys competitive advantage is based on the upper levels (skill to explo
create new).
Basic Technology Common Platform (architecture)-
New & Unique
innovations
Corporation 2
New & Unique
innovations
IBM
New & Uni
innovation
Corporatio
Technological cabability
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7.3 New schizophrenic strategy
Although basic technology with open standards will be non-proprietary i
mean an end to IBMs patenting efforts. The company argues that the new I
any deceleration in the companys innovativeness. In fact, this new strateg
effort rates (Forelle, 2006; Merrit, 2005; Mamudi 2005). According to Jim
President for IP and standards), the company is opening itself up to participa
but it is also accelerating the companies activities on the proprietary side. IB
coexist. Were going to be really good at managing both communities tog
the thing that comes from both will allow us to innovate in the market (d
interesting things for customers. Thats really what we are describing. (Mam
The above comment raises a question: Where is the line between the te
decides to give away and the innovations that it hopes will make it mon
picture 18. The boundary is moving all the time, so there is no com
Innovations that years ago were maybe at the level of getting basic compo
and getting basic infrastructure stabilized in computers, is now mundane
same kind of function in their products, so that function is no more differ
moved up the technology stack to a higher level (technological capability h
Mamudi, 2005). What can be seen, and what we expect to happen, is that th
boundary will continue to move up the stack.
The bottom line in the new policy is to try to raise the line between IP-prop
to accelerate the innovation rate and then develop the industry. The de
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Table 7. Common benefits of OS for IBM.
Interoperability
Increasing interoperability of IBM's software products
Small niche firms (VC) are capable to join the game: they aalso developing the open platform and researching high rispossibilities, which IBM can later adopt (absorptive capacit
Industry development
More mature platform (based on own products) where to bcommercial products
Resource allocation
More resources can be focused on the new opportunities: need to spend time on the basic rudiments (there is no neespend time to re-invent the wheel)
More valuable solutions
More valuable products for customers: the more people uthe more valuable the product is (meaning of diffusion)
Customers can participate in the development process modeeply, because there is a more open environment (custom
needs)
The biggest problem in OS development is creating a sustainable competiti
maximal contribution margin the company should create a product based
open platform has to offer a great value compared to full in-house develo
value of the platform, companies have to give up their in-house innovatio
their competitive advantage) to develop the open platform and then ensu
based on these publications. This cycle has to be continuous for OS-platfo
proprietary software. The crux of the new competitive advantage has t
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rivals products. The competitive advantage has to be based also on levera
other key players.
There is also a small risk that IBM will create respectable rivals by
companies and sharing code with them. New VC companies gather talen
tempting risk/reward-rate to develop software solutions in new areas
companies are capable to create potential business models, but when they s
potential entries in the industry.
7.5 How IBM profits from the open source?
IBM profits from the open source business in two ways. First, open sourmeasures less expensive than proprietary software, so using it lowers the
pays for IBMs solutions (although smaller contribution margin, wider use/s
a common and universal platform, on top of which IBM can build and sell
services.
Because the open source is non-proprietary, the customers are much les
supplying the IT systems. Its interfaces are open. Opening up the interface m
can easily be written to plug into it, increasing its value to customers. B
lock-in, companies can reap the advantages of open source that accrue not
to all firms in the industry. They can sell software that works for example count on a far wider ecosystem of developers and service companies to im
benefits both IBM and their customers. Opening some parts of the paten
attract independent developers to the platform which opens it up to inn
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8 CONCLUSIONS
The open innovation model has increased its role in the world of innovat
are eroding factors to a closed innovation approach, like the availability o
funding, too many ideas sitting on the shelf, and increasing capability of e
force companies to the open approach. In our study we have considered op
one way to exploit open innovation principle. According to the literature, op
offers shorter development cycles, more resources and lower costs. It also e
that entails an accepted system architecture and language, the comm
combination of ideas and technological solutions. In our case studies we
source development is a flexible option in software development. In the N
more effective R&D processes, as well as strong software architecture on
projects. In the IBM case, the basic idea of using the open source has b
software platform to increase the diffusion and value of the companys ow
interoperability, because of wide and common standards. The motives from
table 8.
Table 8. The motives of OS at Nokia and IBMNokia, at product level Variable/motive/outcome IBM, at
Strategic flexibility Agility
Effective R&D Effiency Effective
Strong software architecture
Not re-inventing wheels(the significance of basic
technology) Mature
Increasing customer value after
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and services with multiple technologies Convergence demands common p
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and services with multiple technologies. Convergence demands common p
and the key for many firms is open development and collaboration with riva
and customers. Convergence affects especially the handset side where
remarkable force is the increasing complexity. Firms add more and more fe
and services to maintain their competitive advantage. The increasing amo
strong architecture and platforms as well as wide resources.
Increasing VC money in the software industry also encourages companie
niche markets, because of good risk/reward -rate. When this phenomenon m
components will become more modular and interchangeable, which speeds
software (Linux). The other factor is the interoperability of software. Be
significance of interoperability, companies are forced to develop comm
maximum value to customers and thus to companies as well. It can be see
same industry will have to cooperate more closely to establish universal
players can build. A strong architecture and platform as well as wide usabi
that speed the interest to open source business. It has pushed IBM to releas
ensure the use of its software products in the future.
Open source development needs a mature development environment, wh
develop the code by the give-and-take approach. A good example of a com
maemo.org development site launched by Nokia. Our study has illus
maemo.org environment works. The most important factor is the interfac
organizations and the communitys platform groups. If this group work isthe same development tools, in the best case this collaboration will generate
good quality without a need to go short of orderliness. It is also important th
environment runs the same software as the one available on the target devi
48
By using open source oriented business models companies can create
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By using open source -oriented business models, companies can create
standards and platforms, which can be developed in co-operation with op
This increases the interoperability of software and speeds up innovatio
boundaries. When an innovative platform is reached, the value proposition
platform will provide open standards, which increase the value of basic tec
value of the end-product (IBMs principle). And when the value is highe
profit will be earned through the end-products. The revenue generation
both: the common platform and the companys ability to develop end-produ
standards. The platform also helps commercial companies to allocate their
and focus more deeply on new technology (not re-inventing wheels).
There are some differences also in the cost structure between the open
products. According to West & Gallagher (2006), open source development
than the proprietary one because of wide range of resources (communities
cycles are shorter, the developing costs will decrease and the products c
which is one of the Nokias main targets in the 770 OS project.
Open source development demands different kinds of capabilities and c
development environment is based partly on using external sources of inn
knowledge on the companys own business. These actions demand absorpti
this capacity, engineers and R&D personnel have to be encouraged to
boundaries. In the field of open source, R&D processes have to focus on
architectural solutions in the software products, not re-invent wheels atechnology rudiments (platform). It is also important to abandon the
syndrome. There are also other successful players building your platform,
from technology point of view (this can be seen in both cases) However
49
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Lappeenrannan teknillinen yliopisto
Digipaino 2007
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