1 / 50

The Business of Open Source

The Business of Open Source. Richard T. Watson Marie-Claude Boudreau Martina Greiner Donald Wynn Paul T. York. Terry College of Business University of Georgia rwatson@terry.uga.edu. What do customers say?. Weather.com. Dan Agrow (CIO)

naida-alvarado
Download Presentation

The Business of Open Source

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Business of Open Source Richard T. Watson Marie-Claude Boudreau Martina Greiner Donald Wynn Paul T. York Terry College of Business University of Georgia rwatson@terry.uga.edu

  2. What do customers say?

  3. Weather.com • Dan Agrow (CIO) • My experience is we have actually received better support of open-source software than we have with commercial software • Lots of open-source products work very well and can be deployed and run for about half the cost of commercial products

  4. Sabre Holdings • Moving off fault-tolerant Compaq Himalaya servers onto a combination of Linux and the MySQL database running on clustered Intel servers • Total cost of ownership will be at least 40% cheaper, with anticipated savings of “tens of millions of dollars” [Craig Murphy (CTO)]

  5. La Quinta • Shifted online reservation system from BEA’s WebLogic to JBoss • Rationale • Good service • Increased flexibility • Lower costs

  6. What do suppliers say?

  7. MySQL • Mårten Mickos (CEO) • How do you turn a $9 billion market into a $3 billion market and dominate what is left?

  8. TrollTech • Haavard Nord (CEO) • By next year, it may sound bold and stupid, but in fact we are going to overtake Microsoft in terms of device shipments

  9. Mozilla • Bart Decrem, spokesman for the Mozilla foundation, about Firefox • I think we'll get to 10 percent over the next year… we have the momentum… The move from IE to Firefox is also shown by the fact that half of Firefox downloads are from IE users

  10. A trend • Open source works for some customers and suppliers • It might not be the answer for everyone, but it is the answer for some

  11. Business Models

  12. Business Models Open Distribution / Open Source Proprietary / Closed Source

  13. Proprietary / Closed Source • Developed and supported by employees • Funded by customers • Recognized viability • Offer support & education • Traditional marketing & distribution

  14. Open Distribution / Open Source • Developed by volunteer developers • Supported by volunteer community • Completely free of cost • Viability? • Nano markets?

  15. Business Models Corporate Distribution / Open Source Open Distribution / Open Source Proprietary / Closed Source

  16. Corporate Distribution / Open Source • Bundlers / value added resellers • Do not necessarily contribute code to OS community • Usually make installation / configuration easier • Offer support & education • Viability signal

  17. Business Models Corporate Distribution / Open Source Open Distribution / Open Source Proprietary / Closed Source Funded Open Source ** Open-source release is still pending

  18. Funded Open Source • Some support provided by external agents • Most often provided as code/support from salaried employees of sponsor • Sometimes provided as direct or indirect monetary contributions • Viability signal • Brand inheritance • Sponsors often bundle / enhance OS projects in proprietary products

  19. Business Models Corporate Distribution / Open Source Proprietary / Closed Source Open Distribution / Open Source Funded Open Source Professional Open Source

  20. Professional Open Source • Funded by customers • Free or “dual” licensing • For fee professional service, support, and education • Low marketing and distribution costs • Viability • “Always low prices. Always.”

  21. Professional Open Source Players • JBoss • Application Server • MySQL • Relational Database • Sleepycat • Developer Database • Trolltech • Framework for Cross-Platform Development

  22. JBoss • Marc Fleury (CEO) • We think we’re inventing the new open source. It’s not the pony-tailed faction on the communist fringe. There needs to be professionalism and credibility. There needs to be sales and marketing, and all the things that make a business. People say you’re either a company or a starving poet. Why can’t we be both?

  23. Business Models Corporate Distribution / Open Source Proprietary / Closed Source Open Distribution / Open Source Funded Open Source Supported Open Source Professional Open Source

  24. Supported Open Source • IT service firm supports a range of open source products as part of a service contract • HP • Unisys • SoftPro • Level 1 & 2 support

  25. Business models  . . . . . . . . . . . . . . . . . low high * fewer ’s = better

  26. Licensing

  27. Licensing models • “Copyleft” licenses • Exemplified by the GNU General Public License (GPL) • All contributions and modifications are guaranteed to be “open” • “Non-copyleft” licenses • Apache and Berkeley Software Design (BSD) Licenses are two prominent examples • Code is free to be modified and incorporated into proprietary products without contributing any changes back to the community

  28. Licensing models • “Free” licenses • “Free as in freedom” • Code can be used in any way desired by anyone • GPL, Apache, and BSD are all “free” licenses • “Non-Free” licenses • Any license that does not provide free access to source files or restricts use of source in some way • “Dual” licenses • “Free” for private and “Non-free” for commercial use

  29. Customer value

  30. Supply side • Open source emerges when there is a perceived customer value gap • Open source serves national interests in some cases

  31. Demand side • Customer value • Benefits > risks

  32. Customers’ risks (1) • Viability of supplier’s business model • Availability of support • Availability of education • Potential for lawsuits

  33. Customers’ risks (1)  . . . . . . . . . . . . . . low risk high risk * fewer ’s = better

  34. Customers’ risks (2) • Compatibility with other applications • Maturity of software product • Availability of documentation • Security

  35. Customers’ risks (2)  . . . . . . . . . . . . . . low risk high risk * fewer ’s = better

  36. Customers’ benefits (1) • Access to code • Reduced dependence on single source • Reduced dependence on single platform

  37. Customers’ benefits (1)  . . . . . . . . . . . . . . . low benefit high benefit * more ’s = better

  38. Customers’ benefits (2) • Higher quality code • Increased innovation • Reduced TCO

  39. Customers’ benefits (2)  . . . . . . . . . . . . . . . low benefit high benefit * more ’s = better

  40. Total Cost of Ownership • OS is not cost-free! • Numerous studies comparing OS to proprietary • Mixed results • “TCO is like fine wine: it doesn’t travel well. What may be true in one situation is reversed in another. What gets trumpeted as a universal truth may or may not be true in a specific case, but it is most certainly false when claimed universally.” • Joe Barr, freelance journalist

  41. Total Cost of Ownership • Some important costs to consider: • Initial purchase costs • Upgrade and maintenance costs • Hardware costs • Administration of licenses costs • Staffing costs • Downtime costs • System administration costs

  42. Take aways

  43. POS & strategic risks • Demand risk • Pricing strategy • Innovation risk • Open source • Efficiency risk • Hiring practices

  44. Insights • Intellectual knowledge matters more than intellectual property • Intellectual knowledge is hard to scale • Hybrid Birkenstocks / business suits culture • Professional and supported open source are key developments

  45. Insights • Business model • Vendor • Determines viability • Customer • Determines risks and benefits • Professional open source might provide greater customer value than other models for software development • Scalability?

  46. Scalability • Marc Fleury (CEO), JBoss • A challenge for JBoss is scaling this business in the revenues. Red Hat has set a precedent, there are 250 million bookings, 100 million revenue, and market is paying 40X in capitalization, so it is a 4 billion dollar company on the market. So 40X on the revenues, 20X on bookings, and they sort of set the bar. An open source company can make 250 million dollar revenues. And you know that is going to be a challenge. Getting there, you got to be very lucky and execute well in many steps, and a lot of people is on that way. So, I think that is going to be a challenge.

  47. Scalability • Forester Research report • The organization is very happy with the current support services they receive from JBoss, Inc., but expressed some concern regarding future growth rates exceeding JBoss, Inc.’s ability to continue to provide excellent support • Commercial open source providers are also small companies, and like many small software companies, they may go out of business

  48. POS development model • Innovate • Collaborate • Plan • Develop • Package • Partner • Enable

  49. Why does this matter?

  50. Conclusion • There are different business models • Business model -> risks and benefits • Professional open source might be a disruptive technology

More Related