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A Framework for Understanding The Open Revolution

How the Open Source movement is changing the world. A Framework for Understanding The Open Revolution. Agenda. What Definition Why Economics Why Now Disruption Participation What Next Business Models. What. What is the Open Source Revolution. Technical “Commun”

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A Framework for Understanding The Open Revolution

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  1. How the Open Source movement is changing the world A Framework for Understanding The Open Revolution

  2. Agenda What Definition Why Economics Why Now Disruption Participation What Next Business Models

  3. What

  4. What is the Open Source Revolution Technical “Commun” Socialist Movement Hobby Disruptive Technology / Economic Fight(The Innovator's Dilemma - Christensen) Definition Open Source is a disruptive technology that will restructure the computer industry and bring pervasive, customized computing to all.

  5. Open Source Definition Free Redistribution Source Code Derived Works Integrity of Author’s Source Patch files for build time modifications No Discrimination Against Persons or Groups No Discrimination Against Fields of Endeavour Distribution of License License Must Not Be Specific to a Product License Must Not Restrict Other Software License Must Be Technology-Neutral Definition

  6. Time Line 1995/96 – CPAN (Comprehensive Perl Archive Network 1991 - 386/BDS 1977 - Berkeley Software Distribution (BDS) 1983 – GNU Project 1994 – Linux 1.0 – BIND move to ISC 1995 – Apache (from NCSA 1.3) - PostgreSQL 1987 – Perl 1.0 1997 – KDE 1.0 2003 – Mozilla Foundation 2005 – Firefox 1.0 Definition 75 80 85 90 95 00 05

  7. Domains of Open Source Technology Domain Core Infrastructure Linux, Apache, ..., Xen KDE, Eclipse, Gcc, Gdb Development GIMP, Blender Graphics Definition OpenOffice, Crome, ... Productivity Simutrans Simulation

  8. Economics Lab

  9. Power of Open Source (Netcraft, 2005). Web Server Survey. http://news.netcraft.com

  10. Why

  11. Economic Event Each Project competes for resources User expects a return All Software efforts are an economic event. The only true measure of success is meeting the expected economic return. Economics

  12. User's Return User's expected risk adjusted return Expected Risk adjusted NPV (net present value) Return Economics The Unified Theory of Software Quality (UTSQ ) develops an econometric model defining Quality as providing the users Expected Return.

  13. Software Portfolio Users pursue strategy that optimizes the return of their software portfolio. • Does not dictate proprietary or open source software • Easy to speculate this leads to “Mixed” strategy Economics

  14. Cost to User of Market Power User Cost of Capital Risk Premium Single Player Differentiated Commodity Return to User Economics Extortion Monopoly Pricing Power Developer Marginal Cost

  15. Controlling Market Power Standards Interface API (XML domain schema) Data Structures (SQL) Data and Operations (IETF Internet RFCs) Open Infrastructure Source Code User documentation Architecture documentation Transparent State Bugs, benchmarks, etc. Economics

  16. User's “Capture” of Economic Value Open Infrastructure Transparent Standards User Capture of Economic Value Closed Economics Openness

  17. Why Now

  18. Disruption Framework to understand how technology Paradigm shifts happen Why do the market leader always expose themselves to competition from upstarts Paradigm shifts always change the winners and losers See the Open Source Revolution as part of a normal market dynamic Disruption

  19. Disruption The theory of Disruptive Innovations developed in The Innovator's Dilemma and The Innovator's Solution This is a shortcut to understanding the economics C. Christensen, Harvard School of Business Presents the dynamics of why established firms always create an opportunity for disruptive technologies They innovate faster than the clients can adopt new features or performance Thus, they always create a market segment that is over-served Disruption

  20. Disruption Sustaining Innovation Performance Over served User Absorption Rate Disruptive Innovation Needs Disruption Time

  21. Participation Participation Influenced by the gravitational pull of a project

  22. Participation Driven by economics “Brand Me” Cost Reduction Value-Add Enhancement Research What about “hording” fixes or enhancements What about “free rider” problem Participation

  23. What Next

  24. Shifting Value Chain Hardware Core Software Applications Services Core Software Hardware Core Software Applications Applications Applications Services Core Software Services Services Hardware Hardware Returns Time Line Models Value Stack

  25. Open Model • Open Source • Sell Services from 3rd Party • Installation services • Support contracts • Training • Customization • Many different bundles Models

  26. Presentation and References www.osnv.org

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