Cloud, Digital, SaaS, Enterprise 2.0, Enterprise Software, CIO, Social Media, Mobility, Trends, Markets, Thoughts, Technologies, Outsourcing


Contact Me:

Linkedin Facebook Twitter Google Profile


wwwThis Blog
Google Book Search



  • Creative Commons License
  • This page is powered by Blogger. Isn't yours?
Enter your email address below to subscribe to this Blog !

powered by Bloglet


Monday, March 14, 2005

Open-Source - Defensive Or Offensive Strategy?

Open source software like any other phenomenon respects laws of economics. Open-source software such as Linux, FreeBSD, Apache, and Perl started to attract widespread attention from a new audience: engineering managers, executives, industry analysts, and investors.

Most of the developers of such software welcomed this attention: not only does it boost the pride of developers, it also allows them to justify their efforts (now increasingly related to their salaried positions) to upper management and their peers.

Hard questions abound:
- Is this really a new way of building software?
- Are each of the successes in open-source software a fluke of circumstance, or is there a repeatable methodology to all this?
- Why should resources be allocated to open source projects where competitors would get to use the same code, for free?
- How reliant is this whole development model upon the hobbyist hacker or computer science student who just happens to put together some code to make something work well?
- Does this threaten or obsolesce known appraoches for building software and doing business?
Recently companies like IBM and Sun made several of their software prodcuts to be available as open source products. Corporate open-source must be a strategy to support a business model, not the other way around argues, Benjamin Booth of WebMethods. Since software, can get commoditized quickly and as open-source initiatives contribute significantly to this commoditization, the rationale and application of open-source strategy should be taken seriously. Excerpts with edits and my comments added:

Overall value can only be increased in any trade when each party's relatively scarce goods can be produced more easily than the other. Open-sourcing, collectively, effectively increases every producer's "natural" resources. If open-source software can be thought of as lumber - more open-source software means free lumber for all software manufacturer "builders".There has to be a higher objective that adds overall value to the exchange. The list of open source software looks exhaustive. Software makers in a well-defined software market, rife with increasingly cheap or free alternatives, face two primary alternatives:
1) innovate to redefine the market or
2) start giving your software away
. Several reasons can be cited for giving software away:

- It increases the effectiveness of collaborative research
- It increase labor force mind-share
- It increase the market for higher value software
- It neutralizes a competitive threat
When in later stages of the software market-cycle, the open-sourcing option makes it worthwhile to consider what kinds of threats might be neutralized. The software marketcycle gives insight into understanding this better
- Stage 1: Highly unique and valuable software - There is only one viable supplier
- Stage 2: Software facing increased competition - There are multiple proprietary suppliers who compete by increasing value and keeping prices flat.
- Stage 3: Software facing commoditization - Margins decrease even lower as there are increasing numbers of cheap or free, equally viable alternatives.
- Stage 4: Commoditized software - There are so many cheap or free alternatives that there is little differentiated value in the software itself anymore. Sales are structured around maintenance and support more than anything.The stage at which the software is at is critical to assess and whether it commands premium. Is the software aging a bit and facing an increasing number of viable, cheap or even free alternatives? If so, predominant options are to innovate, redefining your market, or consider open-sourcing and undercut competition while also preserving or increasing your market. Knowing when to open-source highly depends on the scenario.
Thus -opensourcing is sometimes offense, more often defense, and maybe a little bit of both.

ThinkExist.com Quotes
Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"