The Business of Open Source
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Transcript of The Business of Open Source
Richard T. WatsonMarie-Claude BoudreauMartina GreinerDonald WynnPaul T. York
Terry College of BusinessUniversity of [email protected]
The Business of Open Source
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
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)]
La Quinta
• Shifted online reservation system from BEA’s WebLogic to JBoss
• Rationale Good service Increased flexibility Lower costs
MySQL
• Mårten Mickos (CEO) How do you turn a $9 billion market into a $3
billion market and dominate what is left?
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
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
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
MS Office
MS Windows
Acrobat
Linux
Star Office
Perl
Emacs
Apache
GNU C++
BEA Weblogic
Websphere
Netscape
Solaris
Mac OS
Open Distribution /Open Source
Proprietary /Closed Source
Business Models
Proprietary / Closed Source
• Developed and supported by employees
• Funded by customers• Recognized viability• Offer support & education• Traditional marketing & distribution
Open Distribution / Open Source
• Developed by volunteer developers• Supported by volunteer community• Completely free of cost• Viability?• Nano markets?
MS Office
MS Windows
Acrobat
Linux
Star Office
Perl
Emacs
Apache
GNU C++BEA Weblogic
Websphere
Netscape
Solaris
Mac OS
Red Hat
SUSE
Open Distribution /Open Source
Proprietary /Closed Source
Business Models
Corporate Distribution / Open Source
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
Open Distribution /Open Source
Proprietary /Closed Source
Business Models
MS Office
MS Windows
Acrobat
Linux
OpenOffice
Perl
Emacs
Apache
GNU C++
BEA Weblogic
Websphere
Netscape
Eclipse
Solaris** Mac OS
Darwin
Red HatSUSE
Mozilla
Star Office
Corporate Distribution /Open Source
Funded Open Source
** Open-source release is still pending
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
Open Distribution /Open Source
Proprietary /Closed Source
Business Models
MS Office
MS Windows
Acrobat
Linux
OpenOffice
Perl
Emacs
Apache
GNU C++ BEA Weblogic
Websphere
Netscape
EclipseSolaris
Mac OS
Darwin
Red HatSUSE
JBoss MySQL
Star Office
Corporate Distribution /
Open Source
Funded Open Source
Professional Open Source
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.”
Professional Open Source Players
• JBoss Application Server
• MySQL Relational Database
• Sleepycat Developer Database
• Trolltech Framework for Cross-Platform Development
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?
Open Distribution /Open Source
Proprietary /Closed Source
Business Models
MS Office
MS Windows
Acrobat
Linux
OpenOffice
Perl
Emacs
Apache
GNU C++ BEA Weblogic
Websphere
Netscape
EclipseSolaris
Mac OS
Darwin
Red HatSUSE
JBoss MySQL
Star Office
Corporate Distribution /
Open Source
Funded Open Source
Professional Open Source
Supported Open Source
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
Business models
Product price
Installationeffort
Distribution costs
Marketing costs
Proprietary / Closed Source
Open Distribution /Open Source
Corporate Distribution /
Open Source
Funded Open Source
Professional Open Source
Supported Open Source
. . . . . . . . . . . . . . . . .
low high
* fewer ’s = better
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
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
Supply side
• Open source emerges when there is a perceived customer value gap
• Open source serves national interests in some cases
Customers’ risks (1)
• Viability of supplier’s business model• Availability of support• Availability of education• Potential for lawsuits
Customers’ risks (1)
Viability Support Education Lawsuits
Proprietary / Closed Source
Open Distribution /Open Source
Corporate Distribution /
Open Source
Funded Open Source
Professional Open Source
Supported Open Source
. . . . . . . . . . . . . . low risk high risk
* fewer ’s = better
Customers’ risks (2)
• Compatibility with other applications • Maturity of software product• Availability of documentation• Security
Customers’ risks (2)
Compatibility
Maturity Documentation Security
Proprietary / Closed Source
Open Distribution /Open Source
Corporate Distribution /
Open Source
Funded Open Source
Professional Open Source
Supported Open Source
. . . . . . . . . . . . . . low risk high risk
* fewer ’s = better
Customers’ benefits (1)
• Access to code• Reduced dependence on single
source• Reduced dependence on single
platform
Customers’ benefits (1)
Access to code
Reduced dependence on single source
Reduced dependence on single platform
Proprietary / Closed Source
Open Distribution /Open Source
Corporate Distribution /
Open Source
Funded Open Source
Professional Open Source
Supported Open Source
. . . . . . . . . . . . . . .
low benefit high benefit
* more ’s = better
Customers’ benefits (2)
Quality of code
Increased Innovation Reduced TCO
Proprietary / Closed Source
Open Distribution /Open Source
Corporate Distribution /Open Source
Funded Open Source
Professional Open Source
Supported Open Source
. . . . . . . . . . . . . . . low benefit high benefit
* more ’s = better
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
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
POS & strategic risks
• Demand risk Pricing strategy
• Innovation risk Open source
• Efficiency risk Hiring practices
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
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?
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.
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
POS development model
• Innovate• Collaborate• Plan• Develop• Package• Partner• Enable
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