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Strategizing for the Future
MySQL ConferenceApril 27, 2006
Strategizing for the FutureOpen Source Means Many Things
The License
Architecture of Participation
Distributed/Collaborative Development Process
Free Distribution as Viral Marketing
Re-usability
Transparency for Learning and Imitation
Software as Social Currency
*Tim O’reilly – January 19, 2006
Strategizing for the FutureCustomer Perspective
Lower software acquisition costs
A software distribution model, e.g. “frictionless”
Simpler license structuresA licensing approach that provides free access to source code
Applications specifically tailored to customer requirementsDistributed/Collaborative Development Process
No proprietary OS lock-in means more competition, lower costs and faster innovation
Source availability enables alternative vendorsTransparency for Learning and Imitation
Ability to influence development via community
Software as Social Currency
Standards-based solutionsRe-usability
Strategizing for the FutureKey Findings – The Future of Commercial Open Source
Services vs License Revenues
Licensing will Evolve
Open Source is not a Business Model
Open Source will be Ubiquitous
Strategizing for the FutureServices vs. Licenses
Commoditization and Standardization = Focus on Integration
Collaboration for Customization
Supporting the Long Tail
Subscription Model and Open Source
P&L Structure Open vs. ProprietaryLower cost of R&D Lower cost of Sales and MarketingLicense vs. Services Revenues
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Strategizing for the FutureServices vs Licenses
Software:Challenges for Products vs. Services Companies Michael A. Cusumano MIT Sloan School of ManagementFebruary 2006
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A: Case of a firm where products and services revenues reinforce each other
B: Case of a firm where services as % of revenues rise because products business is falling
Software:Challenges for Products vs. Services Companies Michael A. Cusumano MIT Sloan School of ManagementFebruary 2006
Strategizing for the FutureServices vs Licensing
Strategizing for the FutureOpen Source Licenses
Almost 56 approved OSI licenses, movement to reductionMost are either “permissive” or “restrictive”Most Popular
GPL
~70% of all open source software
Free to do whatever with the source code (modify, redistribute, etc.)
Changes that are distributed must also be GPL
Prevent companies from “embrace and extend” strategy
Often called “viral” by both friend and foe
New GPL 3.0 out for review ( Final due Jan’07)
LGPL
Allows linking with non-LGPL code (libraries)
SPL
Commercially popular, non-OSI approved
BSD
Freely use, modify, re-license, etc. - just maintain the copyright notices
Can include the code in a commercial product without releasing your source code
Supports an “embrace and extend” strategy
Safest for corporate use
CPL
Can include in a commercial product
Make source available on request
Licenses royalty both copyright and patents
Must include all copyright notices
License should be chosen as a result of business factors, such as…
Facilitate revenue
Brand Control
Source Derivative Control
Patent Control and Enforcement Policy
Ability to build a strong communityStructure and control
Support structure and pricing
Complimentary to commercial products
Strategizing for the Future Open Source Licenses
Strategizing for the FutureLeveraging Open Source in Business Models
Use open source software to deliver a service How the ISPs were built Most on-demand application services
Sell services, support, information for/about open source software Original purist strategy: code is free, pay for services and books Services: Early Red Hat, LinuxCare, Open Source VARs Information: O’Reilly, SSC (Linux Journal)
Publish information about Open Source to garner advertising revenues Traditional industry publications evolved to on-line publications Andover.net, OSDN (Slashdot, Freshmeat)
Sell hardware for/with open source software Reduce cost of OS, applications that drive hardware uptake VA Linux, IBM, HP, thousands of embedded applications
*Greg Olson, Olliance Group, 2006
Open source/commercial dual licensing GPL (or other restrictive form) for free, pay for commercial re-distribution rights Ghostscript, BerkeleyDB, Sendmail, MySQL
Offer open source software with commercial upgrades “Frictionless distribution” builds user base, upgrades for commercial
requirements Sendmail, MySQL, SugarCRM
Integrate, package and distribute solutions of open source software Red Hat, SuSE (Novell), SpikeSource, Open Logic, etc. Open Source VARs
Patronage model to achieve strategic objectives IBM support of Apache to challenge Microsoft web server IBM support of Eclipse to challenge Sun, Microsoft development platforms Sendmail publishes MILTER and DKIM implementations to create a platform
and new email standards
*Greg Olson, Olliance Group, 2006
Strategizing for the FutureLeveraging Open Source in Business Models
Strategizing for the FutureLeveraging Open Source in Business Models
Product’s followed the wisdom of the crowd
More innovators and integrators (globally)
Broader range of product offerings
Better integration across products
Business models will be very different
Companies operate more like civil engineering firms
Marketing is more important – but very different
Strategizing for the FutureBuilding a Community
Solution to a Problem
Non Profit Endeavor
Speak the Language
Under the Radar
“Expert” Branding
Strategizing for the FutureSuccess & Risk Factors
Success Factors Risk Factors
o Understanding client reactions to Open Source offering
o Building a strong community
o Choosing the appropriate license strategy
o Orienting corporate resources and direction towards a support, training and maintenance biased business model
o Lack of market interest in services such as support and training
o Industry resistance to Open Source at this level
o IP leakage to competitors
o Enabling 3rd party support and services
Strategizing for the FutureNext Steps
Customer validation
Finalize business model
Select a license
Develop go-to-market plan
Develop community plan
Strategizing for the FutureOpen Source Think Tank
Download
Think Tank White Paper
http://www.olliancegroup.com/opensource/sdforum2006oss.ph
Laura Merling
SDForum
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Strategizing for the FutureServices vs Licenses
Software:Challenges for Products vs. Services Companies Michael A. Cusumano MIT Sloan School of ManagementFebruary 2006
