Osp summary

Oct. 2, 2006 open source business models 1

Open Source 2006 Projects

• Operating systems– Linux (also GNOME, KDE)– Linux distributions: Ubuntu, Debian, Red Hat et al– Solaris, FreeBSD

• Web infrastructure– Apache Foundation (dozens of projects)

• Development environment and tools– Eclipse Foundation (dozens of projects)

• Databases– MySQL A.B., Postgres, Berkeley D.B. (Oracle)


More Projects

• Enterprise Applications– SugarCRM, www.vtiger.no, WebERP

• Portal Development– Drupal, Plone, Liferay

• Languages– Perl, Python, PHP, Ruby, Java

• Productivity Tools– Firefox, Open Office

• VoIP

– Asterisk, Pingtel

http://www.vtiger.no/


Observations

• Overall state of open source ecology is strong• Open source a default mode of participation

by developers– what they are socialized into from the outset– "I was never motivated by financial gain.”– “gentle slope” from user to committer

• Many projects relatively mature, require little or no marginal work per instance-in-use

Sept 25, 2006 osdddi gpl 4

HISTORY & CONTEXT● In early days of software industry, software was

either given away or licensed by contract between firm X or Y

● As mass market began to develop, there was uncertainty about intellectual property rights (IPRs) ?s about © because of functionality of code ?s about patents because many program innovations

were mental processes Trade secret protection alone won’t work

● Shrinkwrap licenses attempted to provide some protection, although many ?’d their enforceability


Context Matters

• Shift to open source not taking place against static IT background

• Technology environment itself co-evolving with and because of OS

• Much of the evolution in software would be impossible without Internet and open source

Sept 18, 2006 economics of open source 6

OPEN SOURCE

● Is a puzzle to economists who come to it with the public goods/private goods mindset and IP as the solution to getting information works produced

● Is also a puzzle because open source seems to confound the commonly held “theory of the firm” Firms are necessary for the development of market

goods Open source is often produced without firms

● Most of the literature produced by economists and lawyers grapples with one or both puzzles


VARIOUS EXPLANATIONS● A hobby, amusement, a way to have fun

“scratch your own itch”● An aesthetic experience● Altruism, sharing norms, gift economy● A way for socially impaired geeks to participate

a community, experience social gratification● Skill enhancement, ego gratification● Friedman: “reputonics”; Lerner & Tirole: open

source as a signaling technique● Anti-Microsoft (or AT&T or IBM in old days)● Communism (WIPO official)


STEVEN LEVY ON HACKERS

● Shared identity and beliefs among hackers● Access to computers should be unlimited● Information should be “free”● Distrust authority & promote decentralization● Judge people by what they create, not by who

they are, their credentials● Computers change life for the better● Experimentation is the highest form of human

behavior


Business “Logics”

● proprietary– power with suppliers– customer lock-in– profitable, but inefficient

● open source– power with customers– customer choice– less profitable, more efficient

Microfoundations

• Software can be “anti-rival” and subject to positive network externalities, whereby the value of a system increases with the number of users, even benefiting from free riders, as long as some fraction of the users make a contribution. The highly diverse population of the Internet, combined with low connectivity costs, increases the impact of the small percentage of “outlier” users who actually contribute to code solutions.

Macro-organization

• Open source efforts manage the complexity of software development in part by modular design of the code, which reduces organizational demands on the social and political structures. Sanctions upon violators of community norms take the form of public expressions of disapproval (“flaming”), and denial of cooperation and access to the community’s support (“shunning”)


GPL & OPEN SOURCE LICENSES

● GPL is distinctive: Prohibits proprietary derivatives if you redistribute the code

● GPL imposes obligation to attach same terms if distribute derivatives (H. Meeker questions whether this is enforceable)

● But to what derivatives does it apply? Moralistic tone GPL can’t be changed—but why?

● Wide variety of open source licenses OSI is worried about this, so formed a license proliferation

committee to encourage use of standard licenses OSI has promulgated a definition of what makes a license

“open source” ● Sometimes acts as if it had a certification mark on the term


Mismatch of SW & Patents

• Incremental innovation cf. “invention”• Value in industrial compilation of applied

know-how• Complex systems innovation cf. one-off

product innovation (e.g., drugs)• Many things are so obvious that they aren’t

documented• Lack of prior art for 1st 30+ years of sw history• Need for lead-time protection (patents take

too long to get)


Patents & Open Source

• Open source developers view patents as major threat

• Easy to detect infringement of sw patents by OS because so many patents have issued and OS source is available

• Big firms have portfolio to trade but open source may not have patents

• Various proposals for how to deal with– GPL 3.0 attempting to get pledge not to exercise

patents if you use our software


CONCERNS--REVISING THE GPL

● Addressing the derivative work issue so as to limit open source firms from use of mixed strategy

● DRM provision● Patents clause● Multiple versions of GPL leading to

incompatibilities, harm to open source?● Comprehensibility

GPL3● Changes the language on this issue

completely

● Position on linking, complete source code, etc. is spelled out explicitly in the license

● Most GPL code is “GPL plus any later version” but Linux is version 2 only

● The overarching question is: Will Linux adopt GPL3? (No.)


SOCIAL NORMS

● Steve Weber talks about open source licenses as constitutions, social contracts

● Eben Moglen will yell at you if you violate the GPL, and you will get shunned by open source community + bad publicity

● Eric von Hippel studied IP norms of French chefs they don’t use patents or ©s or even TS but if you violate community norms, your reputation

will be shredded death of Chef Robin in 5 days; no litigation fees


Which community?

• Shuttleworth: Novell’s decision to go to great lengths to circumvent the patent framework clearly articulated in the GPL has sent shockwaves through the community. If you are an OpenSUSE developer who is concerned about the long term consequences of this pact, you may be interested in some of the events happening next week as part of the Ubuntu Open Week...I know that posting this message to an OpenSUSE list will be controversial. I'm greatly respectful of the long tradition of excellence in the SuSE product and community and have no desire to undermine that with this post. That said, I think the position taken by Novell leadership in their contract with Microsoft is hugely disrespectful of

the contributions of thousands of GPL programmers and contributors to SuSE, and I know that many are looking for a new place to get involved that is not subject to the same arbitrary executive intervention. Ubuntu is one option, as are Gentoo, Debian and other communities. Please accept this mail in that spirit.


Project Organizational Models

• Unincorporated– Linux, PHP, wxWindows

• Non-profit– Apache, Eclipse, Free Software Foundation,

Python

• For-profit– My SQL

• Hybrid / sui generis– Mozilla– Open Office


Unincorporated Projects

• Advantages– easy (to get started), low overhead– some developers see it as helpful in

maintaining control

• Disadvantages– lack of clarity about ownership and control– hard to do business with a non-entity– it can’t take donations


Non-Revenue (Indirect) Benefits of Open Source

• build brand awareness, mind share• enable drag-on and add-on sales of

other products and services• take market share from proprietary

competition• low-cost way to build consumer

applications and services using advertising business model


Trend: Web-based Computing

• Enterprise market– browser wins, client-server loses– Linux et al. propagates across the entire

enterprise

• Consumer market– Google, Yahoo et al. in the lead– Microsoft playing catch-up– Web (2.0) apps taking over from desktop apps– Will PC architecture be succeeded by mobility-

centered devices?


Trend: Open Source as a Mainstream Phenomenon

• Less and less a problem requiring special explanation

• More and more a fact of life with a “natural” explanation

Future Challenges• Research

– Transferring lessons from open source development to conventional development (inner source)

– Offshoring – globally-distributed software development – Open code-sharing, large-scale peer-review, community development

model – Expanded role of users and altered user-developer relationship – Elaboration of business models – Derivation of appropriate TCO models

• Practice – Achieving balance between ‘value-for-money’ versus acceptable

community values – Implementing the whole-product approach – Stimulating development in vertical domains – Safeguarding against IPR infringement


Networked Information Economy (NIE)

• Increased role for nonmarket and nonproprietary production

• – software, journalism, games

• • Great potential to:• – empower individuals• – enhance democracy• – foster human development• • Much at stake• – threatens incumbents who try to hold back the

full• emergence of the NIE


Shifts enabled by the NIE

• • Individuals can do more• – for and by themselves

• – informally outside of markets and hierarchies

• – in formal organizations outside the market sphere

• • Transition from mass-mediated public sphere to• networked public sphere• – but is the Internet a Tower of Babel?

• – or is it already being recentralized?

• • Internet democratizes culture• – more transparent

• – more malleable


The Battle

• Big stakes: redistribution of power and money from• 20th century industrial producers of information• (Hollywood, broadcasters, telcos)• • Will resources necessary for information

production• and exchange be governed as a commons?• • Or will there be a second enclosure movement?• – Restrictive IP regime reducing rights to use

• – Death of “Free Culture”

• • Benkler believes we are in a temporary period of• disequilibrium in which the outcome will be• determined

Oct. 9, 2006 OSDDDI 28

LINUX & OPEN INNOVATION

• By the time IBM decided to invest in Linux– It already had a substantial customer base– It already had a stable production process– It already had a community of software developers committed to

maintaining, extending it– Other major firms were providing financial support– It had proven to be a flexible, reliable, interoperable ecosystem

• IBM’s AIX software enabled Linux to support enterprise-level services

• IBM could share costs of this OS with others, build proprietary software & services on top of it

• IBM has uses both open and closed innovation models, thinking strategically about when it makes sense to do collaborative development and when not

Oct. 9, 2006 OSDDDI 29

OPEN INNOVATION

• Taking advantage of innovation generated by others, being willing to license technologies, share costs

• Reaction/response to many factors: – High(er) costs of R&D– Knowledge worker mobility– Availability of venture capital for startups– Increased willingness of university researchers to focus on

industry-relevant projects• University researcher insistence on publications

– Availability of Internet to facilitate distributed collaborative development

• Open source is an example of open innovation– It taps into the minds and experiences of many experts, allows

distributed collaborative development of information resources

Companies get into the game

• Firefox• IBM’s 2001 $1 billion commitment

– Linux support eroding MS and Sun, platform for services– Eclipse $40 million – followed by NetBeans and Beehive

• Red Hat has published an architecture roadmap that details its plans to move open source up the software stack towards middleware and management tools. Fedora/RHEL

• Oracle branding: ”Unbreakable Linux”• Sun: JCP/Java, OpenOffice/StarOffice • HP, O’Reilly• Google, Yahoo, Amazon, Salesforce

Engineering

Osp summary