1. OW2 Webinar May 14, 2009 Open Source Based Business Models
Francois Letellier - [email protected] (Freelance consultant OW2 board/ELC
member)
2. Agenda Market dynamics in software Free/Libre/Open-Source
Software based business models The FLOSS marketing mix Q&A
3. Terminology FLOSS: Free / Libre / Open Source Software Free
as in free speech, not free beer Open Source: term coined to avoid
the ambiguities of free (in English) Libre: latin origin, EU
prefered term for free Free Libre Open Source Software
4. Software is Immaterial main() { double g, x; printf("%lf",
x); g = lg(x); printf("lnG(%g)=%14.12gn", x, g); } Software is a
form of Digital Good Not tangible Reproductible perfectly,
indefinitely Non rival use by one does not preclude use by another
no natural scarcity but (legally) excludable
5. Software Protection: Legal Framework Copyright / Author's
rights: the Berne Convention Protection of Literary and Artistic
Works Principle of national treatment Protection over a work is
automatic, not subject to registration The work must be original
and creative To use copyrighted work (e.g. Software): Must enter a
contract ( license ) with the author or copyright owner No right
granted unless explicitely specified No obligation of the licensee
to accept This is the basis of legal excludability
6. Market Dynamics of Proprietary Software Huge economies of
scale $ Equilibrium at price 0 Demand Unlimited supply, price = 0
Nash eq. winner takes all 1/x Mouthwatering perspectives Quantity
oversupply 1 Mkt size Oversupply (100,000s Free* projects)
Uncertain Poor Profitability Competition Open Source Brings New
Business Models 6
7. FLOSS: a Collective Strategy for Software Development
Because sooner or later, publishers of proprietary software have to
compete against vendors of (almost) free substitutes Because
software production costs can be reduced through collaborative
engineering Because opening the source code is the best way to
maximize the potential of collaboration And because collaborating
when competing is pointless is the best way to keep innovating
7
8. Vendors to Leverage the Industry Demand for FLOSS
9. What is a Business Model Planning level: the Strategy
Architectural level: the Business Model Operations: the Business
Processes
10. Categories of FLOSS Players FLOSS Pure Players Software
companies FLOSS is central in their business model Opportunistic
FLOSS strategies Software or service companies May use FLOSS when
appropriate FLOSS-based open innovation Any industry: software,
hardware or other Software intensive Leveraging FLOSS in their
innovation strategy
11. FLOSS Pure-Player Business Models Service Added value
distribution ( distro ) Dual licensing Mutualized R&D
12. Service: Engineering Emilia Romagna, Italy: pop. 4 M
Monitoring of regional labour market Data collected from local
information systems 9 decentralized DWh 1 for each district, 1- 3GB
1 regional DWh 10GB Open Source: SpagoBI, eXo Portal Proprietary:
Oracle 9i SE, PL/SQL ETL 10-20 users / district 12
13. Major Linux Distros Community Maintained Slackware Linux
1992 (Patrick Volkerding) oldest distro still maintained highly
stable, clean and bug-free, strong adherence to UNIX principles
limited number of supported applications; complex upgrade
procedure
14. Major Linux Distros Commercially Maintained Red Hat 1994
(Bob Young & Marc Ewing) enterprise edition: Red Hat Enterprise
Linux; maintained by FLOSS forerunner and pure player targeted to
corporate IT departments (servers) more concerned about support
than cost community edition: Fedora
15. Dual Licensing: eXo Platform US Joint Forces Command
Chooses ObjectWeb eXo Platform Maximize Benefits of Open Source
& Open Standards Stimulate industry Enable Coalition partners
the ability to roll their own interoperable solution Reduce the
cost of collaboration in DoD Why eXo Platform? One of the first
certified JSR-168 portals Multinational Very flexible layout engine
with good group layout/page controls Information Sharing Leapfrogs
the commercial portals in its Solution to support war technology
Supports server load balancing fighters operating in a coalition
environment 15
16. Mutualized Development: Eclipse Nonprofit, EU, incepted in
2003 on IBM's initiative Focus on the Eclipse development platform
(Java) Corporate membership, high level of membership fee,
different value proposition for developers and for consumers
Formalized governance all the way down to project management
17. Opportunistic FLOSS Strategies Agnostic service companies
and VARs Externally funded ventures (Hype) FLOSS-based open
innovation will be dealt with separately
18. Agnostic Service Company IBM Global Services $ 91B revenue
#1 in number of US patents granted/y
19. Loss Leader Strategy $ 1B/y FOSS investment (2002) invests
in FLOSS to disseminate technology not seeking direct return to
undercut competition and grow the market for a complement
20. FLOSS Based Business Models Key messages: Business models
form a continuum from proprietary to free software There are about
as many business models as companies You may create your own:
innovation also happens in business models
21. Windows of Opportunities Emerging Commoditized
Opportunities Adoption
22. FLOSS Based Business Models Key messages: There is no
single business model for FLOSS There are many possible business
models based on FLOSS or leveraging FLOSS The key is not to chose
between proprietary and FLOSS, but to always evaluate FLOSS as an
option in a corporate environment
23. Marketing Mix Product Price Promotion Place 23
24. Supplier / Customer & FLOSS The Customer P.o.V Product
Supplier Customer price, place Solution, promotion? Selling value,
access, information? Customer The F/L/OSS Solution, value,
Ecosystem access, information? Sourcing
25. What are the FLOSS 4 P's (NOT)? Product: FLOSS project
Price: zero Promotion: none, only word-of-mouth Placement: online,
full-stop These mis-conceptions lead to the classical question: but
how can you make money with software you give away for free ?
26. FLOSS Product / Solution The product is A superset Eg:
Embedded; SaaS... A complement Eg: Professional services; Distros
with subscriptions... A substitute Eg: Dual-licensing;
Bait-and-hook... of the FLOSS project
27. Project vs product
28. FLOSS Pricing / Value Monetary In few models, comes from
FLOSS Usually, comes from complements/superset (hardware, doc,
services) or non-FLOSS substitutes Non-monetary Adoption leads to
sustainability Contributions, peer-to-peer support Direct user
feedback enhances the product marketing process
29. FLOSS Promotion / Information Urban legend: the natural
selection of FLOSS projects (the widely adopted are the technically
superior ones) Reality: promotion is a huge effort A healty FLOSS
project may be the promotion channel for product(s)
30. FLOSS Placement / Access Since the product is not the FLOSS
project ... the access point is not just the Internet Scalability
issues apply to some models... Eg: FLOSS enabled consumer
electronics Less to others, eg: Online support subscription
Ecosystem leverage: go to market jointly with partners
31. FLOSS - Competitors Reminder: the product is not the FLOSS
project... Product competitors depend on the product Competitors to
the FLOSS project Proprietary or FLOSS substitute May jeopardize
project image, sustainability FLOSS free riders may not be
competitors even though they benefit and do not pay Because the
product is not the project
32. Recap / Take-aways Collaboration on software development
makes economical sense hence FLOSS Industry demands gave
opportunities for new business models There's a wide variety of
FLOSS-based business models... ...in most of them, the product is
NOT the FLOSS project, but a superset, complement or substitute To
be cont'd (open innovation in software June 11, 2009) and we'll see
where OW2 fits!
33. More : Open Source Software: the Role of Nonprofits in
Federating Business and Innovation Ecosystems, F. Letellier, AFME
Conference 2008
http://flet.netcipia.net/xwiki/bin/download/Main/publications%2Dfr/GEM2008%2DF
Letellier%2DSubmittedPaper.pdf Thank you for your attention
Questions ? And Answers Le middleware from est partout ? Francois
Letellier - [email protected] Sunny Grenoble 33