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Open Source Business Models Rafael de Albuquerque Ribeiro IN953 – Software Engineering 2007.1 July 23, 2007 :: Recife – PE.

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Presentation on theme: "Open Source Business Models Rafael de Albuquerque Ribeiro IN953 – Software Engineering 2007.1 July 23, 2007 :: Recife – PE."— Presentation transcript:

1 Open Source Business Models Rafael de Albuquerque Ribeiro IN953 – Software Engineering July 23, 2007 :: Recife – PE

2 What is a business model? Business model is a term often used to describe the key components of a given business. [...] unite finer aspects of strategy, such as resource-bases, activities, structure, products and external factors. Hedman, J. and Kalling, T The business model concept: theoretical underpinnings and empirical illustrations.

3 Key points for Open Source Business Models IPR, Copyright and product lifecycle control Harnessing community workforce Tailor revenue sources according to licensing model Location in the value chain

4 Boss, lets start an Open Source group OK Him: - But it must make economic sense Me: - Sure – no problem *gulp* Langham (2005) Surviving the five year itch: A tale from the trenches of European Open Source business models

5 Innovation Happens Elsewhere Lessons from the experience of setting up the an open source like project at Sun The JINI Project served as base for NetBeans, OpenOffice, Project JXTA, and java.net. [...] Sun did not have the expertise to define Jini services in areas like printing, digital photography, [...]

6 The community 6. Treating your users as co-developers 7. Release early. Release often. 10. treat your beta-testers as if they're your most valuable resource 11. The next best thing to having good ideas is recognizing good ideas from your users. Raymond, E. S The Cathedral and the Bazaar. 1st. O'Reilly & Associates, Inc.

7 Open Source Paradigm Shift Commoditization of software Network-enabled collaboration Customizability and Software-as-Service OReilly (2005) The Open Source Paradigm Shift. In Perspectives on Free and Open Source Software, eds. Feller et al., MIT Press

8 OSS Licenses Licensing is such a complex subject that we can find books about it * New Zealand government has developed a research in where the licenses where categorized as: –strongly infectious –weakly infectious –permissive *Laurent, Andrew M. St Understanding Open Source and Free Software Licensing. O'Reilly Media,Inc. State Services Commission (2006) Guide to Legal Issues in Using Open Source Software. New Zealand Government Policy. [ ]

9 Strongly infectious licensing Problem: –How to estimulate the return of the enhancements of an open source software to the community or author. Solution: –Have the software or product licensed using the GNU General Public License (GPL) Known uses: –MySQL SGBD, Cyclades products Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

10 Weakly infectious licensing Problem: –How to estimulate the return of the enhancements of an open source software to the community or author without the huge impositions of the GNU GPL Solution: –Have the software or product licensed using the GNU Lesser General Public License (LGPL) or Mozilla Public License (MPL) Known uses: –OpenOffice.org uses LGPL and Mozilla Firefox uses MPL Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

11 Permissive licensing Problem: –How to protect the copyrights of the original author of a software and impose that any derivative work promotes the original software Solution: –Have the software or product licensed using the Apache License (APL) or Berkeley Software Distribution (BSD) License Known uses: –PostgreSQL uses BSD and Apache HTTP Server uses APL Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

12 Apache chairman: Days numbered for commercial software A license can ruin a perfectly good piece of software […] A bad license can make it so restrictive that nobody wants to use the software Krill (2006)

13 Licensing and Sponsorship Several project characteristics may be important to OSS success including –project age –project development status –programming language –type of software developed –intended audience –reputation of participants –licensing issues –organizational involvement in the project Stewart et al. (2005) A Preliminary Analysis of the Influences of Licensing and Organizational Sponsorship on Success in Open Source Projects. In Proceedings of the 38th Annual Hawaii International Conference on System Sciences (HICSS'05)

14 Licensing and Sponsorship 147 projects on Freshmeat.net Dependent variables: –Change in subscribers (popularity) –New releases (vitality) Independent variables –License restrictiveness –Is the project sponsored? –Initial popularity Control variables –Project category –Project age Stewart et al. (2005) A Preliminary Analysis of the Influences of Licensing and Organizational Sponsorship on Success in Open Source Projects. In Proceedings of the 38th Annual Hawaii International Conference on System Sciences (HICSS'05)

15 Licensing and Sponsorship Stewart et al. (2005) A Preliminary Analysis of the Influences of Licensing and Organizational Sponsorship on Success in Open Source Projects. In Proceedings of the 38th Annual Hawaii International Conference on System Sciences (HICSS'05) Hypothesis 1: OSS projects that use a nonrestrictive license will become more popular over time than those that use a restrictive license. Hypothesis 2: Sponsored OSS projects will become more popular over time than non-sponsored OSS projects. Hypothesis 3: OSS projects using a restrictive license will experience higher levels of vitality than those using a non-restrictive license. Hypothesis 4: OSS project popularity will have a positive effect on OSS project vitality.

16 Guide to Legal Issues in Using Open Source Software A guide to help New Zealand government departments assess and mitigate the legal risks of using open source software. New Zealands State Services Commission (2006) [http://www.e.govt.nz/policy/open-source/open-source-legal/guide-to-legal-issues- in-using-open-source-software.pdf]

17 Guide to Legal Issues in Using Open Source Software New Zealands State Services Commission (2006) [http://www.e.govt.nz/policy/open-source/open-source-legal/guide-to-legal-issues- in-using-open-source-software.pdf]

18 Guide to Legal Issues in Using Open Source Software New Zealands State Services Commission (2006) [http://www.e.govt.nz/policy/open-source/open-source-legal/guide-to-legal-issues- in-using-open-source-software.pdf]

19 How open is open enough? Leveraging openness while keeping differentiation –Apple Reuse and leverage –IBM from platforms to applications –Sun opening new platforms J. West. How open is open enough? melding proprietary and open source platform strategies. Research Policy, 32, 7 (July 2003),

20 Towards a Product Model of Open Source Software in a Commercial Environment Deng et al. (2003). Towards a Product Model of Open Source Software in a Commercial Environment. In 3rd International Workshop on Open Source Software Engineering. ICSE 03.

21 OSS Business models Based on the seven business models identified on (Koenig, 2004), seven business patterns were proposed Koenig (2004) Seven open source business strategies for competitive advantage. IT Managers Journal

22 Patronage Problem: –Share the cost of developing a common kernel for an specialized software accross several companies Solution: –Foster the development of an open source product on top of which you can derive your specialized software Known uses: –IBM incentive to Eclipse Foundation Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

23 Optimization Problem: –Have a software which has optimal performance in relation to the commodity layers that it runs on top Solution: –Adjust the software to have optimal performance when running on top of an open source software Known uses: –Oracle SGBD and Linux Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

24 Dual Licensing Problem: –Increase installed base for a software without loosing revenue from licensing Solution: –Offer the same software with two possible licensing options depending of its usage. Known uses: –MySQL Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

25 Embedded Problem: –Develop a multi-platform embedded solution minimizing the costs Solution: –Develop the product on top of an existing open source solution Known uses: –Cyclades Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

26 Subscription Problem: –Have a business based on the new perspective of the software industry where the revenues are mainly based on services Solution: –Give the software away for free and charge for value added services Known uses: –Redhat Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

27 Hosted Problem: –How to offer a services platform that is platform independent Solution: –Implement the services platform on top of open source software in order to reduce costs and increase interoperability Known uses: –Google and Amazon Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

28 Consulting Problem: –How to offer services for a software market Solution: –Implement the services platform on top of open source software in order to reduce costs and increase interoperability Known uses: –Google and Amazon Ribeiro, R. A., Guimarães, R. A., Moraes, A. K. O., Albuquerque, J. O., Meira, S. R. L. (2007) Padrões para Negócios Open Source. 6ª Conferência Latino Americana em Linguagens de Padrões para Programação, Porto de Galinhas, Brasil, 2007.

29 Food for thought Questionings....

30 The Transformation of Open Source Software Open Source is shifting from community driven to business driven Presence of concepts such as product roadmap Cathedral like design and development and bazaar like distribution Brian Fitzgerald (2006)The Transformation of Open Source Software. MIS Quarterly, Vol. 30, No. 3, 2006

31 The real development community? The myth of a global, expansive open source development community is just that: a myth. Even JBoss and MySQL are overwhelmingly developed by those respective companies, and not by a crowd of outside developers (95% and 85%, respectively, I believe) [Asay 2005] Between 80 percent and 85 percent of people working on Eclipse projects are paid salaries by their employers who send them to work for Eclipse. Asay (2005) So you want to build an open source community... [http://asay.blogspot.com/2005_09_01_asay_archive.html] Krill (2006) Death of the software salesman?

32 In the end… There is no right business model for Open Source –Whatever works for you, your customers and the community you participate in, is right. –SURE? What should be a business model for open source software factories? Langham (2005) Surviving the five year itch: A tale from the trenches of European Open Source business models

33 Open Source Business Models Rafael de Albuquerque Ribeiro IN953 – Software Engineering July 23, 2007 :: Recife – PE


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