Strategizing for the Future MySQL Conference April 27, 2006

Strategizing for the Future Open 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 Future Customer Perspective Lower software acquisition costs A software distribution model, e.g. “frictionless” Simpler license structures A licensing approach that provides free access to source code Applications specifically tailored to customer requirements Distributed/Collaborative Development Process No proprietary OS lock-in means more competition, lower costs and faster innovation Source availability enables alternative vendors Transparency for Learning and Imitation Ability to influence development via community Software as Social Currency Standards-based solutions Re-usability

Strategizing for the Future Key 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 Future Services 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. Proprietary Lower cost of R&D Lower cost of Sales and Marketing License vs. Services Revenues

Oracle Products Services Strategizing for the Future Services vs Licenses Software:Challenges for Products vs. Services Companies Michael A. Cusumano MIT Sloan School of Management February 2006

Growth index Time Services Products Growth index Time Services Products 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 Management February 2006 Strategizing for the Future Services vs Licensing

Strategizing for the Future Open Source Licenses Almost 56 approved OSI licenses, movement to reduction Most 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 community Structure and control Support structure and pricing Complimentary to commercial products Strategizing for the Future Open Source Licenses

Strategizing for the Future Leveraging 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 standards *Greg Olson, Olliance Group, 2006 Strategizing for the Future Leveraging 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 Future Building a Community Solution to a Problem Non Profit Endeavor Speak the Language Under the Radar “Expert” Branding

Strategizing for the Future Success & Risk Factors Success FactorsRisk 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 3 rd party support and services

Strategizing for the Future Next Steps Customer validation Finalize business model Select a license Develop go-to-market plan Develop community plan

Strategizing for the Future Open Source Think Tank Download Think Tank White Paper Laura Merling SDForum

Strategizing for the Future Services vs Licenses Software:Challenges for Products vs. Services Companies Michael A. Cusumano MIT Sloan School of Management February 2006