I. Introduction of Open Source SW I-1. What is Open Source Software? I-2. Open Source Software Licenses I-3. Benefits of Open Source Software I-4. Growth of Open Source Software
II. Current Status of Open Source Business
II-1. Comparison between Proprietary and Opens Source Software II-2. Chasm and Barriers II-3. How to Cross the Chasm and Barriers II-4. Chapter Summary
III. Proposed Open Source Business Framework
III-1. Basic Principles III-2. Proposed Open Source Business Framework III-3. Benefits
IV. Conclusions V. References
Contents
I. Introduction of
Open Source SW
Open Source SW Business? Shin, Sanghee([email protected])
I-1. What is Open Source SW?
q Open source SW(OSS) is the computer SW that is available in source code form under certain licenses.
q Users of OSS are permitted to use, copy, study, change, improve and even redistribute those OSS freely.
q ‘Free’ does not mean ‘Free of Charge’ nor ‘Free Stuff’ but ‘Freedom’
I. Introduction of Open Source SW
4
FREEDOM Of
Software
Freedom of
Redistribute
Freedom of
Modify
Freedom of
Copy
Freedom of
Use
Open Source SW Business? Shin, Sanghee([email protected])
I-1. What is Open Source SW?
q Open Source SW Criteria by OSI(Open Source Initiative)
I. Introduction of Open Source SW
5
1. Free Redistribution
2. Source Code
3. Derived Works
4. Integrity of The Author's Source Code
5. No Discrimination Against Persons or Groups
6. No Discrimination Against Fields of Endeavor
7. Distribution of License
8. License Must Not Be Specific to a Product
9. License Must Not Restrict Other Software
10. License Must Be Technology-Neutral
Open Source SW Business? Shin, Sanghee([email protected])
I-1. What is Open Source SW?
q Open Source SW vs. Freeware
I. Introduction of Open Source SW
6
• Users have the right to access & modify the source codes.
• In case original programmer disappeared, users & developer group of the S/W usually keep its support to the S/W.
• OSS usually has the strong users & developers group that manage and maintain the project
OSS Freeware
§ OSS is different from Freeware
§ Antonym of OSS would be ‘Closed Source S/W’ or ‘Proprietary S/W’
§ Recently OSS is also regarded as ‘Commercial S/W’
• Freeware is usually distributed in a form of binary at ‘Free of Charge’, but does not open source codes itself.
• Developer of freeware could abandon development at any time and then final version will be the last version of the freeware. No enhancements will be made by others.
• Possibility of changing its licensing policy
Open Source SW Business? Shin, Sanghee([email protected])
I-2. Open Source SW Licenses
q Copyright vs. Licenses
7
I. Introduction of Open Source SW
ü Set of exclusive rights granted to the author or creator of an original work, including the right to copy, distribute and adapt the work.
ü Rights obtained just after create the work without any registration.
ü Without any permissions, others could not use, copy, distribute, adapt the work.
ü Permission to use the work under certain agreement.
ü A kind of contract agreement like EULA(End User License Agreements)
ü If you buy Window7, it means you just buy a permission to install & use Windows7 S/W in your PC.
ü License is different from products buying.
Copyright License
Copyright Patent Trademark Trade Secret
IPR
Open Source SW Business? Shin, Sanghee([email protected])
I-2. Open Source SW Licenses
q Typical OSS Licenses
8
I. Introduction of Open Source SW
Free Re-Distributable
Access to Source Code Modification
Obligation to
Open Derived Works
Combining with
Proprietary SW
GPL O O O O O X
LGPL O O O O O O
MPL O O O O O O
BSD Alike O O O O X O
Apache Alike O O O O X O
§ GPL : Application need to be licensed under the same GPL if redistributed with the GPL asset. § LGPL : Modified library need to be licensed under the same licenses as the originating asset. § BSD/Apache Alike : Much more permissive for combination with proprietary SW.
Open Source SW Business? Shin, Sanghee([email protected])
I-2. Open Source SW Licenses
q Open Source SW License Rate
9
I. Introduction of Open Source SW
Sourceforge.net, May, 2006.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Black Duck Software Knowledgebase, April, 2008.
§ More than 60% of OSS licenses are GPL based license. § Due to hard condition of OSS licenses, OSS is perceived to be difficult to be commercialized.
è How to commercialize the open source SW?
Open Source SW Business? Shin, Sanghee([email protected])
I-3. Benefits of Open Source SW
10
I. Introduction of Open Source SW
q Benefits of Open Source Software purported by OSS Community
§ Save money, save resources, increase stability, access to source code, access to skilled community of dev
elopers
Develop the society by sharing technology & outcomes!!
1. Technological Aspects
2. Economical Aspects
3. Business Aspects
4. Other Aspects
Rapid development of high-class SW Increased stability by skilled community review Reduce technological gap to leading proprietary SW company Internalize outside SW developer resources
Very low adoption cost Reduce SW development cost Easy to customize Reuse successful story
Extend company’s products portfolio Open up new market by providing diversified services & products Improve brand image of company
Reduce energy Self-Satisfaction Help society
Open Source SW Business? Shin, Sanghee([email protected])
I-3. Benefits of Open Source SW
11
I. Introduction of Open Source SW
q Open Source Advantages over Commercial SW
§ Open source’s price tag is clearly important driver. OSS is practically cheaper than commercial one.
§ 57% said that accessibility to source code really matters and 41% cited community code review as an imp
ortant benefit over proprietary.
80%
57%
41%
20%
18%
15%
15%
15%
10%
6%
5%
0% 20% 40% 60% 80% 100%
Price
Source Code Access
Community Code Review
Don’t Know
Bug Fix Turnaround
Security
Code Quality
Best Product Functionality
Easier to Adopt in Organization
Other
IP Protection
è Price & opened source code are key factors!
* Source : Barracuda Networks
Open Source SW Business? Shin, Sanghee([email protected])
I-3. Benefits of Open Source SW
12
I. Introduction of Open Source SW
* Source : Barracuda Networks
65%
47%
44%
35%
28%
23%
17%
9%
7%
4%
3%
0% 10% 20% 30% 40% 50% 60% 70%
Vendor Professional Services
Easier to Adopt in Organization
Automated Updates
Reduced IT Support
Best Product Functionality
Security
Code Quality
Don't Know
IP Protection
Other
Price
q Commercial Software Advantages over Open Source
§ 65% cited lack of professional services as a major defect point of open source software.
§ 47% and 44% said that commercial software is easier to adopt and more automated. Users believe that op
en source software is good but lacks professional services and convenience.
è Professional services & convenience are key factors!
Open Source SW Business? Shin, Sanghee([email protected])
I-4. Growth of Open Source SW
13
I. Introduction of Open Source SW
q Forecast of Open Source SW Growth
§ “By 2012, open-source software's impact on application software will grow to $19 billion, with a five-year compound annual growth rate of 44%.”, 2008
§ “By 2012, 80 per cent of all commercial software will include elements of open-source technology”, 2008
§ “Worldwide revenue from open source software will grow at a 22.4 percent compound annual growth rate to reach $8.1 billion by 2013.”, 2009
§ “Large software vendors like IBM, Sun, Dell, HP, and Oracle are making significant amounts of indirect revenue from their activities with and support of OSS.”, 2009
§ “The notional value of Europe’s investment in FLOSS software today is Euro 22 billion (36 billion in the US) representing 20.5% of total software investment (20% in the US)”, 2007
§ “FLOSS-related services could reach a 32% share of all IT services by 2010, and the FLOSS-related share of the economy could reach 4% of European GDP by 2010.”, 2007
Open Source SW Business? Shin, Sanghee([email protected])
I-4. Growth of Open Source SW
14
I. Introduction of Open Source SW
<FOSS Projects Growth>
* Source : Amit Deshpande et al , 2008, “The Total Growth of Open Source”, In Proceedings of the Fourth Conference on Open Source Systems (OSS 2008).
<FOSS Source Codes Growth>
q Trends of Open Source Software Growth
§ With cumulative growth of open source software, open source software has now reached a turning point or
tipping point in terms of adoption of open source software and business.
II. Current Status of
Open Source Business
Open Source SW Business? Shin, Sanghee([email protected]) 16
q SW Development Model Comparison
Closed Open
Developers to Customers Developers to Developers
<Proprietary Model> <OSS Model>
§ In-house development of SW and ‘Product’ § Before beta-version, couldn’t review SW and product § Designed and developed by core programmers
§ Community based SW development and no ‘Product’ § SW reviewed by community members at any time § Designed and developed by community developers
In-House Development
Community Development
è OSS does not care about customers real needs!
II-1. Comparison between Proprietary and OSS II. Current Status of Open Source Business
Open Source SW Business? Shin, Sanghee([email protected])
II-1. Comparison between Proprietary and OSS
17
q Business Model Comparison : Proprietary Business Model
è In-house based development of SW and ‘Whole Product’
Proprietary Company
Customers Partners
OEMs
SW Development
Engineering Product Mgmt.
‘Go To Market’
Sales, Marketing, Support, Services, Engineering, Pr
oduct Mgmt.
Money
Whole Product
§ Engineering has 2 roles : Development of SW and participate in ‘Go To Market’ program.
§ Product Management ‘owns’ the product roadmap and has the responsibility of creating product.
§ Sales, Marketing, Support, and Services departments are focused on the customers.
§ ‘Go To Market’ program creates the ‘Whole Product’ that mainstream customers require.
§ By collecting customers needs and feeding back those needs to company, this model creates and deliver value to customers
Resources
Software
* Source : James Dixon, The Beekeeper
II. Current Status of Open Source Business
Open Source SW Business? Shin, Sanghee([email protected])
II-1. Comparison between Proprietary and OSS
18
q Business Model Comparison : Open Source Business Model
è No ’Whole Product’ is the key barriers to adoption of OSS!
Core Developers
Administrators
Engineers
* Source : James Dixon, The Beekeeper
Community
Contributions
Contributions
Peer Review Use Cases
Testing Documentation
Translations Features
Forum Help Bug Fixes
Roadmap Design
Software ‘The Project’
§ Administrators typically design and develop ‘SW’ itself.
§ Roadmap is owned by the project administrators.
§ Community participate in designing, implementing and testing the software.
§ Core developers and community usually focus their resources on ‘Software’ development itself for their use, fun and satisfaction.
§ No ‘Go To Market’ process. Community usually does not care about ‘Whole Product’.
§ No elaborate marketing strategies.
II. Current Status of Open Source Business
Open Source SW Business? Shin, Sanghee([email protected])
II-2. Chasm and Barriers
q Open Source Software in the Chasm
19
§ Innovators and early adopters are very enthusiastic at open source software in spite of its risk and lacking of supp
ort, since many of innovators and early adopters are technical person.
§ However many pragmatists are still reluctant to use open source software. That’s why OSS is in chasm.
ü
Open Source Software in the Chasm
II. Current Status of Open Source Business
Open Source SW Business? Shin, Sanghee([email protected])
II-2. Chasm and Barriers
q 6 Barriers to Open Source Software Adoption
20
6 Barriers Open Source SW Success Story
1. Lack of formal support and services
2. Velocity of change
3. Lack of roadmap
4. Functional Gaps
5. License Types
6. Lack of endorsements by independent ISVs
II. Current Status of Open Source Business
* Source : Ray Lane, 6 barriers to open source adoption
Open Source SW Business? Shin, Sanghee([email protected])
II-3. How to Cross the Chasm and Barriers?
21
Crossing The
Chasm
Target the
Point of Attack
Assemble an
Invasion Force
Define the
Battle
Launch the
Invasion
• Action Items : - Clear target market for ‘Whole Product’ - Focus resource on achieving leadership - Identifying market identifiers - Target customer - Compelling reason to buy ‘Product’ - Customer value proposition
• Action Items : - Create the ‘Whole Product’ - Focus on customer’s problem - Job-to-be-done approach - Considering complementary assets - Partnership or In-house approach
• Action Items : - Marketing strategy - Distribution channel - Pricing policy - Sales force
• Action Items : - Define positioning - Focus the competition within target market - Approach pragmatist with CVP - Share CVP with company employee - Demonstrate the validity of CVP
q How to Cross the Chasm? § Change paradigm from open source ‘
Software’ to ‘Whole Product’
II. Current Status of Open Source Business
Open Source SW Business? Shin, Sanghee([email protected])
II-3. How to Cross the Chasm and Barriers?
22
q How to Cross the Barriers?
6 Barriers
1. Lack of formal support and services
2. Velocity of change
3. Lack of roadmap
4. Functional gaps
5. License types
6. Lack of endorsements by independent ISVs
Solutions
1. Provide professional support and services
2. Provide scheduled upgrade and patch via subscriptions
3. Increase communication between customers & developer community
4. Critical functional gaps are narrowing down gradually
5. Offer hybrid licensing models or provide solution instead of SW
6. Endorsement by standards
Risk related issues
Risk related issues
Feature issues
Change Open
Source Software
to ‘Whole
Product’
II. Current Status of Open Source Business
Open Source SW Business? Shin, Sanghee([email protected])
II-4. Chapter Summary
23
q Need to Change Paradigm from Open Source ‘Software’ to ‘Whole Product’
II. Current Status of Open Source Business
Software
Integration
Software
Services
Installation
Training
VARs Other
SW/HW
Certification
Support
<Whole Product>
<Open Source SW>
§ Open source ‘software’ itself is mainly for developers not for real customers.
§ Customers unmet needs could not be met with ‘software’ alone. § To monetize open source ‘software’, ‘Whole Product’ should be
offered to customers.
è OSS model is great at producing SW, but it doesn’t produce ‘Whole Product’ for customers!
Open Source SW Business? Shin, Sanghee([email protected])
II-4. Chapter Summary
24
q Need to Target the Clear Market
II. Current Status of Open Source Business
è To offer ‘Whole Product’ to customers, OSS company need to focus on clear target market
III. Proposed
Open Source
Business Framework
Open Source SW Business? Shin, Sanghee([email protected])
III-1. Basic Principles III. Proposed Open Source Business Framework
26
q Combining Advantages of Proprietary and Open Source Model into ‘Commercial’ Model
Advantages of
Proprietary
1. Professional service 2. Continuous support 3. Easy to use 4. Reliability 5. Functionalities
Advantages of
Open Source
1. Cheaper price 2. Source code access 3. Community review 4. Quicker bug fix 5. More standard based
Commercial Open Source Software
‘Whole Product’
è Commercial open source company can exist to create ‘Whole Product’ around an open source project (software + community) and can deliver it to a mainstream market.
Open Source SW Business? Shin, Sanghee([email protected])
III-1. Basic Principles III. Proposed Open Source Business Framework
27
q ‘Commercial’ Open Source Business Model as Platform Business
Customers Partners
OEMs
Open Source
Software Community
Commercial Open Source Company
‘Go To Market’
Sales, Marketing, Support, Services, Engineering, Pr
oduct Mgmt.
+
+
+
Community can hear more functionalities & requests
Customers can gain higher quality software at a better price
The bigger community the more resources
Open Source SW Business? Shin, Sanghee([email protected])
High quality open source
SW
High quality open source
‘Whole Product’
Attract more
customers
Business growth
& Contribution to
community
Growth Of
Community
III-1. Basic Principles III. Proposed Open Source Business Framework
28
q Ecosystem of ‘Commercial’ Open Source Business Model
Commercial Open Source
Business Model
Open Source SW Business? Shin, Sanghee([email protected])
III-1. Basic Principles III. Proposed Open Source Business Framework
29
q Respect Open Source Principles
" Freedom of participation " Accepting feedback from members " Review/criticize design & code " Various contribution
" Let community members know what’s going on
" Communication about schedules and hurdles
" Public defect tracking system
" Earliest draft version and updating it often
" Release of source code " Release of software design " Release of software roadmap
" Do not treat community members as potential customers
" Respect autonomy & activities of community
" Community is not the part of company
Openness Transparency
Early & Often Respect Community
Open Source SW Business? Shin, Sanghee([email protected])
III-2. Proposed Open Source Business Framework III. Proposed Open Source Business Framework
30
q Commercial Open Source Business Model
Commercial OSS Company
Customers Partners
OEMs
SW Development
Eng. Product Mgmt. Ecosystem Develop
‘Go To Market’
Sales, Marketing, Support, Services, Engineering, Pr
oduct Mgmt.
Money
Whole Product
Resources
Software
* Source : James Dixon, The Beekeeper
Community Contributions
Contributions
Peer Review Use Cases
Testing Documentation
Translations Features
Forum Help Bug Fixes
Configuration Matrix Quotes & News
Roadmap Design
Software ‘The Project’
§ Community : Development of SW § Company : Making ‘Whole Product’ and deliver it to customers § Customers : Buy product from the company
Open Source SW Business? Shin, Sanghee([email protected])
III-2. Proposed Open Source Business Framework III. Proposed Open Source Business Framework
31
q Value Chain Change
‘Whole Product’
Software 1
Software 2
Software 3
Software
Current Proprietary Model
Cha
nnel
Customer 1
Customer 2
Customer 3
Whole Product Channel Customers
In-house In-house & partners Outside
Cost Side Money Side Cost Side
Open Source SW Business? Shin, Sanghee([email protected])
III-2. Proposed Open Source Business Framework III. Proposed Open Source Business Framework
32
q Value Chain Change
‘Whole Product’
VA Software
Software
Commercial Open Source Model
Cha
nnel
Customer 1
Customer 2
Customer 3
Whole Product Channel Customers
Community In-house & partners Outside
Money Side Money Side Cost Side
Community
In-house
Cost Side
Open Source SW Business? Shin, Sanghee([email protected])
III-3. Benefits III. Proposed Open Source Business Framework
33
q Benefits of Commercial Open Source Business Framework
Open Source Proprietary Commercial Open Source
Rate of innovation Higher Lower Higher
Visibility into product design/implementation Higher Lower Higher
Quality of software Higher Lower Higher
Reliability of support Lower Higher Higher
Reliability of roadmap Lower Higher Higher
Ownership of solution Higher Lower Higher
Availability of professional services Lower Higher Higher
Availability of references and case studies Lower Higher Higher
Ability to prototype and ‘try before you buy’ Higher Lower Higher
Cost of license or subscription Lower Higher Lower
Ability to customize software Higher Lower Higher
IV. Conclusions
Open Source SW Business? Shin, Sanghee([email protected])
IV. Conclusions IV. Conclusions
35
q Approach Customers with ‘Whole Product’ to Cross the Chasm & Barriers
Weakness of Open Source Model • Lack of professional services
• Reliabilities
• Not to meet customers real job
• Focused on software itself
• Inconvenience
Strategy for Success • Approach customers with ‘Whole Product’
• ‘Whole Product’ includes support, service, integ
ration, additional SW/HW
• Combining advantages of proprietary and open
source model into ‘Commercial’
• Focus on CVP rather than ‘Software’
Open Source SW Business? Shin, Sanghee([email protected])
IV. Conclusions IV. Conclusions
36
q ‘Commercial’ Open Source Model as Robust One
Community
:Benefit from company & customers
Customers
:High quality SW & professional ser
vices
Company
:Reduce product development cost & incre
ase its valuation
‘Commercial’ Open Source Model
§ The open source community benefits directly from the full-time engineering staff that exist because of the fee-paying customers.
§ The customers benefit from the increased quality of the software, quality of design, and increased traction enabled by the open source community. And they could expect professional services & support from the ‘commercial’ open source company.
§ The ‘Commercial’ open source company benefits by increasing its valuation when it meets the needs of both customers and open source community.
Meet the unmet needs of customers by offering core value proposition with open source ‘Whole Product’, that is the key success point of open source business
V. References
Open Source SW Business? Shin, Sanghee([email protected])
V. References V. References
38
� 강형구, “오픈 소스 비즈니스 모델 혁신 실증 연구 : 레드햇 사례를 중심으로”, 포항공대 기술경영대학원 석사학위 논문, 2010.
� 김진우, “오픈 소스 사회 현상에 대한 마케팅적 고찰”, 고려대학교 경영대학 석사학위 논문, 2008.
� 권순선, “오픈 소스의 비지니스 모델”, http://kldp.org/node/80381
� Dixon, J., “The Honey-Gatherer Model for Service/Support Commercial Open Source”, http://jamesdixon.wordpress.com/the-bees-and-the-trees/servicesupport-model/
� Dixon, J., “The Maple Syrup Farm Model for Proprietary Software Companies”, http://jamesdixon.wordpress.com/the-bees-and-the-trees/proprietary-model/
� Dixon, J., The Beekeeper I, II, http://wiki.pentaho.com/display/BEEKEEPER/The+Beekeeper
� Sanghee Shin, “Open source does matter”, KAIST Business School IT Strategy Class Presentation, 2010.
� Dan Farber, Summary of a Ray Lane’s Keynote, “Six barriers to open source adoption”, ZDNet, http://techupdate.zdnet.com/techupdate/stories/main/Six_barriers_to_open_source_adoption.html
� Goeffrey Moore, Crossing the Chasm, http://en.wikipedia.org/wiki/Crossing_the_Chasm
� 신상희, “오픈 소스 라이선스의 이해”, 2009년 GIS 추계 공동학술대회, 2009.
� Interview with Barracuda Networks : http://news.cnet.com/8301-13505_3-9789246-16.html?tag=mncol;txt
� Amit Deshpande et al, “The Total Growth of Open Source”, In Proceedings of the Fourth Conference on Open Source Systems (OSS 2008), 2008.
� OSI(Open Source Initiative), http://www.opensource.org
� Paul Ramsey, ”Beyond Nerds Bearing Gifts”, FOSS4G 2009 Keynote address, http://2009.foss4g.org/speakers/#Paul_Ramsey