Marketing, Organization, and Financing

Unlike other companies that have a focused manner of development, the open source is less clear-cut. There are mature open source products that perform product marketing, but most of them have no global planning authority. This is justified by the fact that open source is not a business, but an entire business, which moulds to the market itself. The product marketing for the global open source community operates in the way a capitalist nation operates its economy, rather than the way a company plans its products.

Networks of programmers can be formed via the Internet. They can create large and complex software products, and the team increases progressively according to the phase of the development. Software is extremely modular by nature, and thus many people can work on different segments of the software, almost autonomously, if they agree how to share tasks. A good example would be the Debian GNU/Linux Distribution. This system includes more than 16,000 software packages maintained by over 1,000 volunteer developers worldwide.

Open source is funded directly or indirectly as a cost-centre item by the companies that need it. This software is developed in order to use it for other activities, which are the ones that bring profit to the business, so the cost of development is less important than the future use of the software. Such contributors are willing to invest in this kind of project because it allows them to spend less on their cost centers by distributing the cost and risk among many collaborators.

Open Source Components

There are several contributors on the market of open source: volunteers, Linux distribution companies, companies with a single open source program as their main product, hardware vendors, end-user businesses and their contractors, service businesses, government, academic and scientific researchers. The synthetic comparison of the actors is to be found in the appendix section. [1]

i.                    Volunteers – this activity starts from a hobby and it does not imply a financial motivation. It gradually becomes volunteering.

ii.                  Linux distribution companies – they work mainly as integrators of the work of others, they do a lot of maintenance work in order to eliminate bugs for their paying customers and they do original open source software development to enable their product or a new market. Today we are experimenting the second generation of open source business plans: some Linux distributions are trying to imitate proprietary software. Behind their costly box of software or per-seat license is a product that the customer could acquire without charge through other channels. The best name for this business model is proprietary open source, as services are offered but the business is operated in the proprietary box-software model. It is important to emphasize that not all Linux distributions engage in proprietary open source, and that proprietary open source is not the dominant business model for open source software development (ex: Red Hat, Novell).

iii.                Companies with a single open source program as their main product – these can be of three types: mixed open source and proprietary licensing model (My SQL AB, Sleepycat Software), a core open source program with proprietary software accessories (also called widget frosting, ex: Sendmail Inc.), pure open source plus services model.

iv.                Hardware vendors – they produce open source because there is no conflict between open source and differentiation for them as there is in a software company. This activity enables sales, does not reduce their hardware-based business differentiators and thus it does not threat the profit centre (ex: IBM, HP).

v.                  End-user business and their contractors – their contributions come from the internal software support and development staff, or contractors supporting the company (ex: eBay).

vi.                Service businesses – they participate in the development and maintenance of open source programs, but not intensively in any one.

vii.              Government – it provides services that enable economic and social activities.

viii.            Academics and scientific researchers – they are usually graduated. In science the maxim is publish or perish and it holds true for open source as well. To be considered valid, scientific research has to be capable of being duplicated. Some research work is performed by unsalaried students.

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[1] See Appendix no. 7 for a comparison

The Open Source Paradigm II

The customers for a particular open source product generally identify themselves: they search for the product in a directory of open source software, and then they download and test the software. If tests are successful, they deploy it. Thus they gain a continuing interest in the product. At that point if they desire additional features to the product, they have an incentive to become co-developers of the software they are using.

The companies that join open source collaborations are seeking to use the software in a non-differentiating, cost-center role. Their profit-centers are things other than software, and software is for them an enabling technology. In order to continue to operate their profit-centers, they must make some investment in their cost centers. In the case of differentiating software, they have little choice but to make use of the in-house or contract development paradigm, because they need to prevent their differentiators from falling into the hands of their competitors. For their non-differentiators, they have the choice of the retail or open source paradigms.

The Open Source Paradigm I

In this model, multiple entities come together to develop a software product. Generally the initial development is done by a single entity as in the in-house and contract development paradigm, and the software is released to the public as soon as it is useful to others, generally before it would be considered a finished product and thus much earlier than a retail product would be released. Once the software is useful, other entities make use of it. Only when the software becomes useful to others does the open source paradigm work fully, because only then will other parties have an incentive to use the software. Once they are using the software, these other parties will have an incentive to extend the software to implement additional features that are of interest to them. This extension is performed by the customer's own employees or contractors under the customer's control.

The incremental cost of adding a feature is much smaller than the cost of the entire development. Parties that create modifications have an incentive to write them in such a way that they will be accepted by the other developers on the project and will be merged into the main body of source code that is shared by all developers. Thus, open source tends to foster a community of developers who make contributions to a useful product. The cost and risk of developing the product is distributed among these developers, and any combination of them can carry on the project if others leave. Distribution of cost and risk begins as soon as the project is mature enough to build a community outside of its initial developer.

Open source is developed directly by its end-users. For example, Apache web server features are added by the companies that need those features to operate their own web sites, or sometimes by contractors working for those companies.

Efforts At Collaboration Without Open Source Licensing

Consortia used to be the standard means of collaborating between companies upon software development. Closed consortium software (gated communities) has a record of titanic failures (Taligent and Monterey intended to create a replacement for Unix, but Linux replaced them) and it is the wrong structure for the development of non-differentiating software. A consortium costs more because there are fewer members to share cost and risk than with an open source project and more structure and overhead as well.

Digital creativity

Compared to atoms which make up the physical world, digital bits are weightless and intangible. Digital coding is a major technological influence on how ideas are expressed, shared and communicated. Robert Metcalfe, who invented Ethernet networking and founded 3Com Inc., the maker of the Palm Pilot, proposed a law of networks which says that the community value of a network grows as the square of the number of nodes increases. The smallest possible network consists of two people. In this case, Metcalfe’s value is 4. If a third person joins, the number of connections rises to three and Metcalfe’s value is 9. If a fourth, it rises to six and the value is 16.

The Internet is not a hard-wired network, like the telephone network, but a soft network, consisting of the manners, rules and procedures by which hard network is used. It is best described as a set of administrative arrangements for connecting users to information via other networks. At first, the owners of the hard networks hardly noticed the Internet. For many years, it had no impact on their infrastructures, services or prices.