24.1 The business of open source

First off let me state the obvious and say that building a business that depends on open source is not an easy thing to do. If it was, there would a great deal more success stories out there.

Offering services around Intellectual Property (IP) you own, manage and control that no one else can replicate - or not easily any way, is a well understood model if not always executed in the best way. Grabbing hold of ‘free’ software and wrapping services in a completely transparent way means really understanding operational risk. Given that the same IP is available for anyone to do exactly the same thing and compete in your marketplace means your always fighting to innovate faster than the next guy and that can only be a good thing.

Personally, I love the idea of forcing my competitors to innovate.

The goal of course is to build a value proposition to the market that provides the highest quality of service at the lowest cost. The transparent nature of open source projects allow you to develop your own risk model where you can identify exposure and price your services competitively.

Visibility into the underlying source code is the first step. Those organizations that participate in the project community gain a much greater advantage than those listening from the outside. By contributing to the development of the code and gathering feedback from both the software users and fellow developers, a more refined risk model can be developed with lower risk premiums and therefore a greater competitive pricing model can be offered to the market.

The more obvious benefits that are more widely presented include reduced internal costs in two significant areas: research and development and support.

There are companies that invest nothing in R&D and, generally speaking, history has not been kind to them. This is especially true of software companies where very tight competition forces constant innovation. In a closed model that innovation has to be paid for by the customer and is often non-transparent so the true value is hard to assess.

The other major cost in a closed environment is the end user support where the model has to be developed and maintained internally and paid for entirely by the customer. Without the ability to share any proprietary material, the market is forced to accept whatever inefficient support model the supplier can offer.

Thankfully, we’re rapidly moving from the old days of having two extreme options. The first option is working in a world with locked down commercial licenses and no access to source code, while the second option on the other side was having all the code to play with and no support number to call for help or guidance.