The Second International Conference on Open Source Systems Como, 8 th - 10 th June 2006 1 BUSINESS MODELS FOR OPEN SOURCE SOFTWARE : TOWARDS A MATURE UNDERSTANDING.

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Como, 8th - 10th June 2006 1

BUSINESS MODELS FOR OPEN SOURCE SOFTWARE:

TOWARDS A MATURE UNDERSTANDING OF THE CONCEPT AND ITS IMPLICATIONS FOR PRACTICE

Joseph Feller, Patrick Finnegan & Jeremy Hayes

University College Cork, Ireland

Björn Lundell,

University of Skövde, Sweden

PANEL – OSS 2006

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WHAT DO WE (NOT) KNOW?

● An analysis of 155 peer-reviewed research artifacts (1998-2004)

● Analysis – not review● What types of OSS projects have been

researched?● What has been the area of research?● What methodologies have been used?

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WHAT TYPES OF OSS PROJECTS HAVE BEEN RESEARCHED?

● Ad Hoc Communities● Standardised Communities● Organised Communities

● Commercial Organisations

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WHAT HAS BEEN THE AREA OF RESEARCH?● Software Engineering Issues

– Version Control– Software Architecture– Development Methodology

● Economic and Business Model Issues– Revenue Models– Resource Allocation– Market Drivers

● Socio-cultural and Organisational Issues– Conflict Resolution– Motivation– Legal Issues

● Software Application Spaces– Specific Vertical Sector (Automotive, Health, etc.)– Specific Horizontal Sector (Financials, Human Resources, etc.)– Software Acquisition and Management

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WHAT METHODOLOGIES HAVE BEEN USED?

● Anecdotal / Descriptive– Little or no formal data-gathering methodology.

● Secondary – (Re-)Analysis of previous research.

● Case Study– Formal, high-depth data gathering focused on a single research site.

● Cross-Case – Formal, medium-depth data gathering focused on 2-3 research sites with

comparative analysis.

● Field Study– Formal, low-depth data gathering across a wide number of research sites

with comparative analysis.

● Survey – High-volume structured questionnaire.

● Experiment– Laboratory or field-experiment.

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THE “BUSINESS” GAP

● Commercial Organisations (particularly their relationships with other kinds of communities)

● Economic and Business Models (Full models, not just revenue models)

● OSS research literature requires greater discipline and rigour and more interdisciplinary research (cross-topic analysis)

● There is a relative lack of robust models and theories

● There is a relative lack of “why’s” and “how’s”

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WHAT IS A BUSINESS MODEL?

● Consultants, executives, researchers and journalists have “abusively” used the phrase “business model” but have “rarely given a precise definition of what they exactly meant by using it.

● Business model as a way of doing business● Business model as simplification of complex

‘real world’ description● Business model as archetype

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BUSINESS (REVENUE) MODEL ARCHETYPES

The initial collection are as follows:

• Support Seller

• Loss Leader

• Widget Frosting

• Sell it, Free it

• Accessorizing

• Service Enabler

• Brand Licensing

• Community Enabler

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DELIVERING ‘WHOLE PRODUCTS’ WITH OSS

● Challenge for Libre software businesses is effectively delivering the “whole product” in a manner that takes account of, and in fact leverages, the unique business model dynamics associated with Libre software licensing and processes.

● Importance of business webs / networks in delivering ‘whole product’

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WHAT IS A BUSINESS MODEL? (OSTERWALDER, 2002)

It’s the business logic of how a company makes

money in a sustainable way

WHO?

• Target Customers• Channels• Customer Relationship

HOW MUCH?

• Cost Model• Revenue Model

HOW?

• Capabilities• Value Configuration• Partnerships

WHAT?

• Value Proposition

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Business Model Ontology (Osterwalder and Pigneur, 2002)

Product Innovation Target Customer Segment Value Proposition Capabilities

Customer Relationship Information Strategy Feel & Serve Trust & Loyalty

Infrastructure Management

Resources Activity Configuration Partner Network

Financials Revenue Model Cost Structure Profit/Loss

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Effects of network on participants' business models

. Business Model Pillar Effect of Network on member’s business models

Target Customer Segment

Enhances reputation and branding of participants by providing a single ‘market leader’ brand.

Value Proposition

Extends geographic coverage, supports the ability to offer specialised expertise, products and services in many languages and leveraging local knowledge.

Product Innovation

Capabilities

Enhances existing capabilities by providing a broader range of business capabilities, especially project management and customer Relationship Management.

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EFFECTS OF NETWORK ON PARTICIPANTS' BUSINESS MODELS


Information Strategy

Network aims to provide lead referrals and to contribute to the sharing of experiences and knowledge.

Feel & Serve

Facilitates profile building through common branding.

Customer Relationship

Trust & Loyalty

Leverages access to expertise of software originators to build customer trust.

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Resources

Lowers friction when building teams, through information sharing, common methodology, tracking results, reporting bugs, etc.

Activity Configuration

Enables members to act as a “value shop” configuration. Network reduces the information asymmetry between client and consultant resulting in customers ‘joining’ the community.

Infrastructure Management

Partner Network

Network means that members do not have to outsource to partners outside the network.

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Revenue Model

Increases deal size for members by creating “whole product” consortia.

Cost Structure Enables cost-sharing amongst members.

Financials

Profit/Loss

Increases revenue and lowers expenses through sharing among members, leading to bigger profits.

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technology life cycle

COMMODIFICATION OF SOFTWARE

intracompany

open cooperation

commodity

differentiating

intercompanies

basic for the business

wasting valuable

engineering resources

COTS

Open source

losing

intellectual

property

technology

(van der Linden, 2006)(www.itea-cosi.org)

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HETEROGENEOUS DISTRIBUTED DEVELOPMENT

in houseoutsourcingboundedcollaborations

externalopencollaborations

companycontrol &ownership

knowledge& cost

sharing

software shift

(van der Linden, 2006)(www.itea-cosi.org)

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OPEN SOURCE IN THE STEEL INDUSTRY

● SSAB Oxelösund– a member of the SSAB Svenskt Stål AB Group

– the biggest Nordic manufacturer of heavy steel plate

– profits for 2003 totalled SEK 312 millionhttp://www.ssabox.com/company/en_index.htm

● SSAB Oxelösund & Open Source– “SSAB Oxelösund releases its process automation

system Proview as open source.”http://www.ssabox.com/news/pressreleases/h/en_proview_h.htm

– Proview is available on SourceForge (under GPL)http: //sourceforge.net/projects/proview/

http: //www.proview.se

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OPEN SOURCE IN LARGE COMPANIES

In a study of state of practice with respect to Open Source in Swedish companies which have adopted Open Source Software one interviewee commented:

“We use ObjectWeb, from a European OS consortium, which I would call a hidden pearl. We have used this in a large project at a customer site, and it runs like a Swiss clock.“

See paper in OSS 2006 (Lundell et al., 2006)

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This research is funded by the European Commission via IST Project 004337, CALIBRE

(http://www.calibre.ie)

BUSINESS MODELS FOR OPEN SOURCE SOFTWARE:

TOWARDS A MATURE UNDERSTANDING OF THE CONCEPT AND ITS IMPLICATIONS FOR PRACTICE

DISCUSSION

The Second International Conference on Open Source Systems Como, 8 th - 10 th June 2006 1 BUSINESS MODELS FOR OPEN SOURCE SOFTWARE : TOWARDS A MATURE UNDERSTANDING.

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