Presentation for TECHNOLOGY & INNOVATION MANAGEMENT at CERAM on 16-Oct-2007 by Mikko Riepula, Researcher, Helsinki School of Economics Business and Economics of Open Source Software 1

Contents Intro Academic Background and Current Focus On motivational factors License types Why use OSS? Business models around OSS Some pointers for further info COSI/Shared source ppt 2

Introduction Definition of OSS by OSI:  (1) freely redistributable, its license not restricting any party from bundling it for sale or giving it away and not requiring royalties, with (2) source code made available in a way that also (3) allows any modifications and derived works to be distributed under the same license terms. … An OSS license (7) automatically applies to those who use it, with no need to execute additional agreements, (8) must not be specific to a given product and (9) must not restrict other software. … Terminology: Free, Open, OSS, F(L)OSS Motivation Examples:  OSS as such: Linux, Apache web server, Jboss, MySQL, Mozilla Firefox, the whole GNU project, OpenOffice…  OSS as enabler: IBM, Sun, HP, Novell… 3

Classic Papers Academic research of OSS has its underpinnings in  Transaction Cost Economics (Williamson, 1975-)  Diffusion of Innovations (Rogers, 1983)  Teece’s appropriability regimes (1986)  Resource-based theory of the firm (Conner et al., 1996) Seminal works on OSS:  Eric S. Raymond (1997): The Cathedral and the Bazaar  Hecker (1999): Setting up the Shop Experiences from Hecker’s time with Netscape  von Hippel (2002), Lakhani and von Hippel (2003), Thomke and von Hippel (2002) End users as innovators  von Hippel and von Krogh (2003): private-collective as opposed to either private investment or collective action  Lerner and Tirole (2002): “Some simple economics of OSS” 4

Recent Research on OSS OSS research interests in academia revolve around  Motivational factors: what drives these developers, or even companies, to work “for free” for the community?  E.g. Intrinsic vs. extrinsic motives  Legal issues  Business models of OSS companies  Practical issues with use of OSS by ISVs  Development economics and efficiency in OSS  Effect of OSS on quality, timeliness, budget etc. 5

Some Motivational Factors  Intrinsic  creative pleasure, i.e. intellectual reward (“programming is fun”),  altruism, and  sense of belonging to a community  Extrinsic  low opportunity costs,  monetary rewards,  reputation among peers,  future career benefits,  learning,  contributions from the community,  technological concerns, and  filling an unfilled market 6

OSS Licenses and Legal Issues  GNU General Public License (GPL)  GNU Lesser/Library GPL  BSD-style  Others… (in total, OSI lists 60 “approved” licenses as of Oct 15 th, 2007)  Non-OSS, e.g. Microsoft Shared Source licenses, Sun Community license 7

Summary of Licenses 8 License Type Can be mixed with non-free software? Modifications can be taken private and not returned to original author? Can be re- licensed by anyone? Special privileges for original authors? Restrictiveness GPLNo Strong reciprocity LGPLYESNo Standard reciprocity BSDYES No Permissive Netscape Public License YES NoYESStandard reciprocity Mozilla Public License YES No Standard reciprocity Public Domain YES NoPermissive (not OSS) Table 1. Main differences in OSS license types according to Perens (1999) and V ä lim ä ki (2005)

The Business Case for Inbound OSS Free, but not without cost (consider TCO) Support on forums: very reactive to non-existent Avoidance of single-vendor lock-in Flexibility and (at least seemingly) direct access to developers, possibility to make improvements Quality: Linus’s law: “many eyes makes bugs shallow”; peer review process. Lower initial deployment cost, lower risk to trial 9

OSS Business Models (1/2)  Distributors/ Software Integrators strictly in the sense of selling packaged OSS.  Hardware Integrators: Companies in this category would include IBM and VA Linux,  Widget Frosters, or Specialized (Hardware) Product Vendors  Support Sellers: E.g. RedHat  Contract Developers: Consulting activity  Loss-Leaders, or Commercial Value-Adders, bundle OSS with proprietary software.  Cont’d… 10

OSS Business Models (2/2)  …Cont’d  Dual Licensors  Commercial Enhancers of OSS: Otherwise the same as Commercial Value-Adders above, but entails modifying the original product instead of treating it as a separate module.  Service Enablers refers to OSS companies creating and distributing OSS primarily to support access to the their revenue-generating on-line services.  Accessorizers, mainly Publishers and Training Houses: e.g. O’Reilly Associates  “Sell It, Free It” Companies are those who have nothing more to lose by releasing their product as OSS. 11

Further Info Open-Source Initiative, see Sourceforge.net, ~100’000 OSS projects FLOSSMole (ossmole.Sourceforge.net) The Free Software Foundation, “ideological” Martin Fink (2003): The Business and Economics of Linux and Open Source, see also list of books on the OSI site. Some more specific:  maemo.org: OSS for (Nokia) Internet Tablets  French/PACA site: 12

Closing Remarks Today, OSS research seems to be fashionable even. OSS is still marginal as a revenue generator but has already had a profound impact on the market OSS has brought some changes to the business models of also “traditional” closed-source companies (opportunity or threat) Inner Source (or ”Corporate Bazaar”) being introduced in companies Shared Source (or “Gated Source”) – I claim – represents interesting middle ground between traditional licensing and OSS for certain kinds of ISVs. 13