“The Business of Open Source,” the twenty first installment of the Impact of Open Source Software Series, was posted on April 11, 2008, by Stuart Sim. Stuart serves as the Chief Technology Officers and Chief Architect of Moodlerooms 1, which provides comprehensive technical support services to the Moodle course management system open source software. Thanks, Stuart, for a great posting!
In his posting, Stuart raises some of the challenges of building a business model for wrapping services around intellectual property (IP) that is open. He points out that providing services for IP that you own provides an element of control that you do not have while supporting OSS. Your success with open IP is based entirely on the value proposition of your services.
Stuart clearly communicates that there are significant benefits to providing services for OSS as well as challenges. First, working in the OSS space provides a strong impetus to innovate and manage risk. For example, code visibility provides an advantage to commercial service providers who become part of the development community, spend time understanding the code and community, and contribute to the code. It is through this type of involvement that a service provider can better refine its risk model, reduce its risk premiums, and pass them on to customers.
The “punch line” of Stuart's posting is that transparency leads to efficiency, efficiency to lower cost, and lower cost leads to more and happier customers/users. While code transparency provides opportunities for efficiencies, the inefficiencies associated with proprietary (closed) IP come, at least in part, from the noncompetitive nature of how R&D is conducted and services are provided in closed software environments. The development of comprehensive and commercial service providers such as Moodlerooms, has eliminated, for some OSS products, the problem for end users of having great low cost software, but no options for external software support. The economics of open code allows smart service organizations to provide low-cost high value services, and smart software users to take advantage of both low or non-existent license fees, and low cost services.
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