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Explore how the Open Source movement is transforming industries, from disruptive technology to new business models. Learn the economic implications and the evolution of Open Source through a historical timeline. Discover the economic events, user expectations, software quality theory, and the dynamics of market disruption. Gain insights into participation, economic value, and the future of the Open Source revolution.
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How the Open Source movement is changing the world A Framework for Understanding The Open Revolution
Agenda What Definition Why Economics Why Now Disruption Participation What Next Business Models
What is the Open Source Revolution Technical “Commun” Socialist Movement Hobby Disruptive Technology / Economic Fight(The Innovator's Dilemma - Christensen) Definition Open Source is a disruptive technology that will restructure the computer industry and bring pervasive, customized computing to all.
Open Source Definition Free Redistribution Source Code Derived Works Integrity of Author’s Source Patch files for build time modifications No Discrimination Against Persons or Groups No Discrimination Against Fields of Endeavour Distribution of License License Must Not Be Specific to a Product License Must Not Restrict Other Software License Must Be Technology-Neutral Definition
Time Line 1995/96 – CPAN (Comprehensive Perl Archive Network 1991 - 386/BDS 1977 - Berkeley Software Distribution (BDS) 1983 – GNU Project 1994 – Linux 1.0 – BIND move to ISC 1995 – Apache (from NCSA 1.3) - PostgreSQL 1987 – Perl 1.0 1997 – KDE 1.0 2003 – Mozilla Foundation 2005 – Firefox 1.0 Definition 75 80 85 90 95 00 05
Domains of Open Source Technology Domain Core Infrastructure Linux, Apache, ..., Xen KDE, Eclipse, Gcc, Gdb Development GIMP, Blender Graphics Definition OpenOffice, Crome, ... Productivity Simutrans Simulation
Power of Open Source (Netcraft, 2005). Web Server Survey. http://news.netcraft.com
Economic Event Each Project competes for resources User expects a return All Software efforts are an economic event. The only true measure of success is meeting the expected economic return. Economics
User's Return User's expected risk adjusted return Expected Risk adjusted NPV (net present value) Return Economics The Unified Theory of Software Quality (UTSQ ) develops an econometric model defining Quality as providing the users Expected Return.
Software Portfolio Users pursue strategy that optimizes the return of their software portfolio. • Does not dictate proprietary or open source software • Easy to speculate this leads to “Mixed” strategy Economics
Cost to User of Market Power User Cost of Capital Risk Premium Single Player Differentiated Commodity Return to User Economics Extortion Monopoly Pricing Power Developer Marginal Cost
Controlling Market Power Standards Interface API (XML domain schema) Data Structures (SQL) Data and Operations (IETF Internet RFCs) Open Infrastructure Source Code User documentation Architecture documentation Transparent State Bugs, benchmarks, etc. Economics
User's “Capture” of Economic Value Open Infrastructure Transparent Standards User Capture of Economic Value Closed Economics Openness
Disruption Framework to understand how technology Paradigm shifts happen Why do the market leader always expose themselves to competition from upstarts Paradigm shifts always change the winners and losers See the Open Source Revolution as part of a normal market dynamic Disruption
Disruption The theory of Disruptive Innovations developed in The Innovator's Dilemma and The Innovator's Solution This is a shortcut to understanding the economics C. Christensen, Harvard School of Business Presents the dynamics of why established firms always create an opportunity for disruptive technologies They innovate faster than the clients can adopt new features or performance Thus, they always create a market segment that is over-served Disruption
Disruption Sustaining Innovation Performance Over served User Absorption Rate Disruptive Innovation Needs Disruption Time
Participation Participation Influenced by the gravitational pull of a project
Participation Driven by economics “Brand Me” Cost Reduction Value-Add Enhancement Research What about “hording” fixes or enhancements What about “free rider” problem Participation
Shifting Value Chain Hardware Core Software Applications Services Core Software Hardware Core Software Applications Applications Applications Services Core Software Services Services Hardware Hardware Returns Time Line Models Value Stack
Open Model • Open Source • Sell Services from 3rd Party • Installation services • Support contracts • Training • Customization • Many different bundles Models
Presentation and References www.osnv.org