Open Source Software

1. Open Source Software Sticking it to the man

2. Presentation Introduction Support Sellers Model, Example, financial Loss Leaders Model, Example, Financial Accessorizers Model, Example Widget Frosters Model, Example, Financial Why Companies are so Volatile

3. Introduction • Frank Hecker is the executive director of the Mozilla Foundation, which promotes choice and innovation on the Internet. He was a key contributor to Netscape's decision to release the source code for Netscape communicator> he believes that the challenges that software companies face are interconnected and are functions of constrained resources

4. Support Sellers: “the original free software model” original free software model by Richard Stallman in the GNU manifesto, first implemented by Cygnus Solutions, a for profit company formed to provide support service for GNU tools, most of all the GNU compilers. Revenue is generated in this model by selling two categories of items: physical goods (media and hard-copy documentation) and services (technical support) distribution, branding, training, consulting, custom development, and post sales support. Vendors can differentiate themselves by using easier to use software distributions; this simplifies and improves the users experience. They can also differentiate themselves by the quality and pricing of their services. Most use the GNU general public license, but most open source licenses would work for this model. limited ability to use value driven pricing, price determined by the cost of goods and services. If a vendor has a good reputation then this could justify higher prices.

5. Red Hat Enterprise Linux and Red Hat Desktop technologies, an operating system used for enterprise computing • Red Hat systems management solutions (RHN) provides systems management and software delivery services for Red Hat enterprise technologies. • Red Hat Enterprise Linux Red Hat Desktop, used for deployments, software development, and engineering design. • Red Hat enterprise technologies include applications for managing Web content, software development, clusters of Linux systems and storage, and authentication of users, directory sever services. • Red Hat’s RHN comprises modules to provide functionality enhancements and upgrades to individual systems • training courses: system administration, advanced enterprise deployment, and development and security • products are sold directly through sales force and Web store; and indirectly through distributors and resellers • www.redhat.com

6. Financials • Competitors include Novell, Microsoft Corporation and SCO group • Strategic relationships: Oracle Corporation; International Business Machines Corporation; Symantec; Sybase, Inc.; BEA Systems, Inc.; Dell, Inc.; Hewlett-Packard Company; Sun; Fujitsu Limited; Fujitsu Siemens Computers (Holding) BV; and NEC Corporation.

7. Loss Leaders • Personified by Netscape/Mozilla • Money is made by giving away one product (Mozilla Firefox) to support another (Netscape Servers) • Revenue can still be made from the free product using the support sellers model • Must be careful of license “taint”

8. Suffered during the browser wars of the late 90’s • Went open source in January 1998 • Acquired by AOL November 24 1998 for $4.2 Billion • Microsoft lost its anti-trust case • AOL filed suit and won $750 million and royalty free rights to use and distribute IE for seven years • This signaled the end of Netscape which was disbanded July 15, 2003

9. Accessorizing Strategy • Distribute books • Computer hardware • Other physical items associated w/OSS • Piggy Back products • Not Software • Not Services

10. Accessorizing • Publications that Document & Explain OSS • Linux, Perl, GNU Emacs, etc. • Licensing required when bundling software • Quality and Brand Loyalty • Cost-Driven • Dependent upon third party developers and maintainers of OSS

11. O’Reilly Media • http://www.oreilly.com/ • Tim O'Reilly founded the company as a technical writing firm in 1978. • The company is known worldwide for its computer books • O'Reilly publishes books and software on UNIX, Linux, Perl, Java, Oracle • Publishing about 300 titles a year • Revenue: $25 Million • Employees: 225

12. Widget Frosters • Primarily sell hardware (Widget) • Hardware is preconfigured with Linux (Frosting) • Most if not all of the revenue is made from hardware.

13. Founded in 1993, the then VA Research group built and sold PC’s using Linux as an alterative to expensive Unix workstations. • Today they own the Open Source Technology Group which operates Slashdot.org, Thinkgeek, Source Forge among others. • Widget frosting is not as prevalent today because of the ease at which Linux distributions can be installed and the ample support from online communities and local Linux User Groups (LUGs)

14. To this day the most successful IPO in history • During the opening day prices topped out at $320 • Great example of the .com bubble

15. Industry Financials • Technological change can quickly and unexpectedly render entire business models obsolete. • Volatile changes in revenue create stock volatility.

16. OSS Business Models • Choose correct model • Appropriate License • Converting Proprietary software • Creating from scratch • Choose wisely