Tuesday, April 29, 2008

the value in Open Source Software

Open Source Software destroys the value in commercial software.

This is traditionally what M$ would have you believe.

But before you can really answer this question you need to understand the value proposition that software offers.

Software is basically a means to an end, and that's it. And as we have already discussed, you as the consumer should be able to determine what value you are prepared to pay for with software.

But what's in it for a commercial software company offering Open Source software?

The first thing you have got to do is ditch the traditional model of how software makes money.

This model is the typical M$ model where a company provides a shrink wrapped product and bit off support for that software, and the company pretty much earns money from the sales and support services around that product. Money it then uses to pay the bills and drive creation of new products.

Open Source software cannot work like this since obviously you have to "give" the software away.

You could earn all your money from support services around that product and this model is the one that many Open source companies have adopted. You can make money this way, Red hat is testament that this can work.

However this is definitely not the only model or the most effective model. Firstly as I have said already all software is a means to an end. Software simply provides a mechanism to enable your hardware and in turn apply it in order to solve a problem.

Software is simply a part of the entire system albeit a very important part.

The side effect of this type of thinking is that you realise that the organisations who benefit commercially from open source are not necessarily software companies.

Consider Intel.

Intel is the dominant provider of desktop and low to middle tier server chips in the world. It is the giant of chip makers, or at least until you step out of the said market segments and then take another look.

Consider that in the big three of Big iron; IBM, Sun and HP, Intel is a second class citizen. Also consider that all major gaming consoles run IBM Power based chips. Finally Intel fairs absolutely dismally in the embedded space, area traditionally dominated by MIPS based chips.

Now, it's not that Intel is not capable of competing in these markets, it's mostly due to the fact that it doesn't have the necessary software solutions for these markets, for one thing you need to have an OS running on your chips and that's easier said than done.

Intel tried it in the Big Iron market with Project Monterey for it's Itanium (also known as Itanic) processor and got burned horribly. Intel is also reliant on M$'s decision to go after certain market segments with a Windows based solution.

So what do you do if you're kinda stuck for an OS with features for a specific market. Well you take one that exists and is established and you add what's missing for a specific market segment.

The one caveat is that you have to use one which you can modify easily such as - say - an Open Source based OS such as Linux.

Intel has become one of the largest contributors to Linux, recently it started adding some Real time components to the kernel. The reasons for this are quite obvious.

A real time operating system potentially means a carrier grade operating system, and a carrier grade operating system mean telcos.

The cost that Intel had to spend on the engineers who developed the real time components for Linux is nothing compared to the payback of a Vodafone deciding to chuck out all it's existing Unix servers for Intel based Linux servers.

Similarly Linux has become a core component of Intel's Atom based strategy for the embedded market.

In this approach Intel is set to make a lot of money indirectly from Linux, and that's really the gist of the value in Open Source software; in that it is part of making a solution that is a means to an end rather than providing value as a pure software solution.

Which of course is why we have software to begin with.

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