The Future of Software...Is Softer

Matt Asay

VP, Business Development

What's open source going to do? Nibble our bums?

Agenda

What I've learned about open source

How it works (and how it doesn't)

Who it helps/hurts

The rise of soft(er)ware

The upload economy and open source

Mechanics of the revolution

Making a business out of soft(er)ware

Top considerations in building an open source project and/or company

What to do, and what not to do

What I’ve learned about open source:

Markets are right, pundits are wrong

Decades of disruption:
Learning from the entertainment industry

“At present…severe economic damage [is being done] to the property rights of owners of copyrights in sound recordings and musical composition.…Unless something meaningful is done to respond to the…problem, the industry itself is at risk.”

Alan Greenspan. Testimony before Congress, 1983.

“The VCR is to the American film producer and the
American public as the Boston Strangler is
to a woman alone.”

Jack Valenti, President of the MPAA. Testimony before Congress, 1982.

“As the majority of hobbyists must be aware, most of you steal your software…. [Y]ou…prevent good software from being written…. I would appreciate letters from any one who wants to pay up.”

Bill Gates, “An Open Letter to Hobbyists,” 1976.

Disruptive technologies:
Whiners in blue, winners in green

Performance

Time

Performance that customers

can utilize or absorb

Pace of

Technological

Progress

Sustaining innovations

Disruptive technologies

Incumbents nearly always win

Entrants nearly always win

Source: Clayton Christensen, OSBC2004

What we thought open source was…

Open source saves?

How open source works

The Internet: A network of networks

Open Source

A community of communities

Small core development team (10-15 people do 80% of development)

Note: Most projects are much smaller than this - 84% have fewer than 10 developers

73% have only one active developer (85% not actively developed); 80% have less than 10 active users (downloads)

Larger circle of bug fixers and still larger group of bug finders/beta users (Big value)

Facilitated, not inhibited, by licensing that generally requires:

Right to access the source code (plus the right to modify it)

Right to distribute modified code (“derivatives”)

Requirement to distribute derivative works under same license [NOTE: This is only triggered if you distribute the code]

Establishes developer to buyer communication outside the firewall

Sources: Andrea Capiluppi et al., 2003; Mockus et al., 2004.

Permeability in the open source world

Developer

Development

(Bugs)

Product

Mgmt

Support

Sales

Marketing

Accounts

Reception

QA

Customer

Customer

Customer

Partner

Partner

Partner

Media

Shipping

Customer

Developer

Partner

Marketer

Tester

Mgmt

Support

Engineer

Internet

Blogger

Code

Open

Closed

Lessons learned @ various employers

Writing software for developers is a great way to build great software...but a terrible business

VERY difficult to change corporate culture

VERY difficult to change market perception of a vendor (Open source is no panacea)

Open source must be THE business, not a loss-leader for other business

Management and product quality critical

Community is hard work

The nature of community changes for open source commercial projects

Developers rule in open source…
…but how do you engage with them?

The developer imperative:

Developers are critically important

Developers will play a major if not determining role in the success or failure of your products

Developers, like any audience, will have things to say about your products

Developers will not pay you a dime. But's that's OK

Are you engaging with them?

Source: Stephen O’Grady’s “Bottom-up Marketing” presentation.

“The Java IDE--there's really only one, Eclipse--is a 105MB zip file. You know how I installed it? Unzipped it. How do I run it? Click on Eclipse.exe.

You know how I install Studio? Pay $2500 for top version (not out yet btw but will be about that amount or more); Insert DVD; answer inane questions; walk away for 2 hours; return with at least 1.5_G_B less diskspace and a doubled registry size.”

Source: Michael Stuart , former Microsoft employee

http://minimsft.blogspot.com/2005/09/three-quick-things-jobs-dynamics.html#c112698172605533703

You might not like what you hear
(But listen, anyway)

Source: Stephen O’Grady’s “Bottom-up Marketing” presentation.

Reasons for involvement:
Pragmatics over religion

Percent of respondents

Note: Question asked for top three motivators of F/OSS participation, n=684

Source: Boston Consulting Group, 2003

Intellectually stimulating

Non-work functionality

Obligation from use

Work with team

Professional status

Other

Open Source reputation

Beat proprietary software

Work functionality

Code should be open

Improves skill

License forces me to

Who cares about open source?

No one cares about source code…
…do they?

Microsoft survey of their customers

>60% felt access to source code was “Critical”

Yet only 5% said they planned to look at it, and a mere 1% expected to modify it

This is not Microsoft FUD - this is analogous to MySQL, Novell, JBoss, etc.

Modify the source and you violate your support contract with Novell, Red Hat, JBoss, MySQL, IBM, HP, etc.

So, why the interest in open source/access to the source?

You can’t do anything with it (without taking on the full support burden)

You don’t have interest or time to do anything with it (That’s what you’re paying the vendor to do for you - deliver value)

What’s the point?

Trust and flexibility (but mostly trust), and it’s the relevant “currency” for developers

Open source stops reinvention of the wheel:
Drives innovation up the stack

Who cares about open source?

Alfresco

Global QA

Leveraged development (LDAP, etc.)

Lowered barriers to trying Alfresco

Partners

Ease of customization, enhancements

SugarCRM’s community is 80% partner-based

Customers

Co-development (Yes, many want to do this)

Lower prices

Improved product (Performance, functionality)

Open source = $$ saved by CIO

Cost of sales force goes to near zero for end customers

Cost of marketing goes down due to community dynamics

Cost of support goes down due to community support

Cost of quality goes down due to global testing, usage and code review

Cost of development goes down due to community contribution

$1.1B Support/Service revenue broken down by legacy vendor

“With this much functionality at this price, why wouldn’t we go with Alfresco?”

Fortune 250 CIO

Fixed

Variable

Development

Development

Maintenance

Maintenance

Maintenance

Infrastructure

Infrastructure

Infrastructure

100%

Cost Reductions

Cost Reductions

Development

Alfresco customers can spend $ elsewhere

Source: Larry Augustin (OSBC2004)

Where Is this Taking Us?

The first wave: Mainframe
Big hardware, custom software

The second wave: PCs and Retail Software
Smaller hardware, packaged applications

The third wave: Soft(er)ware
Often server-based, continuous product updates (“perpetual beta”)

Evolution toward the third wave

Commodification of the software stack

Linux subverts the operating system

Apache/BIND/Sendmail/etc. subvert/create the web (And voila! The beginning of the end….)

MySQL + JBoss consume middleware

New breed of software emerging

SugarCRM, Amazon, Alfresco, eBay, etc.

Demonstrates maturing open source business models more than any technological improvements

Architecture of participation

Value moving upward (up the stack) and outward (edge of the network - i.e., you)

…The result? Soft(er)ware (and “Outerware”)

Where is all the activity?

Media/File sharing

Gaming/Entertainment

Communications

Gaim, Mozilla

Phone/Voice

Skype, Asterisk

Utilities

7-Zip, Ethereal

Infrastructure

MySQL, JBoss, JUnit

Security

SpamBayes, ClamAV

Systems Admin

net-snmp, Nagios

Applications

Alfresco, Compiere, SugarCRM

Rank	Name	Total Downloads

1	eMule	130,783,837

2	Azureus - BitTorrent Client	87,771,014

3	BitTorrent	45,832,144

4	DC++	29,689,745

5	CDex	24,878,270

6	VirtualDub	20,912,050

7	Shareaza	9,503,896

8	ZSNES	9,401,028

9	eMule	8,881,266

10	phpBB	8,680,016

19	7-Zip	6,218,265

20	JBoss.org	6,044,665

46	Ethereal	2,546,210

47	Firebird	2,529,261

71	MySQL	1,948,012

75	SquirrelMail	1,656,029

102	JUnit	1,073,105

112	Hibernate	998,746

113	net-snmp	997,405

122	Compiere ERP + CRM	910,901

163	Clam AntiVirus	624,105

170	Nagios	603,196

187	eGroupWare: Enterprise	554,939

190	osCommerce	543,013

191	SmoothWall	542,336

200	Courier Mail Server	520,445

Step 1: Commoditize big markets, big ticket items

Where we are in the process

Why Alfresco?
Must differentiate beyond open source

Performance:

5-10X over Documentum, SharePoint

Best repository/document management available…anywhere

Ease of use:

Google-like search and

Shared-drive UI

Standards

Standards-based + open source

Business model that encourages continuous customer service and product innovation

Cost and use of resources:

1/5 price of Documentum; 1/3 price of SharePoint

Enables IT spending on fine-grained tuning to enterprise needs (or on other technology altogether)

Step 2: Innovate new markets with old technology

IM?

Step 2: Innovate new markets with new technology

Blogs?

RSS?

Search?

VOIP?

Something mobile...?

Important business considerations

The Internet grew because

Open at the core, providing an open foundation upon which to build and

Closed at the edge of the network (promoting copyright-induced innovation)

Open source commercial growth can be the same

But:

First mover advantage is huge in open source

You don’t need to attract THE Community - you need to build a vibrant user community

Open source requires a different mindset, a different culture

Use open source licenses as a valuable weapon - they are an opportunity to you, and a threat to your competitors

Recipe for open source (comm/unity/ercial) success

Code attributes

Modularity - Easier to build plug-ins, facilitates casual, drive-by development/bug fixes (Lowers the bar to contribution, as does good documentation)

Great initial code base

Open source without an excellent product is just crappy code that you have to look at

Open source commercial benefits may not be what you think…

Degree of applicability - Need a large user/developer population from which to draw

Market attributes

Significant consolidation around 2-3 “gorillas”

Multi-billion dollar ($2B+) industry with

Steep license costs

Trend toward services/maintenance revenues (50%+)

Feature creep - Small subset of features actually required

Summary and conclusion

Open source software

The market’s response to vendor lock-in, inflexible & costly IT

Imposing dramatic changes in the way software is developed and sold

Part of the emerging “upload economy”

Open source will increasingly drive the rise of “soft(er)ware”

Requirements (today): Big market, feature overreach, great code

Requirements (tomorrow): Community. Great code. Community. Great team. Community.

Requirements (always): Coherent business model. Cool technology isn't enough – you have to know how you're going to make money

Source: Stephen O’Grady’s “Bottom-up Marketing” presentation.

Source: Stephen O’Grady’s “Bottom-up Marketing” presentation.

PowerPoint Presentation

2003-11-25T08:20:35