FLOSS Business Models and Economic Dynamics

Background Economics Licences’ Strategies Business Models To be continued...

FLOSS
A Pick-lock to Open the Market

Massimiliano Gambardella
massimiliano.gambardella@gmail.com

EconomiX, University Paris Ouest

Paris October, 12 2012

Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market


Introduction

The Non-Senses

For an economist it seems a non-sense that:
people decides to invest eﬀort and time without an advantage
a producer assembles and manages experts to produce a
quasi-public good (non-rival & non-excludable)
experts decide to work for free

...this is what happens in the FLOSS



Economic dynamics

Economics



Economic dynamics

Formal Institution

All organization structures are based on Formal Institutions:
understandable
accepted
shared

FLOSS licenses represent our Formal Institution



Economic dynamics

Motivations

Intrinsic Motivation
activity itself (Lakhani and Wolf, 2005; Valentinov 2007)
ego motivation (Lerner and Tirole, 2002; Lakhani and Wolf 2005)
solve particular need (von Hippel, 1988, 2005; Johnson, 2002)



Economic dynamics

Motivations

Extrinsic Motivation
Monetary
administrative commands and money (Valentinov, 2007)
Non-Monetary
reputation (Lerner and Tirole, 2002)
career concerning (Lerner and Tirole, 2002)
peer recognition (Lerner and Tirole, 2002)
sharing innovation (Harloﬀ et al., 2003)



Economic dynamics

The extrinsic non-monetary and intrinsic motivations compensate
for a lower salary and incentivise volunteering and donations



Licenses



Licenses

GNU/GPL

allows to modify, copy and redistribute with or without charge
as long as they reuse the same license
“do ut des”
I give so that you give (in a well-defined way)
persistent: constraint on the redistribution
viral: the union with a program under different license may be
distributed under the GPL
production disconnected from the diffusion
services are disconnected from the product



Licenses

BSD(-like)

allows to be incorporated into proprietary products
allows to license derivative works under proprietary license
much of FreeBSD’s code base is integral part of other
operating systems such as Apple’s OS X



Licenses

IBM public

it places the liability on the publisher or distributor of the
licensed software code
the idea is to facilitate commercial use of ﬂoss
no risk of liability for the contributors
it reassures the customers



Licenses

Netscape public

first commercial license
Netscape can re-distribute external modifications under
proprietary terms
mandatory clause because of accords with clients
Mozilla Public License
no special clause for Netscape
it allows proprietary modules in derived projects, but core files
must remain free/open



Licenses

What was Netscape’s business model?

Ads
tremendous amount of downloads
Netscape portal as default browser homepage
Contributions
IBM and other Unix vendors paid to provide a browser
no client... no server!
Support
bug-ﬁxing for customers



Business Models



The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiﬀ, 2002

Business Models 1/7

Loss-leader/Market positioner
Use open source software to maintain a market position for a
related proprietary software product.

Example
Netscape’s open source Mozilla web browser and proprietary server
software




Business Models 2/7

Widget frosting
Sell hardware with open source driver software.

Example
Apple’s MacOS X




Business Models 3/7

Give away the recipe, open a restaurant
Distribute open source software and sell service and support
contracts.

Example
Suse




Business Models 4/7

Accessorising
Sell accessories for open source software such as documentation.

Example
O’Reilly and Associates




Business Models 5/7

Free the future, sell the present
Sell closed source software with a license that makes it open source
after a speciﬁed time period.

Example
Aladdin’s Ghostscript




Business Models 6/7

Free the software, sell the brand.
Sell other developers a brand that certiﬁes their implementation of
your open source technologies is compatible with all others who
use the brand.

Example
Sun’s StarOﬃce




Business Models 7/7

Free the software, sell the content.
Develop an open source product that receives proprietary content
that the ﬁrm sells.

Example
e-Learning platform



Conclusions



Conclusions

Economies of Scale



Conclusions

The long tail
*

* http://www.leftclick.com/blog/online-marketing/chasing-the-long-tail


Conclusions

Local Economy

Firms point of view :

niche markets
starts-up

State point of view :

innovation
funds in the territory



Conclusions

It’s so easy?



Conclusions

tons of similar and diﬀerent software
asymmetry of knowledge among diﬀerent actors
no time...



Conclusions

Evaluation

* OITOS project in Italy



Conclusions

Total Cost of Ownership

* local health authority - Rimini - Gambardella Master Thesis 2004



Conclusions

Total Cost of Ownership

costs distributed in 3 years
FLOSS 1y:
Total e436.262,38
1 PC e256,62
Closed 1y:
Total e946.194,13
1 PC e556,58

* local health authority - Rimini - Gambardella Master Thesis 2004



Conclusions

Innovation is not an instrument...

...is a strategic variable!


cc-by-nd 2.0

Conclusions

Thank you!

This document is under Creative Commons license 3.0 Attribution -

FLOSS Business Models and Economic Dynamics

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