Open Source Strategies

A blog about open source software and business models, enterprise software, and the opentaps Open Source ERP + CRM Suite.

Thursday, April 07, 2005

Open Source Business Conference (OSBC)

My friend told me that the first thing he looks for in an industry is a conference. "Once there is a conference, you know it's a real industry."

So it was with great excitement that I went to the second annual Open Source Business Conference. In the Gilded Age splendor of the Westin St. Francis, about 700 excited open source enthusiasts, curious to cautious to optimistic venture capitalists, hopeful entrepreneurs, sagacious lawyers, and fast-typing journalists mingled.

Here's my summary of the conference:
  1. Open source is a legimitate business now. Few at the conference tried to justify that "free" can also mean "business." (In that sense, software has finally joined the rest of American industry, where businesses are built on things other than intellectual property secrets.)
  2. The users, in this case CIO's of some very large organizations, were very excited about open source and simply wanted more of it--more projects, more support, more services to help identify projects. (Though, to be fair, they are a biased sampling of CIO's out there.)
  3. Venture capitalists have seized on the fact that open source is a great distribution model and could potentially do away with the inefficiencies of sales and marketing in software. One statistic cited was that software licensing revenues are 76% of software sales & marketing revenues. Translation: users are paying vendors to sell to them. This is fundamentally inefficient, and they view open source as a direct, more efficient model of selling software.
  4. Business models of services around open source are well established. (Curiously, in the Geoffrey Moore talk, the audience rated "open source service businesses" as more mature than any open source project such as Linux or MySQL.)
  5. There was also active interest in deployment tools, management tools, devices, appliances, on-demand (hosting) businesses around open source software.
  6. There was real disagreement over the future of open source in applications. One VC, the keynote speaker, was enthusiastic about it. The other VCs, in the panel discussion, were less so.
  7. When a correspondent from The New York Times asked the VC panel why this time it would be different, one responded that the valley is a "manic-depressive" place. All of the VCs are publicly cautious about open source. One noted the open source is fundamentally "capital frugal, intellect intensive" (which I agree with very much.) At the same time, they were lots of VCs there talking to projects and entrepreneurs, so who knows?
I came back from the conference wanting more. It seems that the "open source" industry, if there is indeed such a thing, is still in the early stages, and people are still groping at the right business models. It's wonderful that services, appliances, deployment tools, etc. are well-established business concepts now. It's wonderful that VCs are willing to fund them.

But the conference largely skirted the ultimate power of the open source process: how will it fundamentally alter the dynamics--the economic relationships--in the software industry? In other words, not just sales and marketing, but also how software could be created and financed and how software companies can be organized and managed.

Could open source created a more frictionless model for the software industry? Instead of requiring huge investments to produce software and then hoping that users will buy them (and investing more money to convince people to buy them), could software be more of a demand-driven industry? A similar transformation is occurring in just about every other industry, from manufacturing to retailing to construction. Could it also happen in software? Could open source make it happen?

And then, from there--could open source unleash new creativity and help create whole new ways that software can benefit people and businesses? Software has become a living, breathing part of all our lives and all our businesses. Such creativity could surely be the greatest gift open source could bestow upon us all.

I think it could do both--create a more frictionless, demand-driven, "pulled" software industry and unleash new creativity in the industry. It will take new forms of not just software development but also organization of the industry. It will change how software companies are started, financed, and managed.

And that's the most exciting thing, as I look ahead to the future of open source. I hope to be part of inventing that future.

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At 10:28 AM, Blogger Si Chen said...

The title should have been "Open Source Business Conference (OSBC)." Sorry for the error.


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