Open Sourcing Software in a Large Corporation?

code-libre asks: "I work for a small R&D group in a large corporation. We've spent the past few years developing a small but unique piece of software that was originally meant for internal use only. A VP recently approached us and asked if we could 'package and sell' the software so as to get a direct return on investment - at prices as much as $500k. Within our group, we worry about the costs associated with long term support and maintenance. We are also sure that a price over $10k is ludicrous, let alone $500k. I think it would be an excellent move to open source the software, but I need some advice..." "Even at a price of $10k, we don't expect to sell more than maybe 20-50 licenses. Costs associated with producing this software thus far are approaching $2mil, so we doubt our costs would be recouped. It is thus relatively easy to make the case that we _shouldn't_ sell the software.

On the other hand, it is software that will be vitally useful to those in the right markets. I would like to present the idea that releasing the software for free (and open source) will have two effects: one, branding the software turns it into a free piece of advertisement for our company in emerging markets. Two, open sourcing it will allow for others to help improve the software, which we in turn can use to our advantage - an indirect ROI.

Will points like this fly at a large corporation with little to no policy on giving stuff out for free? How can I convince an older generation of business leaders that FOSS is the way of the future? Ideally, I would like to help the company setup a internal group that could expedite small internal projects to the market place via FOSS routes. Any one have any experience with this?"

Comments

Maybe they want to justify your salary ?

[gorim]

Look, if they think they can sell even 1 $500k license, thats better than the 10-20 $10k licenses you are proposing.

If the VP approached you about this, its probably because he knows much more about the $500k possibility than you do. Take it as a hint that something is really there, rather than something maybe being there.

Besides, maybe the VP also wants to make sure your salaries are justified in the face of out-sourcing or cost-cutting measures.

Think about what your numbers mean

[McMuffin Man]

Okay, you're saying that your company was willing to spend $2M to develop this, but no other company would pay more than $10K to acquire it? If you really mean that, you must think your management are complete morons to have paid you to do this. Reversing it, if it was worth $2M to your company, why is it so inconceivable that it might be worth a quarter that to someone else? I'll assume here that you hadn't really thought about it that way, and go a different direction.

Assume you're right and it's only worth $10K. Sell it to 50 customers at that price and you've made $500K. You seem to be saying that because that's less than it cost to develop, it isn't worth selling. Clearly, it wouldn't be worth developing the software from scratch for the sole purpose of selling it if those figures were accurate. But you've already made the software, and $500K is a lot more than $0, which is what you propose to earn from the software.

Your next argument is probably "it will cost us more than $500K to support it". Okay, says the VP, either we sell it as is, or we sell support contracts to cover the cost of support, or we offer support on a time and materials basis.

Basically, any way you do the analysis, if the software really can't be sold to make any money than either 1) your company was stupid to spend this much making it or 2) most of the capital value from that investment is unique to your company's business and it's worth holding onto the competitive advantage of sole use. In case 1), selling it is trying to recoup from a mistake. In case 2), selling it is a mistake, but giving it away would be an even worse one.