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Stanford Teaching MBAs How To Fight Open Source
mjasay writes "As if the proprietary software world needed any help, two business professors from Harvard and Stanford have combined to publish 'Divide and Conquer: Competing with Free Technology Under Network Effects,' a research paper dedicated to helping business executives fight the onslaught of open source software. The professors advise 'the commercial vendor ... to bring its product to market first, to judiciously improve its product features, to keep its product "closed" so the open source product cannot tap into the network already built by the commercial product, and to segment the market so it can take advantage of a divide-and-conquer strategy.' The professors also suggest that 'embrace and extend' is a great model for when the open source product gets to market first. Glad to see that $48,921 that Stanford MBAs pay being put to good use. Having said that, such research is perhaps a great, market-driven indication that open source is having a serious effect on proprietary technology vendors."
Reminds me of Microsoft's strategy. Except for the "judicious improvement," and it doesn't seem like it will work for them in the long term anyway.
The professors advise 'the commercial vendor
So many obviously smart people confuse proprietary with commercial. The two are orthogonal. Back in the 90s this might have been academic, but there are now many commercial open source companies. Get with the program.
How we know is more important than what we know.
Knowing the enemy's potential avenues of attack is a wonderful asset. It makes counter-attacking and defending much easier.
What happened to all open source software is crap arguments?
Surely companies likes Microsoft were not jesting!
Change is certain; progress is not obligatory.
I'd actually be disappointed if information like this weren't being taught in Silicon Valley!
unless your product is targeted at such a small subset of users that noone in the OSS world would bother to create a competing product there will always be some geek out there willing to dedicate all their spare time to create something that will compete with your product... for free. What proprietry vendors need to do is charging for software as a service and provide support packages that the OSS world don't bother to do.
-- Sex is the antonym of pringles. Once you pop it's time to stop.
They should have left their research closed. Now anyone can take their research, reverse engineer it, and repackage it under a Creating Commons license.
There was a paper in nature recently titled "Improve your jihad: nuclear weapons" as part of their weekly jihad improvement segment.
Control is an illusion, order our comforting lie. From chaos, through chaos, into chaos we fly
I'm happy to see that the suggested strategies are ones which carry significant drawbacks. Segmenting markets and keeping everything closed does indeed give you control, but it also slows the very network growth that makes products become successful. And it frequently leads to user frustration (because of, for example, DRM, or the lack of support groups, or the inability to find or construct fixes/hacks as needed).
This is good news in the sense that any strategy to fight open-source means that you emphasize the gap between open-source and closed-source products: the open-source product's advantage is the openness, the community, the ease of distribution, the non-naginess, the network effects, the hackability... and the more closed the closed-source products try to be, the more these items become product differentiators, which the open-source product can point to as big advantages.
So, I do hope closed-source projects go ahead and implement those user-hostile strategies. It will only serve to make open-source products look that much better by comparison. As other posters have pointed out, there is no fundamental divide between "open-source" and "commercial". So I would think the better strategy for MBAs thinking about open-source is "if you can't beat 'em--join 'em". Or in other words, why get involved in closed-source business ventures when an open-sourced equivalent inherently leverages network effects?
The 90s called, they want their argument back.
Many programmers are paid to work on free software these days.
In fact, the problem isn't finding jobs, the problem is finding programmers.
How we know is more important than what we know.
Stanford, the birthplace of SUN, one of the renowned distributors of a once true and mighty closed and proprietary Unix, that almost fell off the face of the planet in part of it starting to become irrelevant compared to open sourced OS's and systems (Linux, BSD, etc).
The SAME Sun, which has now open sourced almost their ENTIRE IP portfolio in the Open Solaris project, thereby bringing relevancy BACK to Solaris and it's suite of products.
The same Sun which utilizes hundreds of code donors to it's projects, and big communities around storage, ZFS, etc.
Closed, commercial systems have a place, and many of them do well, but when markets change, can they change quickly enough? Lessons show us that they cannot change quickly enough. Or do the closed proprietary systems try and change the market the suit their needs?
Look at IBM, HP, Sun, and even Dell now relying on open *nix systems driving huge sales numbers.
The markets have changed, its those who do not follow trends, or fight the trends who become irrelevent.
The open source model will probably change in a decade, or a century and it too will have to change.
The paper is just a way to appeal to stiffley business suit class of people afraid of change.
Brent Jones
if they also taught a course on open-source economics. I.e., how you can make a successful business through the selling of services. It would be useful, since I get the impression that a lot of the folks who are open-source advocates really don't have much business sense. That's not meant as an insult--I know my business skills are mostly lacking. It's a big part of why I wouldn't start a business myself. It might have the added benefit of giving some of the commercial==closed-source people some ideas on where it can make sense to use open-source in their own businesses. I work with a guy who can't understand why anybody would ever contribute to open source. He sees it as people giving away valuable brain juice for free.
From the press release that this guy links to (the paper is actually here):
A recent paper on this topic by Mendelson, coauthored with Deishin Lee, PhD â(TM)04, now a faculty member at Harvard Business School, is not a how-to manual for hard-pressed executives. Rather the researchers have built a theoretical model explaining the choices open to commercial firms. âoeAlthough open source is the lead example of our work, the principles certainly apply to other businesses, including, for example, the media business,â says Mendelson.
Heaven forbid that somebody actually study how businesses choose between free and proprietary software! That's of no good whatsoever! And of course free-as-in-speech definitely does not extend to a university allowing its academics to publish material which might be bad for open source. Clearly Stanford should've had these two men killed and fed to rabid, pestulent chipmunks, rather than allow this affront to reach the press.
No kidding!!! What do you say at this point?
I think we've been in that penultimate step for a while now. Here's hoping Ghandi was right =)
It is pitch black. You are likely to be eaten by a grue.
The two strategies presented are not strategies against software.
The first, embrace and extend is a play against already established standards, and usually is applied to protocols and APIs but not to package software. Most successful E&E campaigns have been against standards implemented in closed source systems. Most of MS success was before the rise of Open Source as a viable model. Generally E&E fails against open source competition (see firefox, Apache, Linux v Unix, etc...).
The second was just a trashcan "make a better product" and "hide it from the competition" kind of suggestion. Oh, and segment your market better... problem is that it's assuming that your open competitors can't make better products or segment better.
-- $G
In the long term, what happens if all software ends up being free?
In the present, all software is free http://www.ubuntu.com/ http://thepiratebay.org/
Wouldn't there cease to be many programming jobs where there once were?
No... Most software would still be developed in-house. What will cease is companies who can make a bloated program that is badly written and gain millions for it.
Wouldn't that lead to lower paying programming jobs in turn leading to less cs graduates and lower quality software?
No. It would only serve to increase the quality of code as the fact that it compiles does not mean that it is good code. Open source software has no secrets, the quality would go up because anyone could fix it.
I know some companies do alright supporting products they've written and give away freely, but I can't see that extending to applications beyond some mission critical business system type things.
Ever heard of the Geek Squad? They make a fortune supporting products that they never even written and most are trivial applications (Windows, iTunes, etc)
I've long wondered things such as this. OSS sounds great at a glance, but I really have a poor concept of where it will go in the long run. I like writing software, but I also like being able to pay my bills.
Where do you work now? Chances are, that company will still develop applications in house, not to mention that you would be in charge of changing various OSS programs to better fit the needs of the company.
Taxation is legalized theft, no more, no less.
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The paper is freely available for everybody to learn from, in fact the Jan-Feb 2008 issue is fully of very interesting article (what month are we in now?).
Google says: No results found for "Improve your jihad: nuclear weapons".
GASP! They nuked the article! CENSORSHIP!
The slashdot summary author (mjasay) appears to see the world through a lens which makes the developers of open source software victims of some nasty MBA conspiracy.
The academics who wrote the underlying article go out of their way to say that their writings are not a 'how to' manual for MBAs, and that open source software is only one example.
The article is simply a recent take on 'How to compete with free,' an important MBA marketing topic for decades. 'How to compete with free' can be considered a subset of how to compete in general, and the gist of any marketing solution to 'how to compete' will be based on building value in the product.
One method to build value is to increase switching cost through lock-in. Even free / advertising supported services do this: my.yahoo, iTunes, gmail, hotmail and countless others.
If you read the underlying academic article, you just might notice that most of the tools presented now are analogous to the tools presented at Sanford in the early nineties to the MBAs who eventually went on to Coke and Pepsi to fight the scourge of FOSW (Free Open Source Water).
Open source water survived just fine. As long as open source software continues to offer value, it will continue to thrive.
Marketing is marketing. MBA courses are MBA courses. Same shit, different year.
__ Someday, but not this morning, I'll finally learn to use the preview button.
Why is Slashdot so biased towards open source?
I'd rather get my MBA from someone who gives me the tools to actually compete in the market place. Not teach me ways to circumvent competition and leverage market share through these tactics. There's already a university for this. It's called the street. I'm surprised these guys aren't named Guido and Mugsy.
The headline is misleading. The MBA students aren't learning how to fight open source as an abstract concept; they're learning what to do when your business produces a piece of proprietary software that competes with an open source product.
I'm all for open source and use a lot of open source apps, but I don't believe that such a dilemma is always most profitably answered with "embrace open source yourself."
it is my understanding that most of these paid OSS jobs are funded by proprietary software.
That is what you understand wrong.
You imagine people will keep working on software out of altruistic desire forever? Many people I know are in this profession solely for the high salaries. Once OSS peanut-salary is the norm, they will dump this profession like a cheap rental suit.
I dunno where you get your information from, but again, you're completely wrong here. There's no difference between the salaries of programmers who work on free software and the people who work on proprietary software.
I'm just figuring you're a troll now.
How we know is more important than what we know.
I find it very rare to find a average Joe who will not obtain a illegal copy of software if he could unfortunately.
Considering how popular VLC, Media player classic, Pidgin, Linux are... I would have to disagree.
Change is certain; progress is not obligatory.
Before deciding to fight open source and to lock your customers into dependence on your company so that they cannot escape, step back and ask yourself a question. Do I want to make money by doing good for people, or by deceiving and manipulating them?
There are basically two different ways to run a company. One is to make your customers happy and strive to serve them as best you can, trusting that they will reward you for it with loyalty. The other is to trick people somehow, by being dishonest, selling them something they don't need, locking them in to your service, or sticking them with extra fees. Both approaches can be profitable, but only one can actually make the world a better place.
I love companies that take the former approach. For example: NewEgg.com (Low prices, honest customer reviews posted even if they are negative, excellent customer service.) Monoprice.com (For the same reasons.) Netflix (Fast service, easy to use website, honest communication and refunds for rare service outages.) My local coffee shop (High quality drinks that are much better than the chains, friendly staff, good food with custom menu items that change frequently.)
On the other hand, there is no shortage of examples of the latter approach. Best Buy (Selling HDMI cables for $50-75 which can be purchased for $5-8 on Monoprice.com.) Most places that sell glasses (for excessive markups. An online market for glasses at vastly reduced prices is now springing up.) Most cell phone providers (for charging excessive fees, making it difficult to switch providers or move phones to other plans, and designing their plans to overcharge customers who don't guess correctly how many minutes they will talk and at what time.) I could go on.
It's probably easier to make money going the evil route, or at least it requires less originality. But I hope that at least a fraction of MBA students would be interested in something more than the bottom line of profit.
You see, this is clearly a calculated move in the epic power struggle otherwise known as the Cal/Stanford rivalry. Do you really think it's a coincidence that the world's leading institution in the field of hating Stanford also happens to be the 'B' in BSD? You can soon expect a ferocious counterattack of Unix hacking, liberal politics, and lateral passes.
You realize, of course, that long before FOSS was big, over 80% of software written was never sold. It was developed for internal consumption. That's a huge piece of the pie.
As for software sold to others, have you ever heard of "support contracts"? That's where folks like RedHat make their money. Even Microsoft makes money on support. They make a lot of money off of certifying people to work on their software too.
And then there's sponsored development. This is where the two paragraphs above intersect. Suppose Company X really like some package Y, but it's missing some feature it really needs. It can code it itself (the old internal development model) and spend the money internally, or it can hire someone outside to implement the feature. Not an ounce of altruism there. The FOSS license ensures that the feature is able to become part of the overall product. Company X derives direct benefit, and likely has strong influence over the shape it takes.
IBM doesn't send zillions of patches to Linus out of altruism. They send patches because they want Linux to behave better and have the features they want so they can ship more servers. Freescale doesn't send patches to Linus out of altruism. They do it because they want Linux to run well on their embedded chips so that more people will buy them. And so on.
You've got this vision that this is all a big charity. No, it's enlightened self interest.
Program Intellivision!
In the spirit of http://xkcd.com/463/, commercial software that competes like this will slowly lose the battle.
Instead of fighting for the same turf as open source, they should be finding markets that aren't served by open source. Niche markets and new markets are great places for commercial vendors. Generic applications used by everyone that are constantly reinventing the same wheel will be open sourced and the market will shift.
Don't try to make a better web browser or office application. Instead, focus on the pace maker control system or credit card fraud detection system. Focus on things that are worth money to a narrow market and don't have a lot of competition from open source because their isn't demand for bored developers to build a cheaper mouse trap.
Stop doing it wrong.
I strongly believe ordinary economic strategies are more concerned with resources with scarcity.
Software does not have scarcity, because once made it is abundant. And the average fixed cost tends to become zero all the time.
It is even better than the secret Coke formula and thats why people who can force people to buy software can reap unbelievably high profits.
FOSS's greatest weakness lies in its divisibility. People get divided over little things. "There is blob in Linus's kernel? Well, then guess what we are making a new OS".
Therefore as long as FOSSians stay united they are going to be safe.
Heroes die once, cowards live longer.
Sigh. You're understanding of the software industry is so pedestrian that it is impossible to have a serious conversation with you.
Those little boxes on the shelves in Walmart are not the software industry. They're not even a significant percentage of it.
How we know is more important than what we know.
There is always there is always the flip side course for 99.99% of other non-software businesses, which is far more justified as a MBA course.
All those objective that open source software fulfil and core subjects for the majority of businesses.
Open source software, managing software overheads more effectively, their profits are your costs.
Open source software, minimising retraining and re documentation, only implement worthwhile changes.
Open source software, avoiding supplier forced costly upgrades and managing them at your pace.
Open source software, using publicly audited software, hidden software faults cost you money.
Open source software, avoiding data lock in, don't be forced to pay for your own data over and over again.
Open source software, avoiding training costs, open source software for education, save on taxes whilst saving on overheads, double plus bonus.
Chaos - everything, everywhere, everywhen
I guess there's Gears, Android, their patches for Wine and MySQL, as of late there's also Chromium (with the v8 JavaScript engine). They probably have more, see Google and Open Source.
All in all I think they have some 190 open source projects/components/tools/whatchamacallit, a lot of these are Google oriented but there are some more generic ones. Maybe a result of their 20%/80% thing.
You can't deny that Google, with Chris DiBona as their open source program manager, certainly _contributes_ a lot to open source projects or what is regarded the open source community at large. From project hosting (Google Code), to Summer of Code, to hosting events, to individual sponsorships, to participating in standardization organizations (OASIS, W3C), to funding foundations (such as Mozilla).
Perfect is the enemy of done.
"How to sell air to those already breathing"
The Wall Street is listening!
Do not trust this signature.
Prostitutes always forgo morality in favor of money, and there's not much money in free open-source software.
9/11 Eyewitnesses to Explosive WTC Demolition 1 of 2
it's capitalism - as long as iot's within the bounds of the law it's all about competition and squeezing your competitors out
That's not what capitalism is about, capitalism encourages competition. What you're proposing, monopolies, is what what Adam Smith the Father of capitalism was opposed to. He didn't even like patents calling them a necessary evil. To Adams capitalism provided a fair or equitable and optimum outcome for everyone.
Falcon
Should there be a Law?
Glad I never got one of those fancy degree's, they obviously do not teach spelling or grammar.
Perhaps Mexican universities don't teach IT classes in English. Looking at many of the posts on /. US universities don't teach English well either.
Falcon
Should there be a Law?
There is always there is always the flip side course for 99.99% of other non-software businesses, which is far more justified as a MBA course.
Exactly. While it isn't actually all that hard, most non-slashdot reading folks I've ever discussed open source licensing with (admittedly a small sample) grossly misunderstand the terms of open source licenses - especially the GPL. They usually think they give away their copyrights when in fact just the opposite occurs. As a community, we advocates of open source have done a poor job communicating why open source is an advantage to those willing to take the plunge. There are unfortunately a lot of misconceptions about the finer details of open source licensing and the software in general.
One of the touted advantages of open source is the availability of the source code. But if a business isn't a software developer that is not perceived as especially valuable. No auto parts supplier is likely to go and contribute patches to Open Office. It just won't ever happen and they know it. What needs to be emphasized are the follow-on advantages - no forced upgrades, no data lock in, reduced licensing fees, reduced platform lock in, etc.
Many folks also tend to underestimate the advantages of open source software in favor of whatever commercial software they are already familiar with. The fact that Open Office is free (speech and beer) gets overwhelmed by the perceived need to use Excel (or Word or...) because that is what they user is familiar with and often what everyone around him/her uses. Never mind that they are giving significant control over their upgrade schedule and data accessibility to another company and not being compensated for the "privilege".
You had a snide answer. Oh, and it's "your understanding", not "you're understanding".
He didn't say anything about little boxes.
By the way, AC, in answer to your question, and to actually illuminate rather than just tell you that you misunderstand:
Most software is written to serve the in-house needs of large-ish corporations. They need to manage their business, and to be competitive their business has to differ from other businesses serving similar needs. So they have large quantities of software to manage their inventory, coordinate their workers, manage their books, determine if payment they've been given is fraudulent, etc. The little details of all of these things are specific to the business rules of any large business.
Often those needs could be fulfilled by some commercial software, if it weren't for the hundred little things that the company needs done differently. If some open software can do basically the same thing as the commercial software, it's in the company's interest to add the features needed to support their business needs. This typically has to be done without exposing their business specific rules (i.e. without making those rules open source), but you can just make the software configurable and put the rules in some configuration file outside the OSS app.
Frankly, the only times I make changes to OSS software for pay are for basic infrastructure software (e.g. apache, ant, etc) when there is a bug or an obvious feature missing. The actual software that fulfills whatever business need is fully proprietary, except for some of the infrastructure.
Lesson #1: Pick your battles
Lesson #2, method dealing with the enemy while occupying a strategically disadvantageous position: see lesson #1.
Does anybody believe that the proprietary/free clock will be rolled back to the late 1980s, when printing licenses was like printing currency? Of course not. Open source is here to stay. That doesn't mean there aren't opportunities to make money in software, both in competition with and by using free software. It seems to me the smart business leader chooses the mix of competition and cooperation. Google hasn't done too bad, after all.
Where it's tough is when you have a company with a cash cow. Microsoft. ESRI. Oracle. The cash cow may be doomed, but ever year it is kept alive represents money, a great deal of money.
So it makes sense to position your product, say Windows, against the open source "competition". It really boils down to one thing: compete. Give your customers reasons to keep buying your product and cut prices to keep them from moving away from your products. There are now free as in beer versions of Oracle and SQL Server, just to establish a bulwark on the low end of the product position.
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.