Friday, May 20, 2011

Open Source Business: More Than a Question of Profitability

Today we welcome a guest columnist, Martin Heitmann from the Berlin Institute of Technology, who invites you to participate in his survey on open source business. He writes:

Can open source development be truly sustainable? And if so, how? The answer depends on your point of view on sustainability. Very often, sustainability is only used as a buzz word for ecological footprints, while other definitions also include economical and social dimensions. All three perspectives might be the starting point for intriguing studies about how open source development changes and continuously will change the world in the future. But today, our question asks whether open source development can be sustainable from an economic viewpoint. How can open source generate value over time and how are such mechanisms supposed to prevail?

>Open source development has gained much economic momentum in recent years and, despite frequent misunderstandings of the terms “open source” and “free software”, no one can deny this. Studies by Black Duck Software and the European Commission have tried to estimate the cost of reproducing just the global code base, as it was available at the date of the respective study’s sample collection. The dollar ranges in these estimations range from tens of billions to hundreds of billions. This notwithstanding, studies on the economic value creation of open source business are still scarce. What we can see from the estimated numbers is that, not only single companies, but also regional and national administrations have to pay attention to open source development. Without the provision of an open-source-friendly ecosystem, a region may miss opportunities to foster sustainable open source development.

In conclusion, open source development has not even, but especially from an economic perspective much to offer for theorists, as well as practitioners from the private sector and people in charge in the public sector. Nonetheless, academic research on the business-related aspects of open source development has mainly focused on developer motivation and organizational setups. Albeit that many concept papers have asked how open source development might be profitable, rather few studies have focused on business models or even their antecedents. (Examples of the few studies that have include Bonaccorsi et al. and Perr et al.)

The lack of research into open source business models might be due to the challenge of separating and classifying these business models. Often, the concepts show signs of overlap, which hinders subsequent analysis. How can we analyze what drives decision-making toward one business model and not the other if we cannot even distinguish between them? Actually, this task appears to be achievable and yet many studies fail in their attempt for a clear cut typology. One outstanding concept for delineation is that by Chesbrough and Appleyard. It mainly sorts open source business models into four clusters: i) deployment (e.g., professional services, consulting jobs); ii) hybridization (e.g., proprietary extensions and multi-license business models); iii) complements (e.g., complementary products enabled by open source software); and iv) self-service (e.g., organizations like the Sakai project).

In our research project on open source management at the Berlin Institute of Technology, we use this cluster scheme and we investigate the antecedents of business model choice in the open source software industry. By doing this, we aim to identify which factors are or were influential for companies’ initial business decisions regarding open source. Future studies will then also focus on the link between the circumstances of business model design and open source sustainability.

Following the invitation of OSBR, we would like to point out that our survey is still open and we want to invite you to participate. If you were involved in decisions on the business strategy of your company, please complete our survey. It will not take more than 10 – 15 minutes to complete. If you were not involved in the decision-making process, please pass on this invitation to any colleagues who were.

The survey can be accessed online at:

The anonymity of your responses is guaranteed. All data will be analyzed and published only in an aggregated form. As compensation for your efforts, we would like to offer you a more detailed report on our findings. If you relinquish your anonymity, we can provide you with a benchmark report that compares your individual answers to the overall study results.

Further information about our research can be found at

With your participation you help us in our research and our efforts to gain better understanding of how the open source development model can be interlinked with the private and the public sector. Of course, business model antecedents are only the start. From this starting point, we can then dive deeper into matters like social sustainability, regional creation of wealth, and on a micro level, the profitability of open source business models.

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