source projects has opened up the acceptance of these products into a number of previously untapped markets. The Internet has created an environment in which software distribution costs are approaching zero. Products freely and rapidly flow across borders. There is no packaging—no shelf-space requirements. OSS is not confined to one economic system. It overcomes both the tyranny of distance [ 1] and oppression of borders. OSS also espouses new methods of software production that utilize the public as the production mechanism and allows for coordinated, location-agnostic access to the raw materials for these new products.
To assess if OSS has the potential to revolutionize the development and distribution of software, we must first understand how the entities involved in the development of such software are organized. Because different business models are not equal in their capacity to create value, we must analyze each particular blend of customer, product, and production and distribution mechanism. After presenting five models underlying the software development business, we focus our attention on the one that has perhaps the most disruptive potential.
THE BUSINESS MODELS
We distinguish five models of software production or distribution: proprietary, open community, corporate distribution, sponsored OSS, and second-generation OSS. Whereas the first two constitute the extremes of the closed-open continuum, the other three are hybrids of closed and open models.
Proprietary and Open Communities. Proprietary and open communities both have their origins in the early days of computing, when some people freely exchanged code while others recognized there were customers for their programs and accordingly sold executable versions of their products while carefully securing the source.
The proprietary model has dominated the marketplace for decades. Firms employ programmers to develop software and customers purchase it. The code is considered a major intellectual resource, and traditional software firms protect their code from outside eyes by erecting physical and legal firewalls between their code and the outside world. Proprietary firms rely heavily on both copyright law—to ensure that “leaked” source code cannot legally be used in a competing product—and patent law—to protect their intellectual property from duplication. While the code is most often sold for license fees, proprietary firms can and do distribute their products as freeware. It is not the price that distinguishes
proprietary software but rather the public’s inability to view and modify the source code.
At the other extreme is the open community model, which involves the development and support of software by volunteers with limited or no commercial interest. This model dominates the OSS movement in terms of number of projects. Many of them can be located through large, Internet-based project management and source code repositories such as SourceForge, which hosts over 170,000 software projects. 1 While the majority of these projects involve only one or two developers and have a small number of users, many have a vast base of both developers and users and have produced products that provide unique functionality or offer compelling alternatives to commercial products.
Corporate Distribution. Based on the high level of adoption for many OSS products, it seems apparent that quality products are being produced through the open community model. However, some entrepreneurs recognize that identifying appropriate products, interacting with open communities for support, and developing the required support skills can be challenging for many potential OSS customers. As a result, firms, such as RedHat, SpikeSource, and OpenOSX, have emerged to create value (and generate revenue) by identifying best-of-breed OSS projects, improving distribution methods for these products, and providing complementary services in order to make these OSS products more accessible to a broader market.
Sponsored Open Source. Corporations and foundations sponsor some OSS projects. For example, the Apache Software Foundation fosters the development of the Apache server and over 50 other OSS projects. Some corporate sponsors directly contribute development resources to OSS projects. IBM is a high-profile example of a corporation contributing developers to Apache’s Web server. In some cases, sponsored OSS projects have been initiated by corporations releasing previously closed code and encouraging their employees to continue to work on the now open project. Eclipse, an integrated software development environment, was released as OSS by IBM, whose developers are still primary contributors to the project.
1As of late February 2008, SourceForge hostsed 170,539 projects.
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