Want to get a heated debate going among technologists? Ask them this question: Can the open source software movement defeat (or severely cripple) Microsoft in the marketplace?
With little academic attention focused on this question, Harvard Business School professors Pankaj Ghemawat and Ramon Casadesus-Masanell decided to dive in. Most research to date into the OSS movement has focused on the organization and management issues surrounding OSS. Ghemawat and Casadesus-Masanell chose to explore the fundamental competitive dynamics question: Will OSS ever displace traditional software from its market leadership position?
"We believe that there is still a great deal of confusion and puzzlement on how this competitive battle will develop," say the authors of the academic paper Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows, which has just been accepted for publication in a special issue of Management Science.
Ultimately, the authors believe, neither side is likely to be forced from the battlefield—Microsoft has too much market share and OSS offers too many benefits for users. But there are strategies each can use successfully against the other, as they detail in this e-mail interview.
Sean Silverthorne: Why should OSS ever displace traditional software?
Ramon Casadesus-Masanell and Pankaj Ghemawat: One main advantage of open source software is that because users can modify the code directly (as they encounter problems or have new ideas on how to improve it), the development cycle is significantly shorter. Proponents of OSS claim that if this demand-side learning (as we call it) is sufficiently strong, OSS will oust traditional software. In addition, software engineers claim that the better architecture of most OSS projects make them a potentially superior product, adding to the probability of success.
However, OSS has disadvantages too. Most importantly, it comes from behind in terms of market share (installed base). Because the value of an operating system depends critically on the number of users, traditional software has an advantage. Clearly, a larger installed base implies that there will be stronger direct and indirect network effects, and this will enhance the value of the operating system to current and potential users. In addition, a larger installed base also implies that there will be more feedback on bugs and more suggestions for new features.
Our paper introduces a dynamic mixed duopoly model in which a profit-maximizing competitor (Microsoft) interacts with a competitor that prices at zero (Linux), with the installed base affecting their relative values over time. We use a formal model to ask what conditions are needed for Linux to take over Windows. The questions that we address are: Is Linux's superior demand-side learning sufficient to win out? What is the effect of forced procurement by governments and some large corporations on the long-run equilibrium? How do cost asymmetries play out? Can Microsoft use piracy strategically to improve its market position?
From a managerial perspective, these are significant questions. If it turns out that OSS will incontestably displace traditional software, software firms need to adapt as quickly as possible to the new competitive landscape by, for example, incorporating some aspects of the open source development model, or else be ready to exit. In fact, the model suggests ways in which the likelihood of OSS winning out can be minimized (see below). If, to the contrary, OSS turns out not to be a threat to the traditional model, firms should not waste time and attention trying to figure out ways to fight this battle.
Q: Could you summarize your results?
A: First of all, let us make a caveat regarding our approach. Our methodology is formal economic modelling. What this means is that we construct a stylized mathematical model of the relationship. The model captures what we believe are the most important features of the Linux-Windows competitive battle (faster demand-side learning on the part of Linux and an initial installed base advantage for Windows), but makes important assumptions regarding other aspects. Without these simplifications, the model would not be tractable and it would not be possible to obtain results. After having analyzed the base model, we relax some of these assumptions.
Harnessing demand-side learning more efficiently is not sufficient for Linux to win the competitive battle against Windows.
Our main result is that in the absence of cost asymmetries and as long as Windows has a first-mover advantage (a larger installed base at time zero), Linux never displaces Windows of its leadership position. This result holds true regardless of the strength of Linux's demand-side learning. Furthermore, the result persists regardless of the intrinsically better design and potential differential value of Linux. In other words, harnessing demand-side learning more efficiently is not sufficient for Linux to win the competitive battle against Windows.
Having obtained this basic result, we investigate the conditions that will warrant that Linux ends up forcing Windows out. We do this by modifying the model in two ways. First of all, we look at the effect of having buyers such as governments and some large corporations committed to deployment of Linux in their organizations. We call such buyers strategic. In addition to cost-related reasons, governments back Linux because having access to the source code allows them to verify that sensitive data is treated securely. Binary code makes it hard to figure out who has access to information flowing in a network. Companies such as IBM, in contrast, back Linux because they see in OSS one way to diminish Microsoft's dominance. We find that the presence of strategic buyers together with Linux's sufficiently strong demand-side learning results in Windows being driven out of the market. This may be one main reason why Microsoft has been providing chunks of Windows' source code to governments.
Second, we look at the role of cost asymmetries. In the base model we assume that the cost structures of Windows and Linux for the development, distribution, and support of software coincide. A natural question is then whether the central result that Windows survives in the long-run equilibrium regardless of the speed of Linux's demand-side learning persists if there are cost asymmetries. We find that because OSS implies lower profits for Microsoft, the larger the cost differences are between Linux and Windows, the less able Microsoft is to guarantee the survival of Windows.
We also show that it is not all bad news to Microsoft. We analyze the effect of having forward-looking buyers and the presence of piracy, and conclude that both benefit Microsoft.
We question the effectiveness of influencing forward-looking buyers' perceptions on the value of an operating system. The model suggests that the more forward-looking buyers are, the more advantageous it is to use fear, uncertainty, and doubt (FUD) tactics to drive the competing system out. Consider SCO, a small "vulture" firm that had bought up the intellectual property rights to a particular version of Unix and threatened Linux users with lawsuits over infringement of those rights unless they agree to pay substantial licensing fees. IBM, which was one of the prime corporate sponsors of Linux as well as the target of a lawsuit by SCO that sought $1 billion in damages, alleged in mid-2003 that SCO was in cahoots with Microsoft. Our model indicates that if buyers are sufficiently forward-looking, such actions may jeopardize the ability of Linux to continue as an effective competitor in the operating system space.
We also look at the effect of piracy and ask whether piracy can ever be beneficial to Microsoft. This extension was motivated by analyzing data on a cross-section of countries on Linux penetration and piracy rates. We found that in countries where piracy is highest, Linux has the lowest penetration rate. The model shows that Microsoft can use piracy as an effective tool to price discriminate, and that piracy may even result in higher profits to Microsoft!
Finally, the paper investigates the societal welfare consequences of OSS availability by comparing different industry structures (monopoly and duopoly). We find that while a monopoly of Linux is always preferable (from the point of view of societal welfare) to a Windows monopoly, it is ambiguous whether a duopoly Linux-Windows is better than a Windows monopoly.
The basic trade-off is the following: With a duopoly, more individuals and organizations use PCs because prices are lower, and this raises welfare. However, with a duopoly, no operating system ends up exploiting fully its potential because developers' efforts wind up divided between the two systems. However, with a monopoly, the efforts to develop new software and improve the platform are directed towards one system only and this may turn out to be better from a social welfare perspective.
Q: In general, what surprised you about the results? What assumptions did you have going in that didn't hold up?
A: When we began the project, we thought that network effects and demand-side learning would result in Linux forcing Windows out. After all, we reasoned, if Windows is sold at a positive price and Linux is free, there will always be Linux users, and if the strength of Linux's network effect is large, the value of Linux to prospective users should eventually become larger than that of Windows.
Well… we were wrong (and this illustrates the usefulness of developing a formal model). What we had missed is that Microsoft's initial advantage (larger installed base) together with its pricing power allow the company to price strategically to control Linux's market share going forward. By lowering the price of Windows, the demand for Linux shrinks to the point where Linux is not a threat to the survival of Windows. The model also shows that a "milking strategy" (setting high prices in the short term and leaving the market at some point in the future) is not desirable to Microsoft. The reason is that if Microsoft follows such a strategy, as the last period becomes closer and closer, the relative benefit of abandoning it and lowering prices to survive a few more periods increases dramatically.
The model shows that Microsoft can use piracy as an effective tool to price discriminate, and that piracy may even result in higher profits to Microsoft!
The "Windows persistence" result turns out to be robust to different specifications of the model. In fact, in the first few months into the project we had developed several alternative models and every one of them yielded this very same finding.
In addition to this main result, we were also surprised to find that piracy may end up increasing Microsoft's profits. To understand why, notice that there are two types of pirates: those who would not have bought Windows in the first place because it is too expensive, and those who would have bought Windows but now decide to pirate it. The first category increases Windows' installed base without affecting sales. As a consequence, this group increases the value of Windows. And thanks to these pirates, Microsoft is able to set higher prices in the future (because the value of the system goes up). In addition, having these pirates means that Linux's installed base does not grow as much as it would have if piracy weren't there. The second type of pirates (those who in the absence of piracy would have bought Windows) reduces Windows' sales and profit. Thus, if the proportion of first-type pirates is sufficiently large, Microsoft's profits will increase with piracy.
Finally, the social welfare result that a Windows monopoly is not always worse than a Linux-Windows monopoly was also unexpected. This questions the social desirability of policies aimed at guaranteeing Linux's survival.
Q: You mention in the paper that the model is not to be taken as a literal model of the Linux/Microsoft competition. But can you say anything about why Linux has enjoyed success against Microsoft?
A: Linux's success against Microsoft is still relative. In the client space, Windows is the undisputable leader, and in the server space, Linux and Windows have both been gaining positions for the past ten years. The big losers are Novell, Unix, Solaris… everybody except Linux and Windows.
Despite this, Microsoft is visibly concerned about Linux's upsurge. The Halloween memos (see http://www.opensource.org/halloween/) are an obvious testimony of this concern: "OSS poses a direct, short-term revenue and platform threat to Microsoft, particularly in server space. Additionally, the intrinsic parallelism and free idea exchange in OSS has benefits that are not replicable with our current licensing model and therefore present a long-term developer mindshare threat."
Microsoft has a great deal to lose if Linux wins the operating systems battle. Microsoft is a software company, and a defeat in operating systems would point to the vulnerability of its entire business portfolio. In addition, the operating systems group is one of Microsoft's biggest revenue generators. Moreover, to a large extent Microsoft's sustained success over time in such a dreadfully rugged landscape has been due to its dominant position in operating systems. It is well known that Microsoft won the browser wars leveraging its dominant position in client operating systems. And the same will happen in the media player space unless the American or European antitrust authorities prevent it. We expect Microsoft to put all its ammunition to fight this battle.
Part of the reason why Linux has made significant inroads is the determination of Richard Stallman and the Free Software Foundation to have a free (as in freedom) operating system. According to Stallman, application software will never be truly free unless there is a free operating system that supports it. Thus, since the moment Linus Torvalds and Richard Stallman joined forces, a big chunk of the foundation's efforts have been directed at building a free operating system.
Then there are some large corporations and governments backing the development of Linux. These players use Linux as a way to curb Microsoft's dominance. This support is important because there are tedious portions of the code that would rarely be developed spontaneously by members of the Linux-developer community.
Q: From your modelling, what can Microsoft do strategically to remain competitive against a product that is argued to be of better quality, is updated more frequently, and is free?
A: A few actions that the model suggests Microsoft could do to remain competitive are:
Increase its own demand-side learning.
Listen to the demands of the user community to better exploit the benefits of demand-side learning. Microsoft must facilitate communication between the user base and the company to have prompt feedback on the performance of its products.
Make an effort to incorporate improvements in the code (fix bugs and introduce new features) as soon as possible.
Reward those who propose improvements for the code. At the very least, Microsoft could publicly acknowledge those who proposed new features or discovered bugs.
Feed its direct and indirect network effects.
Support as much as possible the independent software vendor community so that the quantity and quality of complements is substantially above that of Linux.
Encourage competition between the different ISVs. The lower the prices of applications, the more appealing the Microsoft system will be.
Price discriminate. Give Windows and applications away to schools and universities so that users build their file libraries on Microsoft, not Linux.
Minimize the number of strategic buyers.
Let governments access the source code and give guarantees that sensitive data is treated confidentially.
Price discriminate. Give binary away to organizations and individuals who are not willing to spend money on Windows but who would be willing to use Linux because it is free.
Reduce costs to be able to sustain long periods of time with low prices.
Decrease Linux's demand-side learning.
Because the way to do this involves some questionable (from a legal point of view) actions, we will refrain from suggesting specifics.
Lessen Linux's direct and indirect network effects.
Make it as hard as possible for Windows applications to work on Linux.
Same for MS Office documents.
"Promote" Linux's code forking.
Infuse fear, uncertainty, and doubt into the Linux user community. For this to work, the statements must be perceived as credible. Credibility requires some past FUD announcements to be realized.
Q: Is there a scenario where Linux could be kicked out of the market by Microsoft?
A: Strictly speaking, within our model the only way in which Microsoft can get rid of Linux is by setting the price at zero. But, even if Microsoft did that, the company would still be selling MS Office for a positive price. Thus, we conjecture that even in this case, there would be people developing and using Linux.
The more important question is: What motivates developers to contribute to open source projects in the first place? As long as the drivers are there, Linux will persist. Given that Linux was born in 1992 in an industry already dominated by Microsoft, and given that the financial motive is secondary, it will be very hard for anyone to oust Linux.
The organizational stream of research on OSS has identified several drivers of motivation to contribute to open source projects. For Microsoft to have a chance to kick Linux out of the market, it needs to successfully fight them.
First, some developers see software as scientific knowledge to be shared "like the sharing of recipes among cooks." In fact, some describe software developers more like artists seeking fun, challenge, and beauty in their work than like calculative, square-minded engineers. Second, some individuals find it fun to go against Microsoft. As the OSS/free software movement gains momentum and developers foresee that victory is within reach, they increase their effort to accomplish this. Third, because most OSS projects have a log file listing all contributors to the code, some developers find it desirable to participate in OSS projects to signal their ability and to enhance their chances of promotion and professional advancement. Finally, user-developers sometimes fix bugs that they find and then release the improved code so that everybody can benefit.
It will be very hard for anyone to oust Linux.
To the motivations of independent developers to contribute to Linux, we have to add the important support that the free operating system receives from companies and governments. As long as the motives that induce these organizations to back Linux persist, Linux will not go away.
Finally, and as we mentioned above, having a free operating system is central to the mission of the Free Software Foundation, Richard Stallman, and Linus Torvalds. It is thus hard to see how Microsoft can "persuade" Stallman or Torvalds to cave. And even if it did… Linux is no longer Stallman's or Torvalds' property. The project is dispersed and there is no "owner" of the code. Thus, someone else can take the lead.
Q: What's next for the both of you for future research projects?
A: There are several ways in which our work on Linux can be extended. One avenue would be to empirically estimate the difference in demand-side learning between Linux and Windows. This would allow us to make educated guesses on the chances of survival of Windows and make managerial and policy recommendations to OSS advocates, Microsoft, and administrations.
In its present form, the paper models the organization of Linux's development in a very stylized way. Having a closer look at issues of effort coordination may help us better understand how to deal with code forking, one of OSS's biggest potential problems.
A second organizational issue that could also benefit from formal analysis is that of incentives to contribute to OSS. While most research on this issue has been sociological in nature, the economic approach may shed light on why supposedly rational individuals are willing to spend valuable time and effort without extrinsic, financial incentives.
A final question that we believe is of utmost importance but that has not attracted much attention thus far (at least among academics) is: What are the drivers of adoption of OSS? Aside from its empirical relevance for both individuals and organizations, it is an interesting question from a theoretical point of view, too. The presence of network effects and demand-side learning make this a non-trivial problem. We conjecture that there are multiple equilibria and that the use of FUD to mold perceptions about future value becomes crucial.
Monday, April 02, 2007
Monday, March 12, 2007
Microsoft and Open Source
Microsoft and Open Source Software
Microsoft has been learning from the OSS community regarding the benefits of deeper collaboration and increased transparency leading to better communication with customers. We believe the most effective pathway for a commercial software company is to strike a balance between investing in research and development and the release of intellectual property assets in the form of source code for both reference and collaborative purposes.
The increased competition resulting from the proliferation of OSS has been constructive for the industry as a whole. The implications of OSS within multiple market segments are causing organizations to figure out what is most important to them. It has placed a higher premium on innovation and a drive to deliver greater value for lower costs. The big winner in this equation has been the software consumer, whose choices have increased dramatically.
The Shared Source Initiative is the manifestation of these factors within Microsoft. With more than 80 source code offerings being used by more than two million developers, Microsoft is looking to apply the best of open source while helping its customers avoid many of the model’s pitfalls. There is no one, correct way to create software. The ecosystem as a whole will benefit from a rich tapestry of development, business, and licensing models.
Read It Microsoft Web Site :)
Microsoft has been learning from the OSS community regarding the benefits of deeper collaboration and increased transparency leading to better communication with customers. We believe the most effective pathway for a commercial software company is to strike a balance between investing in research and development and the release of intellectual property assets in the form of source code for both reference and collaborative purposes.
The increased competition resulting from the proliferation of OSS has been constructive for the industry as a whole. The implications of OSS within multiple market segments are causing organizations to figure out what is most important to them. It has placed a higher premium on innovation and a drive to deliver greater value for lower costs. The big winner in this equation has been the software consumer, whose choices have increased dramatically.
The Shared Source Initiative is the manifestation of these factors within Microsoft. With more than 80 source code offerings being used by more than two million developers, Microsoft is looking to apply the best of open source while helping its customers avoid many of the model’s pitfalls. There is no one, correct way to create software. The ecosystem as a whole will benefit from a rich tapestry of development, business, and licensing models.
Read It Microsoft Web Site :)
Saturday, February 10, 2007
Kerala's draft IT policy released
THIRUVANANTHAPURAM: The draft information technology (IT) policy released by Chief Minister V.S. Achuthanandan here on Wednesday proposes to make Kerala a cradle of knowledge workers. It aims to upgrade the productivity, skill and knowledge levels of the citizen.
Proposals include establishment of an International Centre for Free Software and Computing for Development, ITES Training Centre (in Kochi) and extension of Internet to all educational institutions and villages by 2010. Around 3,000 broadband-enabled information hubs called Akshaya e-Centres will be set up in difference parts of the State.
The Government will support private initiatives to set up IT parks. Private IT parks that meet a minimum set of standards shall be promoted by the Government as an integral part of the State's IT infrastructure, if the parks desire so. The Government will expand Technopark in Thiruvananthapuram and Infopark in Kochi on its own accord and in partnership with private infrastructure providers. Focus areas include e-governance, free software and development of appropriate technologies. The State will network with national and international organisations and industry for research and development in Information and Communication Technologies (ICT) and knowledge sharing. The proposed Centre for Free Software will focus on developing technologies relevant for social and economic advancement in developing countries.
The policy stresses that Free and Open Source Software (FOSS) will be used in e-governance projects. Open standards such as Unicode and Open Document Format and Open Architectures will be followed in e-governance projects to avoid total dependence on select vendors. The Government proposed to develop the State as the FOSS destination in the country. It will provide special incentives to companies developing FOSS. The policy says that the State will try to make maximum use of ICT in governance. Taking the Right to Information Act in its true spirit, the Government will take up ICT-enabled programmes for efficient flow of information between citizens and the Government.
The Government will make use of all the media tools and emerging technologies to ensure proper communication between the Government and the citizen. The Government will promote the use of Web sites, e-mails and other news communication facilities in various Government and semi-Government organisations.
Proposals include establishment of an International Centre for Free Software and Computing for Development, ITES Training Centre (in Kochi) and extension of Internet to all educational institutions and villages by 2010. Around 3,000 broadband-enabled information hubs called Akshaya e-Centres will be set up in difference parts of the State.
The Government will support private initiatives to set up IT parks. Private IT parks that meet a minimum set of standards shall be promoted by the Government as an integral part of the State's IT infrastructure, if the parks desire so. The Government will expand Technopark in Thiruvananthapuram and Infopark in Kochi on its own accord and in partnership with private infrastructure providers. Focus areas include e-governance, free software and development of appropriate technologies. The State will network with national and international organisations and industry for research and development in Information and Communication Technologies (ICT) and knowledge sharing. The proposed Centre for Free Software will focus on developing technologies relevant for social and economic advancement in developing countries.
The policy stresses that Free and Open Source Software (FOSS) will be used in e-governance projects. Open standards such as Unicode and Open Document Format and Open Architectures will be followed in e-governance projects to avoid total dependence on select vendors. The Government proposed to develop the State as the FOSS destination in the country. It will provide special incentives to companies developing FOSS. The policy says that the State will try to make maximum use of ICT in governance. Taking the Right to Information Act in its true spirit, the Government will take up ICT-enabled programmes for efficient flow of information between citizens and the Government.
The Government will make use of all the media tools and emerging technologies to ensure proper communication between the Government and the citizen. The Government will promote the use of Web sites, e-mails and other news communication facilities in various Government and semi-Government organisations.
Wednesday, January 24, 2007
Tamil Nadu (India) may shut door on Microsoft
Chennai, Dec. 31: The Tamil Nadu government, which is on a fast-track pushing the state to the top in the Indian IT sector, has almost shut its door on the software giant, Microsoft, preferring the Open Source Systems (OSS) for reasons of costs and easy migrating capabilities.
“Initially, 99 per cent of government systems have been running on Microsoft systems but then 2007 will be a watershed year for the state IT sector. We are fast migrating to Linux operating systems which are so much cheaper and can be operated at low cost, besides offering continuous updates and freedom from viruses,” says Mr C. Umashankar, managing director of state-owned ELCOT, vested with the responsibility of overseeing such ambitious government projects as e-governance, enumerating the beneficiaries of the free TV scheme, family ration cards and the free sari-dhoti distribution.
“We have already dispatched 6,500 Linux systems to village panchayats and another 6,100 Acer desktop systems with Suse Linux operating systems are on their way. We are procuring 20,000 desktop systems for schools, which will run only on Suse Linux. Remaining 30 desktop systems will also migrate as and when the new machines arrive,” Mr Umashankar told this newspaper.
He said all the ELCOT servers were on Redhat Linus and the government IT company’s 28-seater software development wing was fully on Suse Linux.
“We will train over 30,000 government officials in Linux Operating Systems and Open Office. A contract has been already finalised with the government departments and we have set up a Linux support centre with two Linux-certified professionals to assist the state officers. This number will go up to ten or more in 2007, which will be a path-breaking year for government on migration to Linux Operating System,” Mr Umashankar said. “India can live without Microsoft packages and even progress but Microsoft will find it tough without a huge country like India buying their software packages,” he said.
He said a top official from Microsoft India had met him twice to convince him to continue with MS products. The official offered the XP operating system for about Rs.7000 while he quoted Rs.500. “I explained to her that for a mere Rs.300, I could get the entire operating system, office productivity software and a wide range of utility tools, such as DVD/CD writing software, database software, multimedia editing software, vector map-drawing software plus a whole range of software development tools. Also, I have the option of downloading this entire package in DVD media and not even pay that Rs.300, which is the media cost and not the software charges,” said the ELCOT chief, an IT expert himself besides being a senior IAS bureaucrat.
He said he had also pointed out to the Microsoft official that MS Office did not allow saving of documents in open document format. While it was possible to open all MS Office files using Openoffice.org, the vice versa cannot be done. “I asked her why ELCOT should buy such an inferior product when
Openoffice.org is available free of cost for Windows as well as Linux.
She said Microsoft are working on open XML format,” he added. Mr Umashankar said he had written to state finance secretary enumerating the “huge financial and working advantages” of shifting to Open Source Environment in all government departments. “I have been receiving great support from all the senior IAS officers here, from the chief secretary downwards. It is very encouraging.
ELCOT is not the loser when Microsoft did not accept our price of Rs.500; on the other hand, Microsoft loses out due to our big volumes involved,” he said.
“There is a gross misconception among the governments and officials that if they migrate to Open Source platform, Microsoft would get angry and the entire software industry could come to a grinding halt. This is totally misplaced fear,” Mr Umashankar said.
“Within the next five years, it is going to be the IT services which would dominate the revenue share of the IT companies, because more and more users, governments and the corporate sector have started migrating to OS software, thus removing the scope for more revenues from products. It is time that the users understood this scenario and start saving their precious revenues,” Mr Umashankar said.
Talking of the changes happening in this direction, he said he had ordered 43 rack servers for ELCOT to host various government applications. “All the applications are to run under OS software. I would have paid Rs.20 lakh per server if I had adopted proprietary software but now I have saved over Rs.8 crore from this one transaction.
We intend to procure 1000 servers in the next two years. Imagine the amount of savings we are getting out of this,” the ELCOT chief said. “In my view, a state government of TN magnitude would be able to save Rs 200-500 crores every year, when the National e-governance action plan gets implemented,” he said, adding that school children too could get the benefit of “more robust, secure and economical Open Source software for their work,” he added. “Today, there is more demand for OSS trained engineers. I require at least 500 trainers to train 30,000 state officials across Tamil Nadu in the next six months.
“Initially, 99 per cent of government systems have been running on Microsoft systems but then 2007 will be a watershed year for the state IT sector. We are fast migrating to Linux operating systems which are so much cheaper and can be operated at low cost, besides offering continuous updates and freedom from viruses,” says Mr C. Umashankar, managing director of state-owned ELCOT, vested with the responsibility of overseeing such ambitious government projects as e-governance, enumerating the beneficiaries of the free TV scheme, family ration cards and the free sari-dhoti distribution.
“We have already dispatched 6,500 Linux systems to village panchayats and another 6,100 Acer desktop systems with Suse Linux operating systems are on their way. We are procuring 20,000 desktop systems for schools, which will run only on Suse Linux. Remaining 30 desktop systems will also migrate as and when the new machines arrive,” Mr Umashankar told this newspaper.
He said all the ELCOT servers were on Redhat Linus and the government IT company’s 28-seater software development wing was fully on Suse Linux.
“We will train over 30,000 government officials in Linux Operating Systems and Open Office. A contract has been already finalised with the government departments and we have set up a Linux support centre with two Linux-certified professionals to assist the state officers. This number will go up to ten or more in 2007, which will be a path-breaking year for government on migration to Linux Operating System,” Mr Umashankar said. “India can live without Microsoft packages and even progress but Microsoft will find it tough without a huge country like India buying their software packages,” he said.
He said a top official from Microsoft India had met him twice to convince him to continue with MS products. The official offered the XP operating system for about Rs.7000 while he quoted Rs.500. “I explained to her that for a mere Rs.300, I could get the entire operating system, office productivity software and a wide range of utility tools, such as DVD/CD writing software, database software, multimedia editing software, vector map-drawing software plus a whole range of software development tools. Also, I have the option of downloading this entire package in DVD media and not even pay that Rs.300, which is the media cost and not the software charges,” said the ELCOT chief, an IT expert himself besides being a senior IAS bureaucrat.
He said he had also pointed out to the Microsoft official that MS Office did not allow saving of documents in open document format. While it was possible to open all MS Office files using Openoffice.org, the vice versa cannot be done. “I asked her why ELCOT should buy such an inferior product when
Openoffice.org is available free of cost for Windows as well as Linux.
She said Microsoft are working on open XML format,” he added. Mr Umashankar said he had written to state finance secretary enumerating the “huge financial and working advantages” of shifting to Open Source Environment in all government departments. “I have been receiving great support from all the senior IAS officers here, from the chief secretary downwards. It is very encouraging.
ELCOT is not the loser when Microsoft did not accept our price of Rs.500; on the other hand, Microsoft loses out due to our big volumes involved,” he said.
“There is a gross misconception among the governments and officials that if they migrate to Open Source platform, Microsoft would get angry and the entire software industry could come to a grinding halt. This is totally misplaced fear,” Mr Umashankar said.
“Within the next five years, it is going to be the IT services which would dominate the revenue share of the IT companies, because more and more users, governments and the corporate sector have started migrating to OS software, thus removing the scope for more revenues from products. It is time that the users understood this scenario and start saving their precious revenues,” Mr Umashankar said.
Talking of the changes happening in this direction, he said he had ordered 43 rack servers for ELCOT to host various government applications. “All the applications are to run under OS software. I would have paid Rs.20 lakh per server if I had adopted proprietary software but now I have saved over Rs.8 crore from this one transaction.
We intend to procure 1000 servers in the next two years. Imagine the amount of savings we are getting out of this,” the ELCOT chief said. “In my view, a state government of TN magnitude would be able to save Rs 200-500 crores every year, when the National e-governance action plan gets implemented,” he said, adding that school children too could get the benefit of “more robust, secure and economical Open Source software for their work,” he added. “Today, there is more demand for OSS trained engineers. I require at least 500 trainers to train 30,000 state officials across Tamil Nadu in the next six months.
Tuesday, October 24, 2006
MAVERICK RICHARD STALLMAN KEEPS THE FAITH
When Richard Stallman gave Bill Gates the finger in front of Stanford's computer science building, I got nervous. No, it wasn't the real Bill Gates -- it was just his name, engraved in giant letters over the main entrance to the 2-year-old, Gates-funded building. But it didn't seem like a Stanford thing to do. The campus is immaculately manicured, dotted with picture-postcard palm trees and squeaky-clean students. It's just not a flipping-the-bird kind of place.
It didn't strike me as a Richard Stallman kind of place, either. Stallman is a legendary hacker, the founder of the free software movement, a MacArthur "genius grant" recipient and a programmer capable of prodigious exploits. But on this day in Palo Alto he looked unkempt and off-kilter. I had already spent a good part of the afternoon watching in bemused silence as he painstakingly examined his long, stringy brown hair for split ends. I was also mesmerized by his piercing green eyes, radiating the power of an Old Testament prophet. I feared his wrath.
We had come to Stanford in search of a place where Stallman could download his e-mail. Two hours away from catching a long flight to New Zealand -- partly for vacation, partly to continue proselytizing his free software "mission" -- Stallman was jonesing for one last connection to the Net. Being Richard Stallman, he figured he could just drop in on the computer science department at Stanford. He hadn't visited for several years, but he was good friends with equally legendary Stanford professor John McCarthy -- the man who invented the Lisp programming language and coined the term "artificial intelligence." Stallman himself programmed the multipurpose Emacs editing tool, a kind of nuclear-powered Swiss Army knife favored by top-notch programmers and computer scientists. Surely some Emacs acolyte would be delighted to help the one and only Richard Stallman grab his e-mail.
First we tried to sneak in through a side door of the Gates building. Over a lunch of ribs, duck, trout and popcorn shrimp at Palo Alto's MacArthur Park restaurant, Stallman had told me that he didn't despise Bill Gates as much as other free software guerrilla fighters do. But he clearly wasn't eager to legitimize Gates' stature by walking submissively through his totemic gate. Free software and Microsoft don't mix. There had to be a better way.
Except there wasn't. The path to McCarthy's office from the side door entrance was obscure. We sucked in our guts and headed for the main gate.
"Hey," Stallman called out to a graduate student opening the door in front of us, "is it the tradition here to give Bill the finger whenever you go through these doors?"
The student looked over his shoulder, twitched a nervous smile and disappeared inside. Stallman shrugged -- and right there on the spot decided to start his own protest movement. As we entered the building, out came what the ancient Romans used to call the "digit impudicus." Stallman flashed me a sly grin. I glanced around, looking for security.
Over the course of about half an hour in the building, Stallman encouraged three other people to join his campaign. No one signed on unreservedly, but two recognized him right away -- one from a conference some six years earlier and another from his picture in a recent Forbes magazine article celebrating the surprising commercial success of the free software (or, as it is now more commonly called, "open source") movement.
Would the movement to deride Gates have as much success? Stallman didn't know and didn't care. As he pointed out to me repeatedly through the course of our afternoon together, he doesn't do things because they are socially acceptable or strategically appropriate. Success is not his measure for accomplishment. He does what he does because he thinks it is the morally correct, or simply fun, thing to do. And he brooks no compromise.
It didn't strike me as a Richard Stallman kind of place, either. Stallman is a legendary hacker, the founder of the free software movement, a MacArthur "genius grant" recipient and a programmer capable of prodigious exploits. But on this day in Palo Alto he looked unkempt and off-kilter. I had already spent a good part of the afternoon watching in bemused silence as he painstakingly examined his long, stringy brown hair for split ends. I was also mesmerized by his piercing green eyes, radiating the power of an Old Testament prophet. I feared his wrath.
We had come to Stanford in search of a place where Stallman could download his e-mail. Two hours away from catching a long flight to New Zealand -- partly for vacation, partly to continue proselytizing his free software "mission" -- Stallman was jonesing for one last connection to the Net. Being Richard Stallman, he figured he could just drop in on the computer science department at Stanford. He hadn't visited for several years, but he was good friends with equally legendary Stanford professor John McCarthy -- the man who invented the Lisp programming language and coined the term "artificial intelligence." Stallman himself programmed the multipurpose Emacs editing tool, a kind of nuclear-powered Swiss Army knife favored by top-notch programmers and computer scientists. Surely some Emacs acolyte would be delighted to help the one and only Richard Stallman grab his e-mail.
First we tried to sneak in through a side door of the Gates building. Over a lunch of ribs, duck, trout and popcorn shrimp at Palo Alto's MacArthur Park restaurant, Stallman had told me that he didn't despise Bill Gates as much as other free software guerrilla fighters do. But he clearly wasn't eager to legitimize Gates' stature by walking submissively through his totemic gate. Free software and Microsoft don't mix. There had to be a better way.
Except there wasn't. The path to McCarthy's office from the side door entrance was obscure. We sucked in our guts and headed for the main gate.
"Hey," Stallman called out to a graduate student opening the door in front of us, "is it the tradition here to give Bill the finger whenever you go through these doors?"
The student looked over his shoulder, twitched a nervous smile and disappeared inside. Stallman shrugged -- and right there on the spot decided to start his own protest movement. As we entered the building, out came what the ancient Romans used to call the "digit impudicus." Stallman flashed me a sly grin. I glanced around, looking for security.
Over the course of about half an hour in the building, Stallman encouraged three other people to join his campaign. No one signed on unreservedly, but two recognized him right away -- one from a conference some six years earlier and another from his picture in a recent Forbes magazine article celebrating the surprising commercial success of the free software (or, as it is now more commonly called, "open source") movement.
Would the movement to deride Gates have as much success? Stallman didn't know and didn't care. As he pointed out to me repeatedly through the course of our afternoon together, he doesn't do things because they are socially acceptable or strategically appropriate. Success is not his measure for accomplishment. He does what he does because he thinks it is the morally correct, or simply fun, thing to do. And he brooks no compromise.
Monday, July 24, 2006
The Challenge of the Multi-site Nonprofit
Why is it more difficult for nonprofit organizations than, say, retail chains, to run efficient multi-site operations? A recent Harvard Business Review story concluded that nonprofits waste $100 billion a year through inefficient fundraising and dispersal practices and clumsy administrative operations.
The problem, according to Harvard Business School professors Allen Grossman and V. Kasturi ("Kash") Rangan, rests in inevitable tensions and battles for power that arise between national headquarters and local operations.
Not helping the problem is the fact that many nonprofits employ management techniques developed for for-profit companies. "We say this is not a good approach," said Grossman. Instead, nonprofits need their own management practices that recognize the unique characteristics of the nonprofit enterprise.
Grossman and Rangan presented their findings—and some possible solutions—at the Faculty Research Symposium held at HBS on May 20.
Whether a particular nonprofit organizational structure favors central or local control, inevitable tensions develop between national headquarters and local operations, Grossman said. These disputes often result from the unique characteristics that differentiate them from for-profit concerns:
The real value creators for nonprofits are the dispersed units, where money is raised and good deeds accomplished. With for-profits, headquarters is usually where the value is created.
A constant power struggle takes place between local and national leaders.
Wide use of volunteer labor makes worker motivation more of an issue.
Up to 60 percent of a nonprofit CEO's time is spent fundraising, time that could be spent building a more effective organization.
The strong emotional environment around nonprofits can challenge rational decision making.
Nonprofits often have a cultural opposition to structure.
A lack of theory of management practice exists for nonprofits.
These characteristics lead to a number of disputes between headquarters and affiliates, according to Grossman and Rangan. For example, who controls the donor list and money raised? Is it the affiliate that actually raises the funds, or the national organization that provides the overall brand and direction? Are affiliates delivering the level of service defined by the national organization? Does the affiliate adequately represent the values and goals of the national brand? Do affiliates receive an appropriate level of national services from the fees they pay?
Traditionally these strains have fueled centralization versus the decentralization debate in the nonprofit community, Grossman told his audience. And that's the wrong approach to take—the value proposition created by a national organization with local units is lost. Instead, the debate should be reframed with autonomy and affiliation as the key dimensions.
In their research, Grossman and Rangan looked at the system behaviors of five nonprofits: Outward Bound (where Grossman once served as CEO), Planned Parenthood, Habitat for Humanity, SOS Kinderdorf, and The Nature Conservancy. Each was mapped on two dimensions—one that exerts forces toward unit autonomy and the other influencing the degree of organizational affiliation. (The Nature Conservancy and Habitat for Humanity were the highest affiliation organizations; Planned Parenthood and Outward Bound were high autonomy organizations; SOS Kinderdorf ranked lowest on the autonomy scale, and about in the middle for affiliation.)
The point isn't whether an autonomous-biased organization is better than a more affiliate-driven one, but rather to identify "levers of influence" system managers can employ to get their organization the desired balance between the two forces.
"Headquarters should undertake actions to enhance system value and then sustain it, and affiliates should maximize local resources to enhance their credibility and increase their voice in the running of the system," Grossman and Rangan wrote in a working paper on the subject. "The key for management is to develop a governance system that accommodates this tension in a constructive rather than a destructive fashion."
To get constructive co-existence of unit autonomy and organizational affiliation, organizations must have in place a clear process for making decisions as to who will perform the functions necessary for the system, and a process that commits operating units to adhere to systemic decisions.
At the seminar, Rangan cautioned that there is no single cookie-cutter approach to solve the problems of all nonprofits. For example, if a meal kitchen has 100 strong, local operations there is little need for national people to come in, other than to provide a few services.
Among their conclusions, Grossman said, are:
A multi-site nonprofit's value proposition must be real, and consistently communicated externally and internally.
Strong unit autonomy and strong systems can be compatible and mutually supportive.
Lack of understanding of multi-site dynamics leads to a waste of money and resources.
More research is underway on several issues. To what degree are corporate structure and strong unit autonomy incompatible? How much strong national leadership is required to complement local program customization? And how important is national leadership in determining the success of a multi-site nonprofit?
The problem, according to Harvard Business School professors Allen Grossman and V. Kasturi ("Kash") Rangan, rests in inevitable tensions and battles for power that arise between national headquarters and local operations.
Not helping the problem is the fact that many nonprofits employ management techniques developed for for-profit companies. "We say this is not a good approach," said Grossman. Instead, nonprofits need their own management practices that recognize the unique characteristics of the nonprofit enterprise.
Grossman and Rangan presented their findings—and some possible solutions—at the Faculty Research Symposium held at HBS on May 20.
Whether a particular nonprofit organizational structure favors central or local control, inevitable tensions develop between national headquarters and local operations, Grossman said. These disputes often result from the unique characteristics that differentiate them from for-profit concerns:
The real value creators for nonprofits are the dispersed units, where money is raised and good deeds accomplished. With for-profits, headquarters is usually where the value is created.
A constant power struggle takes place between local and national leaders.
Wide use of volunteer labor makes worker motivation more of an issue.
Up to 60 percent of a nonprofit CEO's time is spent fundraising, time that could be spent building a more effective organization.
The strong emotional environment around nonprofits can challenge rational decision making.
Nonprofits often have a cultural opposition to structure.
A lack of theory of management practice exists for nonprofits.
These characteristics lead to a number of disputes between headquarters and affiliates, according to Grossman and Rangan. For example, who controls the donor list and money raised? Is it the affiliate that actually raises the funds, or the national organization that provides the overall brand and direction? Are affiliates delivering the level of service defined by the national organization? Does the affiliate adequately represent the values and goals of the national brand? Do affiliates receive an appropriate level of national services from the fees they pay?
Traditionally these strains have fueled centralization versus the decentralization debate in the nonprofit community, Grossman told his audience. And that's the wrong approach to take—the value proposition created by a national organization with local units is lost. Instead, the debate should be reframed with autonomy and affiliation as the key dimensions.
In their research, Grossman and Rangan looked at the system behaviors of five nonprofits: Outward Bound (where Grossman once served as CEO), Planned Parenthood, Habitat for Humanity, SOS Kinderdorf, and The Nature Conservancy. Each was mapped on two dimensions—one that exerts forces toward unit autonomy and the other influencing the degree of organizational affiliation. (The Nature Conservancy and Habitat for Humanity were the highest affiliation organizations; Planned Parenthood and Outward Bound were high autonomy organizations; SOS Kinderdorf ranked lowest on the autonomy scale, and about in the middle for affiliation.)
The point isn't whether an autonomous-biased organization is better than a more affiliate-driven one, but rather to identify "levers of influence" system managers can employ to get their organization the desired balance between the two forces.
"Headquarters should undertake actions to enhance system value and then sustain it, and affiliates should maximize local resources to enhance their credibility and increase their voice in the running of the system," Grossman and Rangan wrote in a working paper on the subject. "The key for management is to develop a governance system that accommodates this tension in a constructive rather than a destructive fashion."
To get constructive co-existence of unit autonomy and organizational affiliation, organizations must have in place a clear process for making decisions as to who will perform the functions necessary for the system, and a process that commits operating units to adhere to systemic decisions.
At the seminar, Rangan cautioned that there is no single cookie-cutter approach to solve the problems of all nonprofits. For example, if a meal kitchen has 100 strong, local operations there is little need for national people to come in, other than to provide a few services.
Among their conclusions, Grossman said, are:
A multi-site nonprofit's value proposition must be real, and consistently communicated externally and internally.
Strong unit autonomy and strong systems can be compatible and mutually supportive.
Lack of understanding of multi-site dynamics leads to a waste of money and resources.
More research is underway on several issues. To what degree are corporate structure and strong unit autonomy incompatible? How much strong national leadership is required to complement local program customization? And how important is national leadership in determining the success of a multi-site nonprofit?
Saturday, June 10, 2006
Friday, March 24, 2006
The Secret of How Microsoft Stays on Top
Perhaps no technology company outside of IBM has been able to keep on top of the industry as much as Microsoft. What's more, Bill Gates & Co. have achieved this success during times of incredible technological transformation, usually just the period when titans are vulnerable to being knocked off by disruptive technologies.
To understand the way Microsoft manages IP, you have to go back to the roots of the company. Back in the late 1970s, its first products were aimed at helping other programmers develop applications for the computing hardware of the day. It focused on developing programming platforms, in contrast to most other firms who focused on stand-alone applications. It was an approach that permeated both their tools business—the software they provided to other programmers for developing applications; and the operating system business—the software upon which these applications would run.
It was during these early days that Microsoft began to invest in creating libraries of programming "components": building blocks of intellectual property that could be used to develop different software applications. The original impetus was the need to provide programmers with pre-defined interfaces through which they could access commonly used functions and features. Why reinvent the wheel if someone else had already worked out what it should look like? In essence, Microsoft began codifying knowledge and embedding it in a form that could be leveraged, both by itself and others. But it got to decide which components to "expose," and which to keep hidden, providing a mechanism through which its core intellectual property could be protected.
As the company expanded, Microsoft formalized this component framework and developed a "programming model" to go along with it—in essence, defining the way that applications should interact with its preexisting software components. It extended the model to its application business, sharing increasing amounts of code between products like Word and Excel. Over time, as more and more partners signed up to use the model, developing applications for Microsoft's operating systems and using Microsoft's tools in the process, the power of the platform became evident. It was a win-win relationship—the community of development partners received benefits in terms of enhanced productivity, while Microsoft's position was strengthened through the deployment of products that were complementary to its own. This made it tough for competitors. They were not just going head-to-head with Microsoft's products—they were also competing against the repository of knowledge accumulating in Microsoft's component libraries.
By now, you will see that Microsoft was building a rather unique resource. Its approach to software "componentization" allowed the firm to leverage intellectual property across multiple product lines. And it also made it attractive for third-party firms to leverage Microsoft's platform, as opposed to others. But how did this allow the firm to respond effectively to technological change? First, it had an established base of knowledge that could be brought to bear on newly emerging opportunities. Second, it had a well-defined process through which new intellectual property could be codified and integrated into this knowledge base in a way that ensured compatibility with its existing components. And third, it established processes to evolve this knowledge base to ensure it reflected changes in the broader technological context. For example, the programming model was updated in the early 1990s to reflect the increasing use of networks. Then later in the 1990s, Microsoft once again began "re-architecting" its component base to facilitate the delivery of "Web services," applications that can be activated remotely over the Internet.
Only once in fifteen years did Microsoft products fail to win more than 50 percent of these reviews.
Putting this all together, we see that much of Microsoft's long-term success can be attributed to investments that have created "dynamic capabilities" for responding to technological change. These investments include: the process of software componentization through which it captures and embeds intellectual property in an accessible form; the component libraries that result from this process, which form a vast repository of knowledge that can be leveraged across its product lines; a programming model that allows developers, both inside and outside the firm, to access these components through well-defined interfaces; and the process through which both its software components and programming model are updated to reflect developments in the broader technological context.
Microsoft has been criticized as a company that relies more on predatory tactics than great products and innovation to succeed. What can you say about Microsoft's product development performance over the years?
We analyzed the development performance of Microsoft products for the past fifteen years. Our aim was to come up with an objective measure of performance—one that was unrelated to arguments about market power, monopoly position, or predatory tactics. This meant we excluded any consideration of measures like market share or profitability, and focused instead on the ratings given to Microsoft products by independent reviewers. We found that Microsoft products were consistently rated highly when compared to competitive offerings, a result that held true across different product categories and over time. On average, Microsoft products "won" more than two-thirds of the competitive reviews we examined. Indeed, only once in fifteen years did Microsoft products fail to win more than 50% of these reviews. Given the number and diversity of competitors they faced in each different product category, this consistently high performance is striking.
When developers find attractive alternatives to Microsoft technologies as they did when the Internet first emerged—it's not long before the tools division starts to hear about it.
We also evaluated Microsoft's response to a "technological transition"—a major change in the industry that required the firm to rethink its strategy. We chose to examine the rise of the World Wide Web, given that this transition brought about the rise of a new product category—the Web browser. Microsoft therefore needed to develop a product based on technologies with which it had little previous experience. Our analysis focused on Microsoft's first two internal browser development projects, comparing their performance to a sample of Internet software projects completed at the same time. We discovered that Microsoft's projects exhibited significantly higher productivity than the sample average. Furthermore, we found that the resulting products were rated as equal to or higher in quality than competitive offerings. These results often surprise people, given the perceived wisdom that incumbents have difficulty responding to major technological changes.
Microsoft was originally late in its embrace of the Internet. Yet Bill Gates was able to quickly change strategy to allow the company to become a top competitor in selling Internet-related technologies and services. How did Microsoft accomplish this?
In any industry subject to rapid technological change, a firm faces two big challenges. The first is in recognizing the threats (and opportunities) presented by newly emerging technologies. The second is in mounting an effective response to these threats. Microsoft appears to have solved these problems, giving it the ability to quickly adapt to changing circumstances. The way they have tackled each however, differs in nature.
In terms of recognizing potential threats, Microsoft has built-in "sensing" mechanisms to keep abreast of what is happening in the broader technological context. Much of this ability comes from their tools division, which tracks the needs of the many developers worldwide who write for Microsoft platforms. When these developers find attractive alternatives to Microsoft technologies—as they did when the Internet first emerged—it's not long before the tools division starts to hear about it. You also have to realize that Microsoft has several thousand developers inside the company who are constantly examining the potential of new technologies—"lead users" if you like. When all these sources start telling you the same thing, it's hard not to pay attention. Even if it takes a while to work out exactly what should be done.
In terms of responding to potential threats, Microsoft consistently plays to its strengths—its overall platform strategy, its existing knowledge base, and its process of componentization. For example, when developing the new Internet Explorer browser, the development team opted to leverage its existing programming model, despite the fact that this would initially slow the project down. From this point on, competitors in the browser space faced a formidable challenge—they were competing not only against the Explorer team, but also against the continual improvements made to Microsoft's underlying platform over its many years of existence.
What should company leaders everywhere take away from your research in terms of how to compete in the middle of a technological revolution?
Our research highlights two major themes. The first is the importance of taking a proactive approach to managing the development of a firm's intellectual property. We're not talking about patenting strategies here, but rather the set of processes that contribute to building and evolving a firm's knowledge base. These processes fall into four categories: creation/codification; integration/assimilation; application/exploitation; and evolution/adaptation. Inside Microsoft and other successful firms we've studied, managers give careful consideration to how each of these activities is conducted. In doing so, they pay explicit attention to the way these activities interact with processes that leverage the resulting intellectual property assets (e.g., product development).
The second theme that emerges from our work is the importance of architecture. This theme emerges at multiple levels—in the design of Microsoft's products, its platforms, and its intellectual property. At the product and platform level, the key idea is that in today's networked economy, no firm can remain an island. Technological innovations are increasingly brought to the market by networks of firms, each focused on only specific pieces of the overall puzzle. Competition takes place both between competing platforms and between products that build on top of these platforms. Managers must therefore make explicit choices about the technology architectures they adopt, deciding what to "design/make" themselves, and what to rely upon others to provide.
With regard to developing intellectual property, our work demonstrates the need for an architectural framework that defines how the various building blocks of IP should fit together. Without such a framework, these efforts are likely to be fragmented and difficult to integrate. At Microsoft, this role is performed by its programming model, which describes the interfaces through which its software components can be accessed. Critically, this model is designed to be flexible enough to facilitate future evolutions in content, as required to reflect changes in the broader technological context.
Gates has said, and history suggests, that Microsoft one day will fail. What will be the company's downfall?
If we knew the answer to this question, we'd be rich!
Slightly more seriously, the main threat probably comes from competing platforms—alternative systems that enable large numbers of developers to form competing innovation ecosystems. These other platforms, promoted by competitors such as Sun and IBM, are currently strong alternatives to Windows and the Microsoft Developer Network. One of the most interesting is the Linux/open source platform. This platform has recently become associated with IBM, which has invested resources in its development and extension, and used it to promote complementary hardware, software, and services. However, this is less a story of sudden dramatic failure and more a story of ongoing competition at the platform level. The presence of competing platforms like Linux requires that Microsoft continue to invest in its IP base and integrate new innovations into its own platform. If it fails to do this, it will be certain to lose out to alternatives.
To understand the way Microsoft manages IP, you have to go back to the roots of the company. Back in the late 1970s, its first products were aimed at helping other programmers develop applications for the computing hardware of the day. It focused on developing programming platforms, in contrast to most other firms who focused on stand-alone applications. It was an approach that permeated both their tools business—the software they provided to other programmers for developing applications; and the operating system business—the software upon which these applications would run.
It was during these early days that Microsoft began to invest in creating libraries of programming "components": building blocks of intellectual property that could be used to develop different software applications. The original impetus was the need to provide programmers with pre-defined interfaces through which they could access commonly used functions and features. Why reinvent the wheel if someone else had already worked out what it should look like? In essence, Microsoft began codifying knowledge and embedding it in a form that could be leveraged, both by itself and others. But it got to decide which components to "expose," and which to keep hidden, providing a mechanism through which its core intellectual property could be protected.
As the company expanded, Microsoft formalized this component framework and developed a "programming model" to go along with it—in essence, defining the way that applications should interact with its preexisting software components. It extended the model to its application business, sharing increasing amounts of code between products like Word and Excel. Over time, as more and more partners signed up to use the model, developing applications for Microsoft's operating systems and using Microsoft's tools in the process, the power of the platform became evident. It was a win-win relationship—the community of development partners received benefits in terms of enhanced productivity, while Microsoft's position was strengthened through the deployment of products that were complementary to its own. This made it tough for competitors. They were not just going head-to-head with Microsoft's products—they were also competing against the repository of knowledge accumulating in Microsoft's component libraries.
By now, you will see that Microsoft was building a rather unique resource. Its approach to software "componentization" allowed the firm to leverage intellectual property across multiple product lines. And it also made it attractive for third-party firms to leverage Microsoft's platform, as opposed to others. But how did this allow the firm to respond effectively to technological change? First, it had an established base of knowledge that could be brought to bear on newly emerging opportunities. Second, it had a well-defined process through which new intellectual property could be codified and integrated into this knowledge base in a way that ensured compatibility with its existing components. And third, it established processes to evolve this knowledge base to ensure it reflected changes in the broader technological context. For example, the programming model was updated in the early 1990s to reflect the increasing use of networks. Then later in the 1990s, Microsoft once again began "re-architecting" its component base to facilitate the delivery of "Web services," applications that can be activated remotely over the Internet.
Only once in fifteen years did Microsoft products fail to win more than 50 percent of these reviews.
Putting this all together, we see that much of Microsoft's long-term success can be attributed to investments that have created "dynamic capabilities" for responding to technological change. These investments include: the process of software componentization through which it captures and embeds intellectual property in an accessible form; the component libraries that result from this process, which form a vast repository of knowledge that can be leveraged across its product lines; a programming model that allows developers, both inside and outside the firm, to access these components through well-defined interfaces; and the process through which both its software components and programming model are updated to reflect developments in the broader technological context.
Microsoft has been criticized as a company that relies more on predatory tactics than great products and innovation to succeed. What can you say about Microsoft's product development performance over the years?
We analyzed the development performance of Microsoft products for the past fifteen years. Our aim was to come up with an objective measure of performance—one that was unrelated to arguments about market power, monopoly position, or predatory tactics. This meant we excluded any consideration of measures like market share or profitability, and focused instead on the ratings given to Microsoft products by independent reviewers. We found that Microsoft products were consistently rated highly when compared to competitive offerings, a result that held true across different product categories and over time. On average, Microsoft products "won" more than two-thirds of the competitive reviews we examined. Indeed, only once in fifteen years did Microsoft products fail to win more than 50% of these reviews. Given the number and diversity of competitors they faced in each different product category, this consistently high performance is striking.
When developers find attractive alternatives to Microsoft technologies as they did when the Internet first emerged—it's not long before the tools division starts to hear about it.
We also evaluated Microsoft's response to a "technological transition"—a major change in the industry that required the firm to rethink its strategy. We chose to examine the rise of the World Wide Web, given that this transition brought about the rise of a new product category—the Web browser. Microsoft therefore needed to develop a product based on technologies with which it had little previous experience. Our analysis focused on Microsoft's first two internal browser development projects, comparing their performance to a sample of Internet software projects completed at the same time. We discovered that Microsoft's projects exhibited significantly higher productivity than the sample average. Furthermore, we found that the resulting products were rated as equal to or higher in quality than competitive offerings. These results often surprise people, given the perceived wisdom that incumbents have difficulty responding to major technological changes.
Microsoft was originally late in its embrace of the Internet. Yet Bill Gates was able to quickly change strategy to allow the company to become a top competitor in selling Internet-related technologies and services. How did Microsoft accomplish this?
In any industry subject to rapid technological change, a firm faces two big challenges. The first is in recognizing the threats (and opportunities) presented by newly emerging technologies. The second is in mounting an effective response to these threats. Microsoft appears to have solved these problems, giving it the ability to quickly adapt to changing circumstances. The way they have tackled each however, differs in nature.
In terms of recognizing potential threats, Microsoft has built-in "sensing" mechanisms to keep abreast of what is happening in the broader technological context. Much of this ability comes from their tools division, which tracks the needs of the many developers worldwide who write for Microsoft platforms. When these developers find attractive alternatives to Microsoft technologies—as they did when the Internet first emerged—it's not long before the tools division starts to hear about it. You also have to realize that Microsoft has several thousand developers inside the company who are constantly examining the potential of new technologies—"lead users" if you like. When all these sources start telling you the same thing, it's hard not to pay attention. Even if it takes a while to work out exactly what should be done.
In terms of responding to potential threats, Microsoft consistently plays to its strengths—its overall platform strategy, its existing knowledge base, and its process of componentization. For example, when developing the new Internet Explorer browser, the development team opted to leverage its existing programming model, despite the fact that this would initially slow the project down. From this point on, competitors in the browser space faced a formidable challenge—they were competing not only against the Explorer team, but also against the continual improvements made to Microsoft's underlying platform over its many years of existence.
What should company leaders everywhere take away from your research in terms of how to compete in the middle of a technological revolution?
Our research highlights two major themes. The first is the importance of taking a proactive approach to managing the development of a firm's intellectual property. We're not talking about patenting strategies here, but rather the set of processes that contribute to building and evolving a firm's knowledge base. These processes fall into four categories: creation/codification; integration/assimilation; application/exploitation; and evolution/adaptation. Inside Microsoft and other successful firms we've studied, managers give careful consideration to how each of these activities is conducted. In doing so, they pay explicit attention to the way these activities interact with processes that leverage the resulting intellectual property assets (e.g., product development).
The second theme that emerges from our work is the importance of architecture. This theme emerges at multiple levels—in the design of Microsoft's products, its platforms, and its intellectual property. At the product and platform level, the key idea is that in today's networked economy, no firm can remain an island. Technological innovations are increasingly brought to the market by networks of firms, each focused on only specific pieces of the overall puzzle. Competition takes place both between competing platforms and between products that build on top of these platforms. Managers must therefore make explicit choices about the technology architectures they adopt, deciding what to "design/make" themselves, and what to rely upon others to provide.
With regard to developing intellectual property, our work demonstrates the need for an architectural framework that defines how the various building blocks of IP should fit together. Without such a framework, these efforts are likely to be fragmented and difficult to integrate. At Microsoft, this role is performed by its programming model, which describes the interfaces through which its software components can be accessed. Critically, this model is designed to be flexible enough to facilitate future evolutions in content, as required to reflect changes in the broader technological context.
Gates has said, and history suggests, that Microsoft one day will fail. What will be the company's downfall?
If we knew the answer to this question, we'd be rich!
Slightly more seriously, the main threat probably comes from competing platforms—alternative systems that enable large numbers of developers to form competing innovation ecosystems. These other platforms, promoted by competitors such as Sun and IBM, are currently strong alternatives to Windows and the Microsoft Developer Network. One of the most interesting is the Linux/open source platform. This platform has recently become associated with IBM, which has invested resources in its development and extension, and used it to promote complementary hardware, software, and services. However, this is less a story of sudden dramatic failure and more a story of ongoing competition at the platform level. The presence of competing platforms like Linux requires that Microsoft continue to invest in its IP base and integrate new innovations into its own platform. If it fails to do this, it will be certain to lose out to alternatives.
Thursday, January 12, 2006
Why Evolutionary Software Development Works
Given the importance of software, the lack of research on the best ways to manage its development is surprising. Many different models have been proposed since the much cited waterfall model emerged more than 30 years ago. Unfortunately, few studies have confirmed empirically the benefits of the newer models. The most widely quoted references report lessons from only a few successful projects.
Now a two-year empirical study, which the author and colleagues Marco Iansiti and Roberto Verganti completed last year, reveals thought-provoking information from the Internet-software industry—an industry in which the need for a responsive development process has never been greater. The researchers analyzed data from 29 completed projects and identified the characteristics most associated with the best outcomes. (See "Four Software-Development Practices That Spell Success.") Successful development was evolutionary in nature. Companies first would release a low-functionality version of a product to selected customers at a very early stage of development. Thereafter work would proceed in an iterative fashion, with the design allowed to evolve in response to the customers' feedback. The approach contrasts with traditional models of software development and their more sequential processes. Although the evolutionary model has been around for several years, this is the first time the connection has been demonstrated between the practices that support the model and the quality of the resulting product.
Research on the internet-software industry
A study of projects in the Internet-software industry asked the question "Does a more evolutionary development process result in better performance?" The study was undertaken in stages. First, the researchers conducted face-to-face interviews with project managers in the industry to understand the types of practices being used. Next, they developed metrics to characterize the type of process adopted in each project. Finally, the metrics were incorporated into a survey that went to a sample of Internet-software companies identified through a review of industry journals. The final sample contained data on 29 projects from 17 companies.
The most remarkable finding was that getting a low-functionality version of the product into customer's hands at the earliest opportunity improves quality dramatically.
To assess the performance of projects in the industry, we examined two outcome measures—one related to the performance of the final product and the other to the productivity achieved in terms of resource consumption (resource productivity). To assess the former, the researchers asked a panel of 14 independent industry experts to rate the comparative quality of each product relative to other products that targeted similar customer needs at the time the act was launched. Product quality was defined as a combination of reliability, technical performance (such as speed) and breadth of functionality. Experts' ratings were gathered using a two-round Delphi (in which information from the first round is given to all experts to help them make their final assessment). To assess the resource productivity of each project, the researchers calculated a measure of the lines of new code developed per person-day and adjusted for differing levels of product complexity. Analysis of the data uncovered four practices critical to success
Now a two-year empirical study, which the author and colleagues Marco Iansiti and Roberto Verganti completed last year, reveals thought-provoking information from the Internet-software industry—an industry in which the need for a responsive development process has never been greater. The researchers analyzed data from 29 completed projects and identified the characteristics most associated with the best outcomes. (See "Four Software-Development Practices That Spell Success.") Successful development was evolutionary in nature. Companies first would release a low-functionality version of a product to selected customers at a very early stage of development. Thereafter work would proceed in an iterative fashion, with the design allowed to evolve in response to the customers' feedback. The approach contrasts with traditional models of software development and their more sequential processes. Although the evolutionary model has been around for several years, this is the first time the connection has been demonstrated between the practices that support the model and the quality of the resulting product.
Research on the internet-software industry
A study of projects in the Internet-software industry asked the question "Does a more evolutionary development process result in better performance?" The study was undertaken in stages. First, the researchers conducted face-to-face interviews with project managers in the industry to understand the types of practices being used. Next, they developed metrics to characterize the type of process adopted in each project. Finally, the metrics were incorporated into a survey that went to a sample of Internet-software companies identified through a review of industry journals. The final sample contained data on 29 projects from 17 companies.
The most remarkable finding was that getting a low-functionality version of the product into customer's hands at the earliest opportunity improves quality dramatically.
To assess the performance of projects in the industry, we examined two outcome measures—one related to the performance of the final product and the other to the productivity achieved in terms of resource consumption (resource productivity). To assess the former, the researchers asked a panel of 14 independent industry experts to rate the comparative quality of each product relative to other products that targeted similar customer needs at the time the act was launched. Product quality was defined as a combination of reliability, technical performance (such as speed) and breadth of functionality. Experts' ratings were gathered using a two-round Delphi (in which information from the first round is given to all experts to help them make their final assessment). To assess the resource productivity of each project, the researchers calculated a measure of the lines of new code developed per person-day and adjusted for differing levels of product complexity. Analysis of the data uncovered four practices critical to success
Friday, December 16, 2005
ONE -Your Source for Open Source Solutions
Your Source for Open Source Solutions
Welcome to linuxclub.org - an opensource developmet community site dedicated to providing a forum for open source software used in e-commerce,CRM,CMSin LAMP environments. While we have predominantly included software to date that we have created, we are looking forward to adding more software / developers from all of you as it is submitted to us for inclusion. If you are working on any type of software developemt for ecom, b2b,b2c development, this is your right place,
This Service is Managed by Biju Gopinath and Praveen Kumar
Welcome to linuxclub.org - an opensource developmet community site dedicated to providing a forum for open source software used in e-commerce,CRM,CMSin LAMP environments. While we have predominantly included software to date that we have created, we are looking forward to adding more software / developers from all of you as it is submitted to us for inclusion. If you are working on any type of software developemt for ecom, b2b,b2c development, this is your right place,
This Service is Managed by Biju Gopinath and Praveen Kumar
Wednesday, September 07, 2005
Monday, July 04, 2005
The Organizational Model for Open Source
Programmers contribute to free software and open source projects for many reasons—some for the fun of it, some to improve their skills, others for a paycheck. Many people have wondered why these people give their work away. The truth is that many projects have incorporated in order to protect themselves from individual liability. Since the Free Software Foundation was founded in 1985, a number of new nonprofit foundations have formed, often around specific technologies, to serve the interests of programmers.
HBS professor Siobhán O'Mahony discusses her research on foundations formed around three projects: Debian, a complete non-commercial distribution of Linux; the GNU Object Model Environment (GNOME), which is a graphical user interface for Linux-based operating systems; and Apache, a public domain open source Web server.
Stark: Could you explain why the emergence of nonprofit foundations in the hacker culture appears to be a contradiction in terms?
O'Mahony: The hacker culture prizes autonomy and self-determination. Eric Raymond defines hackers as those who love programming for the sake of doing it, for the sake of obsessively solving a problem. Thus, hackers who contribute to the open source community are often intrinsically motivated.
It is important to realize, however, that hackers are a diverse group. I have interviewed hobbyists, students, academics, software professionals, and government workers who identify themselves as hackers. It is not safe to generalize about all of the values that hackers share, but they tend to agree on at least one thing: Respect must be earned and cannot be derived from position.
There are three big challenges that I identified.
—Siobhán O'Mahony
Much of what is funny about Dilbert cartoons is the disgust that technical workers have for managers who do not have intimate knowledge of the content of their work. This emphasis on demonstration of capabilities is even more critical in the open source community. One earns the respect of peers by demonstrating skills and making valuable contributions of code to a project.
Associated with these values is an embrace of informality and distaste for "administrivia"—for this too can take away from the pure joy of programming. So I suppose what can be considered to be contradictory is that many community-managed open source projects have incorporated and created nonprofit foundations with formal boards and designated roles and responsibilities.
Now there is a wide range of foundations that are emerging. At one end of the continuum are nonprofit foundations that act as little more than legal shells to hold a project's assets and allow it to collect donations. At the other end are nonprofit foundations that have elaborate committee structures, manage releases, and even hire employees.
Q: What were the greatest challenges faced by the three nonprofit foundations you studied?
A: There are three big challenges. One, which is common to all start-ups, is resources. Many foundations have been successful in garnering donations of hardware and equipment when needed, but do not have vast reserves to support legal expenses, travel, or conferences. However, since these foundations are primarily electronically constituted and manifested in the physical world only by a mailing address, their capital needs are minimal.
People are intimately aware of the fact that too much structure will disenfranchise the very people who make the most successful open source projects possible.
—Siobhán O'Mahony
Second is the tension between embracing the informal work norms and ethos of the hacker style of programming with the need to be more predictable and coordinated in managing software releases. Projects that are more closely coupled with commercial firms have experienced direct pressure from firms to communicate better and do more formal planning of what will be included in a release and when. Several projects that have created foundations are experimenting with this tension now—"How much structure can we impose on volunteers?" People are intimately aware of the fact that too much structure will disenfranchise the very people who make the most successful open source projects possible.
Lastly, open source software foundations have been thrilled to receive support from Fortune 500 firms in the software industry. This support is attenuated by the fact that no community-managed software project wants to be "taken over" or co-opted by one firm. The biggest tension here is how to sustain pluralism. If open source contributors only recognize each other based on individual merit, to the exclusion of monitoring where those people of merit are employed, then the pluralism necessary to maintain a community form could be threatened.
One of the most important roles foundations can play is to ensure that pluralism in the governance of these projects is sustained.
Q: Will the nonprofit foundation be an organizational model that will define future software development?
A: I cannot see into the future, but I think the first experiment is in play.
I see the Open Source Application Foundation (OSAF) as an example of the next wave. Mitch Kapor, a successful venture capitalist who founded Lotus Software, invested $5 million of his own money into building a personal-information manager, Chandler. In his own words, "The whole idea of founding a company to develop new productivity software was a complete non-starter. No sane VC would or should fund a venture to compete with the Microsoft monopoly."
Even though his project is in the early stages, over 33,000 people downloaded the very first release in its first two weeks and OSAF has received a grant from the Mellon Foundation to further their work for educational environments.
I doubt that nonprofit foundations will define the future of software development, but all evidence would indicate that they will continue to play an important role. Keep in mind that the Internet Engineering Task Force (IETF), which defines the protocols of the Internet, is a nonprofit professional society. What is different from professional nonprofits or nonprofits focused on charitable causes is that open source foundations produce software that is resold by third parties on commercial markets.
The more fundamental question that firms and policy makers need to be thinking about is just what type of good is software?
—Siobhán O'Mahony
Similar issues surface in the biotechnology world, where university and market conceptions of the life sciences can become intertwined. The more fundamental question that firms and policy makers need to be thinking about is just what type of good is software? The answer to this question may be shifting just as economic and social life becomes dependent upon a common computing infrastructure. When a successful entrepreneur with every possible advantage chooses to found a nonprofit instead of a firm, because this is more likely to lead to success, what can be inferred about the state of the software market?
Organizational theorists argue that nonprofit foundations are created to protect goods too valuable and socially desired to be left to the market, goods like education. If we are granting special tax privileges to organizations to produce software, we as a society are saying something about the nature of that good and the nature of the markets that create it.
Q: What were the biggest surprises that you encountered in this project?
A: The biggest surprise to me was the level of involvement that firms engage in with community forms on software development and standard setting in general. That is, forms that are not government sponsored nor formally constituted by partnership, alliance, or consortia agreements.
It is interesting to watch how individuals with limited power and resources negotiate and collaborate with the largest of corporations. Community may not be exactly the right word to describe these forms, as the term denotes more consensus than reality might dictate. I do think that we need to expand our definition and construction of the types of corporate alliances that are possible and productive to include collaboration with collectives that identify with political or occupational norms and values.
See Related Articles
Nonprofit Foundations and their Role in Community-Firm Software Collaboration
by Siobhán O'Mahony
Contributors to community-managed projects have created nonprofit foundations despite the fact that such formal structures are an anathema to the hacker ethos of technical autonomy and meritocratic decision making. The technical organizations that emerged since the federal government privatized the Internet may have partially influenced the design of these foundations, but some features are the unique product of managing community software in a commodity world. One thing that stands out from either the early Internet working groups or the typical corporate standard-setting bodies of the past is the role of nonprofit software foundations in enabling collaboration between a community of individuals and corporate actors.
...
Facilitating Community-Corporate Collaboration: A New Actor in the Supply Chain
The foundations that emerged in this study are incorporated, organized by and for individual members, and produce benefits for the public, but do not redistribute profits to their members. What is unique about these foundations, in relation to technical communities of the past, is that these foundations also own assets that are sold by third parties in commercial markets and may in fact compete with other commercial offerings. Firms that use free and open source software have, in effect, allowed community-managed projects that grew out of a politically motivated social movement to become a part of their supply chain. This interdependence has fostered a new set of working relations among community projects, their foundations, and firms. Figure 1 [not shown here. -Ed.] outlines the role of nonprofit foundations in this new collaboration model. Foundations hold the assets and property rights of technical communities that produce software, but do not pay their developers or redistribute profits to their members. Community members retain the ability to set their own technical direction and manage the culture, norms, and governance of their own projects. In return for assigning their intellectual property to a foundation, they are granted protection from individual liability and a means to represent the project.
Firms can sell and distribute the community's work at a profit by creating complementary software, hardware, and services that reflect their conception of market needs. They can modify the work of the community as long as they respect the terms of community licenses and contribute improvements back to the code base where required. In return, firms offer sponsorship and support to both individuals and foundations. Individual volunteers that are working on components of critical interest to firms may be hired to continue their efforts as sponsored contributors. Proprietary code, financial resources, hardware, and equipment that firms wish to donate to the project are entrusted to the foundation. In return, some foundations offer firms advisory or sponsor roles: mechanisms that can provide them with a voice on the project. On a day-to-day basis, commercial support of community-managed projects is enacted through the sponsored contributors that work on those projects. On a legal basis, the foundations play an important mediating role. In Figure 1, release coordination is depicted with a question mark sitting between the authority of projects and their foundation. The strength and role that foundations play when collaborating with firms may well depend on the degree to which the authority of the foundation touches the technical core of the project.
In this model, the ownership and maintenance of code is decoupled from its sale and distribution. Without some means to retain their rights it is unlikely that community-managed projects would have had the base of power necessary to engage with firms and create this model (O'Mahony, 2003). Firms, for example, could have legally used community-developed software without necessarily collaborating with them. Community-managed projects held two bases of power that helped firms consider them a credible partner for collaboration: the market share and user base that derived from a project's technical excellence, and the legal and normative controls that encouraged users to "give back" to the project. These two bases of power offset technical communities' lack of economic and political power and helped establish them as a viable commercial actor with which firms could partner.
Granted, this analysis provides a rather static view of the legal and organizational structures that undergird a larger and more complex network of social relationships that flow in and out of these different forms. For example, a volunteer contributor could become sponsored by a firm and then be elected to a board position of a nonprofit foundation. Individuals who were once volunteers and have since founded firms may be active in shaping the nonprofit foundations that represent their project. Informants often stressed that they wished to perceive each other as individual contributors without regard to organizational affiliation. And yet many informants who occupied two or more roles acknowledged that they often experienced role conflict when their activities touched multiple interests.
This touches on an implicit but unarticulated tenet of the hacker ethos: the desire to maintain pluralism. This belief takes two forms. First there is pluralism in voice and process. Raymond has argued that with "more eyes, more bugs are shallow" (1999). An unstated condition is that diverse eyes are necessary for this lay maxim to hold. The more programmers from diverse cultures and backgrounds run various applications in different computing environments, the more likely it is that each user will detect problems unique to them. This allows code to be tested and contributions designed at a level that would require more permutations than are possible at most software firms. Diversity matters as much as volume. The second form of pluralism is required to make multilateral contributions possible: pluralism in the computing infrastructure itself. Software that is created independent of any one vendor's terms; is portable to different types of operating systems; and is interoperable with other applications allows pluralistic contributions to continue. The principle of pluralism depends upon shared standards and protocols, but, I would argue, it also depends upon a form of organizing that prevents dominant interests from forming.
Herein lies a source of conflict. Individuals contributing to community projects want to recognize each other as individuals, retain their individual autonomy, and remain as free from their employment affiliations as possible. On the other hand, without recognition of organizational affiliation, preserving pluralism will be more difficult. Project responses to potential conflict of interest problems have varied, but one feature that works in their favor is public disclosure. The organizational affiliation of project leaders is typically publicly available. When the relationship of one's activities to one's organizational affiliation becomes suspect, other community members are likely to be vocal about their concerns. For contributors who adopt project-based e-mail addresses, affiliation is less public. Over time, this could lead to further blurring of these different roles. The structure foundations provide may become one means to help preserve pluralism.
The evolution of a symbiotic relationship between community-managed projects and firms required adaptation from both actors, and some of these changes are manifested in the roles that nonprofit foundations fulfill, but not all. An understanding of how community-managed projects and firms maintain this relationship at the level of code contribution requires much more explication than has been discussed here. This structural examination of the community-firm collaboration model distributes a very different set of power, ownership, and rights than has been fully appreciated. From an economic perspective, one might ask, have community-managed projects outsourced their distribution costs? Or, have firms outsourced their development costs? Arguments could be made to support both lines of thought. That is in itself perhaps a test of mutualism. A more sociological perspective might question whether community-managed projects that are both politically and pragmatically motivated have successfully resisted co-optation by powerful market dominants. Legally, nonprofit foundations play a critical role in preventing this from happening, but this role reinforces mutual relations that are normatively maintained. Equally significant implications are likely to stem from the intellectual and innovative contributions that can result from collaboration with a new type of actor in the software industry.
Excerpted with permission from the chapter "Nonprofit Foundations and their Role in Community-Firm Software Collaboration" in Making Sense of the Bazaar: Perspectives on Open Source and Free Software, Siobhán O'Mahony, ed. O'Reilly & Associates Publications, 2003 (forthcoming). Copyright (c) 2003 Siobhán O'Mahony. Permission is granted to copy, distribute, and/or modify this document under the terms of the GNU Free Documentation License, Version 1.2 or any later version published by the Free Software Foundation; with no Invariant Sections, no Front-Cover Texts, and no Back-Cover Texts. A copy of the license is included in the section entitled "GNU Free Documentation License."
HBS professor Siobhán O'Mahony discusses her research on foundations formed around three projects: Debian, a complete non-commercial distribution of Linux; the GNU Object Model Environment (GNOME), which is a graphical user interface for Linux-based operating systems; and Apache, a public domain open source Web server.
Stark: Could you explain why the emergence of nonprofit foundations in the hacker culture appears to be a contradiction in terms?
O'Mahony: The hacker culture prizes autonomy and self-determination. Eric Raymond defines hackers as those who love programming for the sake of doing it, for the sake of obsessively solving a problem. Thus, hackers who contribute to the open source community are often intrinsically motivated.
It is important to realize, however, that hackers are a diverse group. I have interviewed hobbyists, students, academics, software professionals, and government workers who identify themselves as hackers. It is not safe to generalize about all of the values that hackers share, but they tend to agree on at least one thing: Respect must be earned and cannot be derived from position.
There are three big challenges that I identified.
—Siobhán O'Mahony
Much of what is funny about Dilbert cartoons is the disgust that technical workers have for managers who do not have intimate knowledge of the content of their work. This emphasis on demonstration of capabilities is even more critical in the open source community. One earns the respect of peers by demonstrating skills and making valuable contributions of code to a project.
Associated with these values is an embrace of informality and distaste for "administrivia"—for this too can take away from the pure joy of programming. So I suppose what can be considered to be contradictory is that many community-managed open source projects have incorporated and created nonprofit foundations with formal boards and designated roles and responsibilities.
Now there is a wide range of foundations that are emerging. At one end of the continuum are nonprofit foundations that act as little more than legal shells to hold a project's assets and allow it to collect donations. At the other end are nonprofit foundations that have elaborate committee structures, manage releases, and even hire employees.
Q: What were the greatest challenges faced by the three nonprofit foundations you studied?
A: There are three big challenges. One, which is common to all start-ups, is resources. Many foundations have been successful in garnering donations of hardware and equipment when needed, but do not have vast reserves to support legal expenses, travel, or conferences. However, since these foundations are primarily electronically constituted and manifested in the physical world only by a mailing address, their capital needs are minimal.
People are intimately aware of the fact that too much structure will disenfranchise the very people who make the most successful open source projects possible.
—Siobhán O'Mahony
Second is the tension between embracing the informal work norms and ethos of the hacker style of programming with the need to be more predictable and coordinated in managing software releases. Projects that are more closely coupled with commercial firms have experienced direct pressure from firms to communicate better and do more formal planning of what will be included in a release and when. Several projects that have created foundations are experimenting with this tension now—"How much structure can we impose on volunteers?" People are intimately aware of the fact that too much structure will disenfranchise the very people who make the most successful open source projects possible.
Lastly, open source software foundations have been thrilled to receive support from Fortune 500 firms in the software industry. This support is attenuated by the fact that no community-managed software project wants to be "taken over" or co-opted by one firm. The biggest tension here is how to sustain pluralism. If open source contributors only recognize each other based on individual merit, to the exclusion of monitoring where those people of merit are employed, then the pluralism necessary to maintain a community form could be threatened.
One of the most important roles foundations can play is to ensure that pluralism in the governance of these projects is sustained.
Q: Will the nonprofit foundation be an organizational model that will define future software development?
A: I cannot see into the future, but I think the first experiment is in play.
I see the Open Source Application Foundation (OSAF) as an example of the next wave. Mitch Kapor, a successful venture capitalist who founded Lotus Software, invested $5 million of his own money into building a personal-information manager, Chandler. In his own words, "The whole idea of founding a company to develop new productivity software was a complete non-starter. No sane VC would or should fund a venture to compete with the Microsoft monopoly."
Even though his project is in the early stages, over 33,000 people downloaded the very first release in its first two weeks and OSAF has received a grant from the Mellon Foundation to further their work for educational environments.
I doubt that nonprofit foundations will define the future of software development, but all evidence would indicate that they will continue to play an important role. Keep in mind that the Internet Engineering Task Force (IETF), which defines the protocols of the Internet, is a nonprofit professional society. What is different from professional nonprofits or nonprofits focused on charitable causes is that open source foundations produce software that is resold by third parties on commercial markets.
The more fundamental question that firms and policy makers need to be thinking about is just what type of good is software?
—Siobhán O'Mahony
Similar issues surface in the biotechnology world, where university and market conceptions of the life sciences can become intertwined. The more fundamental question that firms and policy makers need to be thinking about is just what type of good is software? The answer to this question may be shifting just as economic and social life becomes dependent upon a common computing infrastructure. When a successful entrepreneur with every possible advantage chooses to found a nonprofit instead of a firm, because this is more likely to lead to success, what can be inferred about the state of the software market?
Organizational theorists argue that nonprofit foundations are created to protect goods too valuable and socially desired to be left to the market, goods like education. If we are granting special tax privileges to organizations to produce software, we as a society are saying something about the nature of that good and the nature of the markets that create it.
Q: What were the biggest surprises that you encountered in this project?
A: The biggest surprise to me was the level of involvement that firms engage in with community forms on software development and standard setting in general. That is, forms that are not government sponsored nor formally constituted by partnership, alliance, or consortia agreements.
It is interesting to watch how individuals with limited power and resources negotiate and collaborate with the largest of corporations. Community may not be exactly the right word to describe these forms, as the term denotes more consensus than reality might dictate. I do think that we need to expand our definition and construction of the types of corporate alliances that are possible and productive to include collaboration with collectives that identify with political or occupational norms and values.
See Related Articles
Nonprofit Foundations and their Role in Community-Firm Software Collaboration
by Siobhán O'Mahony
Contributors to community-managed projects have created nonprofit foundations despite the fact that such formal structures are an anathema to the hacker ethos of technical autonomy and meritocratic decision making. The technical organizations that emerged since the federal government privatized the Internet may have partially influenced the design of these foundations, but some features are the unique product of managing community software in a commodity world. One thing that stands out from either the early Internet working groups or the typical corporate standard-setting bodies of the past is the role of nonprofit software foundations in enabling collaboration between a community of individuals and corporate actors.
...
Facilitating Community-Corporate Collaboration: A New Actor in the Supply Chain
The foundations that emerged in this study are incorporated, organized by and for individual members, and produce benefits for the public, but do not redistribute profits to their members. What is unique about these foundations, in relation to technical communities of the past, is that these foundations also own assets that are sold by third parties in commercial markets and may in fact compete with other commercial offerings. Firms that use free and open source software have, in effect, allowed community-managed projects that grew out of a politically motivated social movement to become a part of their supply chain. This interdependence has fostered a new set of working relations among community projects, their foundations, and firms. Figure 1 [not shown here. -Ed.] outlines the role of nonprofit foundations in this new collaboration model. Foundations hold the assets and property rights of technical communities that produce software, but do not pay their developers or redistribute profits to their members. Community members retain the ability to set their own technical direction and manage the culture, norms, and governance of their own projects. In return for assigning their intellectual property to a foundation, they are granted protection from individual liability and a means to represent the project.
Firms can sell and distribute the community's work at a profit by creating complementary software, hardware, and services that reflect their conception of market needs. They can modify the work of the community as long as they respect the terms of community licenses and contribute improvements back to the code base where required. In return, firms offer sponsorship and support to both individuals and foundations. Individual volunteers that are working on components of critical interest to firms may be hired to continue their efforts as sponsored contributors. Proprietary code, financial resources, hardware, and equipment that firms wish to donate to the project are entrusted to the foundation. In return, some foundations offer firms advisory or sponsor roles: mechanisms that can provide them with a voice on the project. On a day-to-day basis, commercial support of community-managed projects is enacted through the sponsored contributors that work on those projects. On a legal basis, the foundations play an important mediating role. In Figure 1, release coordination is depicted with a question mark sitting between the authority of projects and their foundation. The strength and role that foundations play when collaborating with firms may well depend on the degree to which the authority of the foundation touches the technical core of the project.
In this model, the ownership and maintenance of code is decoupled from its sale and distribution. Without some means to retain their rights it is unlikely that community-managed projects would have had the base of power necessary to engage with firms and create this model (O'Mahony, 2003). Firms, for example, could have legally used community-developed software without necessarily collaborating with them. Community-managed projects held two bases of power that helped firms consider them a credible partner for collaboration: the market share and user base that derived from a project's technical excellence, and the legal and normative controls that encouraged users to "give back" to the project. These two bases of power offset technical communities' lack of economic and political power and helped establish them as a viable commercial actor with which firms could partner.
Granted, this analysis provides a rather static view of the legal and organizational structures that undergird a larger and more complex network of social relationships that flow in and out of these different forms. For example, a volunteer contributor could become sponsored by a firm and then be elected to a board position of a nonprofit foundation. Individuals who were once volunteers and have since founded firms may be active in shaping the nonprofit foundations that represent their project. Informants often stressed that they wished to perceive each other as individual contributors without regard to organizational affiliation. And yet many informants who occupied two or more roles acknowledged that they often experienced role conflict when their activities touched multiple interests.
This touches on an implicit but unarticulated tenet of the hacker ethos: the desire to maintain pluralism. This belief takes two forms. First there is pluralism in voice and process. Raymond has argued that with "more eyes, more bugs are shallow" (1999). An unstated condition is that diverse eyes are necessary for this lay maxim to hold. The more programmers from diverse cultures and backgrounds run various applications in different computing environments, the more likely it is that each user will detect problems unique to them. This allows code to be tested and contributions designed at a level that would require more permutations than are possible at most software firms. Diversity matters as much as volume. The second form of pluralism is required to make multilateral contributions possible: pluralism in the computing infrastructure itself. Software that is created independent of any one vendor's terms; is portable to different types of operating systems; and is interoperable with other applications allows pluralistic contributions to continue. The principle of pluralism depends upon shared standards and protocols, but, I would argue, it also depends upon a form of organizing that prevents dominant interests from forming.
Herein lies a source of conflict. Individuals contributing to community projects want to recognize each other as individuals, retain their individual autonomy, and remain as free from their employment affiliations as possible. On the other hand, without recognition of organizational affiliation, preserving pluralism will be more difficult. Project responses to potential conflict of interest problems have varied, but one feature that works in their favor is public disclosure. The organizational affiliation of project leaders is typically publicly available. When the relationship of one's activities to one's organizational affiliation becomes suspect, other community members are likely to be vocal about their concerns. For contributors who adopt project-based e-mail addresses, affiliation is less public. Over time, this could lead to further blurring of these different roles. The structure foundations provide may become one means to help preserve pluralism.
The evolution of a symbiotic relationship between community-managed projects and firms required adaptation from both actors, and some of these changes are manifested in the roles that nonprofit foundations fulfill, but not all. An understanding of how community-managed projects and firms maintain this relationship at the level of code contribution requires much more explication than has been discussed here. This structural examination of the community-firm collaboration model distributes a very different set of power, ownership, and rights than has been fully appreciated. From an economic perspective, one might ask, have community-managed projects outsourced their distribution costs? Or, have firms outsourced their development costs? Arguments could be made to support both lines of thought. That is in itself perhaps a test of mutualism. A more sociological perspective might question whether community-managed projects that are both politically and pragmatically motivated have successfully resisted co-optation by powerful market dominants. Legally, nonprofit foundations play a critical role in preventing this from happening, but this role reinforces mutual relations that are normatively maintained. Equally significant implications are likely to stem from the intellectual and innovative contributions that can result from collaboration with a new type of actor in the software industry.
Excerpted with permission from the chapter "Nonprofit Foundations and their Role in Community-Firm Software Collaboration" in Making Sense of the Bazaar: Perspectives on Open Source and Free Software, Siobhán O'Mahony, ed. O'Reilly & Associates Publications, 2003 (forthcoming). Copyright (c) 2003 Siobhán O'Mahony. Permission is granted to copy, distribute, and/or modify this document under the terms of the GNU Free Documentation License, Version 1.2 or any later version published by the Free Software Foundation; with no Invariant Sections, no Front-Cover Texts, and no Back-Cover Texts. A copy of the license is included in the section entitled "GNU Free Documentation License."
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