This document discusses economics concepts related to free/libre open source software (FLOSS). It begins by noting that FLOSS seems nonsensical from an economist's perspective as people invest time without direct advantage and experts work for free. It then explores the economic dynamics at play, including formal institutions like licenses, intrinsic and extrinsic motivations for contributors, and different license types like GPL, BSD, and MPL. The document also examines several FLOSS business models and concludes by discussing economies of scale, the long tail, local economies, total cost of ownership analyses, and innovation as a strategic variable.
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EOLE / OWF 12 - Free “libre” open source software licenses – a picklock to open the market-massimiliano gambardella (eole2012)
1. Background Economics Licences’ Strategies Business Models To be continued...
FLOSS
A Pick-lock to Open the Market
Massimiliano Gambardella
massimiliano.gambardella@gmail.com
EconomiX, University Paris Ouest
Paris October, 12 2012
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
2. Background Economics Licences’ Strategies Business Models To be continued...
Introduction
The Non-Senses
For an economist it seems a non-sense that:
people decides to invest effort and time without an advantage
a producer assembles and manages experts to produce a
quasi-public good (non-rival & non-excludable)
experts decide to work for free
...this is what happens in the FLOSS
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
3. Background Economics Licences’ Strategies Business Models To be continued...
Economic dynamics
Economics
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
4. Background Economics Licences’ Strategies Business Models To be continued...
Economic dynamics
Formal Institution
All organization structures are based on Formal Institutions:
understandable
accepted
shared
FLOSS licenses represent our Formal Institution
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
5. Background Economics Licences’ Strategies Business Models To be continued...
Economic dynamics
Motivations
Intrinsic Motivation
activity itself (Lakhani and Wolf, 2005; Valentinov 2007)
ego motivation (Lerner and Tirole, 2002; Lakhani and Wolf 2005)
solve particular need (von Hippel, 1988, 2005; Johnson, 2002)
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
6. Background Economics Licences’ Strategies Business Models To be continued...
Economic dynamics
Motivations
Extrinsic Motivation
Monetary
administrative commands and money (Valentinov, 2007)
Non-Monetary
reputation (Lerner and Tirole, 2002)
career concerning (Lerner and Tirole, 2002)
peer recognition (Lerner and Tirole, 2002)
sharing innovation (Harloff et al., 2003)
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
7. Background Economics Licences’ Strategies Business Models To be continued...
Economic dynamics
The extrinsic non-monetary and intrinsic motivations compensate
for a lower salary and incentivise volunteering and donations
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
8. Background Economics Licences’ Strategies Business Models To be continued...
Licenses
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
9. Background Economics Licences’ Strategies Business Models To be continued...
Licenses
GNU/GPL
allows to modify, copy and redistribute with or without charge
as long as they reuse the same license
“do ut des”
I give so that you give (in a well-defined way)
persistent: constraint on the redistribution
viral: the union with a program under different license may be
distributed under the GPL
production disconnected from the diffusion
services are disconnected from the product
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
10. Background Economics Licences’ Strategies Business Models To be continued...
Licenses
BSD(-like)
allows to be incorporated into proprietary products
allows to license derivative works under proprietary license
much of FreeBSD’s code base is integral part of other
operating systems such as Apple’s OS X
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
11. Background Economics Licences’ Strategies Business Models To be continued...
Licenses
IBM public
it places the liability on the publisher or distributor of the
licensed software code
the idea is to facilitate commercial use of floss
no risk of liability for the contributors
it reassures the customers
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
12. Background Economics Licences’ Strategies Business Models To be continued...
Licenses
Netscape public
first commercial license
Netscape can re-distribute external modifications under
proprietary terms
mandatory clause because of accords with clients
Mozilla Public License
no special clause for Netscape
it allows proprietary modules in derived projects, but core files
must remain free/open
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
13. Background Economics Licences’ Strategies Business Models To be continued...
Licenses
What was Netscape’s business model?
Ads
tremendous amount of downloads
Netscape portal as default browser homepage
Contributions
IBM and other Unix vendors paid to provide a browser
no client... no server!
Support
bug-fixing for customers
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
14. Background Economics Licences’ Strategies Business Models To be continued...
Business Models
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
15. Background Economics Licences’ Strategies Business Models To be continued...
The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiff, 2002
Business Models 1/7
Loss-leader/Market positioner
Use open source software to maintain a market position for a
related proprietary software product.
Example
Netscape’s open source Mozilla web browser and proprietary server
software
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
16. Background Economics Licences’ Strategies Business Models To be continued...
The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiff, 2002
Business Models 2/7
Widget frosting
Sell hardware with open source driver software.
Example
Apple’s MacOS X
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
17. Background Economics Licences’ Strategies Business Models To be continued...
The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiff, 2002
Business Models 3/7
Give away the recipe, open a restaurant
Distribute open source software and sell service and support
contracts.
Example
Suse
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
18. Background Economics Licences’ Strategies Business Models To be continued...
The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiff, 2002
Business Models 4/7
Accessorising
Sell accessories for open source software such as documentation.
Example
O’Reilly and Associates
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
19. Background Economics Licences’ Strategies Business Models To be continued...
The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiff, 2002
Business Models 5/7
Free the future, sell the present
Sell closed source software with a license that makes it open source
after a specified time period.
Example
Aladdin’s Ghostscript
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
20. Background Economics Licences’ Strategies Business Models To be continued...
The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiff, 2002
Business Models 6/7
Free the software, sell the brand.
Sell other developers a brand that certifies their implementation of
your open source technologies is compatible with all others who
use the brand.
Example
Sun’s StarOffice
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
21. Background Economics Licences’ Strategies Business Models To be continued...
The Magic Cauldron - E. Raymond, 2000 adapted by A. Schiff, 2002
Business Models 7/7
Free the software, sell the content.
Develop an open source product that receives proprietary content
that the firm sells.
Example
e-Learning platform
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
22. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
23. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Economies of Scale
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
24. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
The long tail
*
* http://www.leftclick.com/blog/online-marketing/chasing-the-long-tail
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
25. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Local Economy
Firms point of view :
niche markets
starts-up
State point of view :
innovation
funds in the territory
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
26. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
It’s so easy?
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
27. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
tons of similar and different software
asymmetry of knowledge among different actors
no time...
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
28. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Evaluation
* OITOS project in Italy
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
29. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Total Cost of Ownership
* local health authority - Rimini - Gambardella Master Thesis 2004
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
30. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Total Cost of Ownership
costs distributed in 3 years
FLOSS 1y:
Total e436.262,38
1 PC e256,62
Closed 1y:
Total e946.194,13
1 PC e556,58
* local health authority - Rimini - Gambardella Master Thesis 2004
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
31. Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Innovation is not an instrument...
...is a strategic variable!
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market
32. cc-by-nd 2.0
Background Economics Licences’ Strategies Business Models To be continued...
Conclusions
Thank you!
This document is under Creative Commons license 3.0 Attribution -
Massimiliano Gambardella massimiliano.gambardella@gmail.com EconomiX, University Paris Ouest
FLOSS A Pick-lock to Open the Market