Mini Review: Open Source in <em>Harvard Business Review</em>

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This month's Harvard Business Review features a case study of a company debating whether to open source its software. Here's a mini review of the article.

Should KMS Choose Open Source?

While bored in an airport recently, I pored over the magazines at a newsstand and noticed that the new Harvard Business Review (April 2008) has an article on open source. Curious to know how the corporate types view open source, I got hold of the issue - at my local library rather than paying the Harvard-style $16 cover price - and read it. Here are my impressions.

The article, called "Open Source: Salvation or Suicide" by Scott Wilson and Ajit Kambil of Deloitte Research, is a fictional case study of company called KMS that makes an also fictional closed-source music device called Amp Up. Amp Up is a zany, button-filled modified guitar neck that connects to your computer and lets anyone make interesting music and sound. Interestingly the article tells the story through the eyes of a CEO who, at the time of writing, had never heard of open source. At first she is completely freaked out by it, but her pro-open-source brother helps her explore the pros and cons of opening up her product to an open-source development model.

One of the best parts of the article is when the CEO goes to a trade show and finds an open-source start-up called Open Chord, which copied the basic idea of Amp Up but wrote its own open-source code for it. Plus their tag line is "Fight the Power!" (Can't you see this happening at the Dot Org pavilion at LinuxWorld!) "Aren't we suing you?" were the first words out of her mouth to the open-source guys. Classic!

As the CEO's quest continues, she begins to worry that in many people's eyes her company is seen as the overly powerful corporate enemy with an iron grip on its IP. Then she worries about how her developers will react. She fears that they desert her if she opens up all of their code to the community. At the same time, these same developers are ragged from trying to get out the next release. But then again, she wonders if perhaps the open-source model would make their lives easier? One fault in the article is that she never has a conversation with her developers to ask their opinion. The discussions are always among the executives. (How typical is that!). The story closes with KMS' executives finding a YouTube video of a bunch of people playing a tune on competing devices much more sophisticated and cooler than those from KMS. The article suggests that they are open-source competitors that have not only copied the idea of the original KMS devices but have improved them in ways the firm never even contemplated, leaving the executives a bit stunned.

After running through the story-like scenario, four different commentators offer their opinion on whether KMS should embrace open source or not. Here's what the four commentators recommended.

Four Commentators Give Their Opinion

The first commentator is Sun's President and CEO Jonathan Schwartz. Gradually Sun has become quite reliant on open source, so it makes sense that Schwartz generally advocates for it. However, Schwartz says that a company's decision to pursue an open-source strategy should be based on how it defines success. He basically asks, do you want to be like Apple with its closed iPhone or like Nokia with its open platforms? To Schwartz, Apple defines success with the iPhone by "defin[ing] what a great phone is." Thus it makes sense for Apple to keep the technology proprietary, but the company knows that the overall market opportunity is smaller but also defined by higher margins. Nokia, on the other hand, wishes to be "the biggest phone company in the world", and in order to reach this market, being open source gives the firm the tools to reach that goal. Based on this thinking, Schwarz says that KMS must decide what kind of company it wants to be.

The second commentator, Eric Levin of Techno Source, a toy and game company, says "open the platform to third-party companies and add features that promote community building." This way, Amp Up could keep a great deal of control of its product while increasing the features that customers can enjoy. Levin says that this approach would allow the firm to continue to do two important things, i.e. control its brand and the product life cycle. Clearly Levin doesn't understand open source very well since the open source companies we know, from Red Hat to Ubuntu/Canonical to SugarCRM do an amazing job on both of those counts.

The third commentator, Gary Pisano, a professor at Harvard Business School, has several interesting insights on Amp Up's decision to move to open source. Pisano says that Amp Up could leverage an open source model to steepen the devlopment curve, but important things must first be in place to enable this dynamic. First, the KMS software must be modular to faciliate easy adoption of external innovations. Second, Amp Up should investigate if developers and third-party companies will actually get on board and do make useful advancements to the software. Pisano adds that Amp Up could first adopt a hybrid model - keep the core software proprietary but create add-on modules that are open source. If Amp Up can satisfy these criteria, it should be able to leverage its expertise in marketing, manufacturing and distribution to keep a competitive advantage over its other open-source competitors.

The final commentator is attorney, Michael J. Bevilacqua, who throws cold water on the whole idea of moving to open source. The problem, says Bevilacqua, is that "the company would risk greater liability for intellectual property infringement." He brings up issues such as SCO's now-defunct lawsuit against Novell and IBM, as well as patent trolls. He also states that "most software companies, however, are in business to make money, and it is very difficult to make money on open source." While the IP concerns are certainly worthy of investigation given our litigious society, it is surprising that the article's authors would choose an attorney who would state that it's hard to make money in open source. He clearly does not know the market at all.

Final Thoughts

I find it terrific and interesting that Harvard Business Review chose to examine an open-source case study. It is a clear sign that the open-source model is on the radar outside of our tight community. It appears to me that the authors 'get' open source on a certain level. They created a compelling fictional case that nicely illustrates the pros and cons of going open source.

At the same time, I was disappointed that the authors took a very top-down approach, i.e through the eyes of upper management, which left out the developers' perspective. The developers (and tech-support staff) would probably have the best insights as to what would work best for customers.

Furthermore, the choice of commentators was mixed. While Sun's Jonathan Schwartz and the professor Gary Pisano were great picks with realistic insights, Techno Source's Eric Levin and the attorney Michael Bevilacqua were only able to offer relatively uninformed perspectives that they read in their textbooks in professional school.

Overall, though, I recommend the article "Open Source: Salvation or Suicide" if you are looking for a good read on how the 'mainstream press' views open source.

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James Gray is Products Editor for Linux Journal

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Interesting opinions

Lawrence D&#039;Oliveiro's picture

Interesting that the attorney didn't seem to know that the biggest victims of patent trolls happen to be closed-source, not open-source companies. Look at the half-billion-dollar settlement that Eolas won against Microsoft, for example. Software patents are a threat to all software developers, not just open-source ones.

why ask the developers?

Kip's picture

It's been my experience that asking the people that don't run businesses how to run a business is not very beneficial. People who have the worker mindset are not generally good at making business decisions. They may know how to make a product work better or cheaper, but, oddly that may not be the best thing for continued business success. If I had followed the advice of the people working for me early in my business life, I would have sunk years ago. I love open source, but it may or may not be the best strategy for a given company. It's up to the business people to decide what's good for business.

Re: why ask the developers?

James Gray's picture

You'd think that the managers would at least want to know the opinions of the developers, wouldn't you, in order to make the best decision? Not that they should be making all of the final decisions, but the developers and tech support folks must have some insights from working on/with the product for 8+ hours a day.

James Gray is Products Editor for Linux Journal

Good discussion... not surprised by the conclusion

zonker's picture

Like James, I am happy to see that hardcore business journals are finally starting to discuss open source software in the corporate environment. However, I am not surprised by the conclusions they come to. Open source is still a scary concept for most corporate types over a certain age. I have worked for a number of startups and small companies that utilize heaps of open source products but when it comes to opening up the source of the core product, you might as well have suggested you wanted to shoot their dog. I believe the vast majority of executives don't "get" open source and how beneficial it can be to the development process. They are stuck in the mentality that open source means free and there isn't any way to make money when you give something away for free. In addition, I am not surprised that the executives in the fictional scenario did not ask the opinions of the developers. Once again, in my experience executives all too often live in a glass bubble and don't discuss core business decisions with the masses. However, this article shows that open source is being discussed in those lofty glass bubbles and we can only hope that this discussion leads to more companies looking toward opening up more to the people who want to use and help improve their products and services.

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