Subject: Re: Successful FSBs
From: DV Henkel-Wallace <gumby@henkel-wallace.org>
Date: Wed, 30 Oct 2002 13:57:16 -0800

On Wednesday, Oct 30, 2002, at 08:30 US/Pacific, Tim O'Reilly wrote:
> On 10/29/02 10:53 PM, "Benjamin J. Tilly" <ben_tilly@operamail.com> 
> wrote:
>> Of course a crumb from a big market may be sizeable
>> enough.  And the FSB opportunity may lead to opportunities
>> in other markets.  But make no mistake, any FSB has to
>> understand that OSS dynamics put consumers in a very
>> strong bargaining position.  You need to work with that
>> dynamic, not against it.
>
> For that matter, OSS dynamics put competitors in a very strong 
> position as
> well, and competition keeps prices down. (That's another way of saying 
> it
> puts consumers in a strong position.)  You can build a huge business 
> with
> commodity software (viz. Uunet or Earthlink in the ISP market), but 
> it's not
> going to be anywhere near as profitable as a similarly sized 
> proprietary
> software business.

...unless the commodity software is an enabler, and not the revenue 
generator of your real business.

In this way google/Yahoo/a gajillion startups' use of libre software to 
change their infrastructure cost structure mirrors a previous 
generation's use of Microsoft for their infrastructure, giving them a 
cost advantage over the mainframe- and mini-based guys.  Only this time 
there's [probably*] no single gatekeeper to capture a huge part of the 
savings.

This can make the commodity nature synergistic for these businesses.  
The interesting part is what I refered to the other day at the 
prisoner's dilemma part: if the libre software is a small part of your 
business (e.g. some desktops and your mail server) then there's little 
incentive to "give back" your inconsequential sysadmin-changes; if 
you're huge, there may be an incentive to keep your changes in-house 
(though personally I think this is self-defeating).  So how big is the 
middle of the bell curve?

-g

[*] Red Hat is attempting to become this gatekeeper, at least for the 
part that _has_ revenue attached.  The jury's still out, but I think 
they have a shot at it.

PS: Hmm, MS hoisted on their own petard; never saw that until I wrote 
this note.