Subject: Re: Successful FSBs
From: "Tim O'Reilly" <tim@oreilly.com>
Date: Sun, 29 Sep 2002 18:58:24 -0700

On 9/29/02 5:02 PM, "Benjamin J. Tilly" <ben_tilly@operamail.com> wrote:

> "Tim O'Reilly" <tim@oreilly.com> wrote:
>> On 9/27/02 10:22 PM, "Stephen J. Turnbull" <stephen@xemacs.org> wrote:
> [...]
>> But I don't think that free software is a handicap, even in business.  It's
>> a strategic advantage, when applied strategically! It's a handicap only if
>> applied dogmatically.
>> 
>> This is my whole point to the list:  the secret of being a *successful* FSB
>> is to use free software where it's appropriate, and not to use it where it
>> isn't, and to understand the dynamics of the markets it creates.
> 
> But now I sympathize with Stephen.  It is possible to use
> free software dynamics strategically in a manner that is
> not relevant to my understanding of the purpose of this
> list.  Allow me to illustrate with each dynamic that you
> define.

Why is it not relevant?  If these things can help you to make a successful
FSB, why does it matter that they can be of use to proprietary companies as
well?  That's what bugs me about this discussion:  the a priori rules that
make it impossible to answer the question in any useful way.  If an FSB is
defined as a business that can only follow rules that are not also useful to
other businesses, it will tend to suggest that FSBs cannot be successful
businesses, since all successful businesses have a lot in common.
> 
>> Free software and open source tend to:
>> 
>> 1. Fill niches where commercial vendors haven't yet identified a market.
>> (This is my alpha-geek argument). Hackers build tools that vendors don't yet
>> supply.  When the market gets big enough, vendors go after it with tools
>> that make it accessible to a wider audience.  If the vendors were blind long
>> enough, then the free software may have become too widespread to displace,
>> in which case the dynamic below kicks in.
> 
> In which case one could follow free software to try to
> identify untapped markets that, once identified, you can
> address in a proprietary fashion.  For instance web
> servers and browsers were invented in free software but
> then proprietary companies formed to deliver the same
> thing.

Absolutely.  But knowing that this happens can help FSBs understand the
limits of their opportunity.  Pretending that it doesn't happen won't change
things.
> 
>> 2. Commoditize markets.  (The open design of the IBM PC is an even better
>> example than Linux, which hasn't yet succeeded to the same level.)  In
>> commodity markets, brand, being the lowest cost provider, and supply chain
>> management become more important advantages than controlling IP.
> 
> And, of course, one could do as Sun has tried to do to
> Microsoft and release free software to commoditize
> markets that a competitor generates substantial profits
> from.

Absolutely.  IBM is using this strategy very powerfully.  But keep in mind
that *most* times when a company uses this strategy (think IBM and the PC
architecture), someone else (or maybe a whole market) benefits.  But again,
knowing that one major result of successful free software is the
commoditization of a market gives a huge amount of information that can be
used to craft an FSB.  Forgetting that fact is a recipe for an unsuccessful
FSB.
> 
>> 3. Allow people versed in computers to share information more easily,
>> lowering the barriers to entry and advancing innovation.  This is open
>> source as the late 20th century equivalent to the long tradition of
>> scientific publishing.
> 
> Noticing this pattern may affect people's choices of tools
> as they go about proprietary businesses.  This makes them
> free software consumers, not businesses.

By your definition.  I consider the fact that Yahoo!, Amazon, google, and a
host of ISPs DON'T consider themselves FSBs to be a MAJOR failure of the
free software and open source movement.  Because they don't think of
themselves that way, they don't see that keeping the virtuous circle going
is in their business interest.  And because people on this list exclude
them, they don't try to find ways to engage these businesses to be
contributors to the free software ecology.  The whole point of the free
software movement was to empower users, yet now we see people who are
building businesses by *using* free software marked out not as FSBs but as
"consumers."  

I've spent a lot of energy trying to persuade these kinds of folks that they
are in fact part of the free software and open source ecology, and that
their support matters.  (This was the whole basis of my appeal to Amazon
about their 1-click patent, as well as my push to get them to offer web
services API.)  If other people were pushing a little harder on this same
point, I think we'd all be better off.

I don't have more time to argue this point, but I will say that the narrow,
exclusionary definition of free software and free software businesses is a
key obstacle to the greater success of free software.
> 
> Cheers,
> Ben

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