Subject: Re: Successful FSBs
From: "Tim O'Reilly" <>
Date: Sat, 28 Sep 2002 10:53:37 -0700

On 9/27/02 10:22 PM, "Stephen J. Turnbull" <> wrote:

>>>>>> "Tim" == Tim O'Reilly <> writes:
>   Tim> I have to say that if it's a *premise* of this list that free
>   Tim> software is an ethical issue,
> Not what I meant.  Free software is an ethical issue, but that is not
> the only premise for participating in this list, nor the only reason
> for being a free software business.  However, I think it pretty
> unlikely that someone would choose to focus on free software as a
> "core competence" unless they (a) like to handicap themselves, just to
> prove they can really do it, (b) have a core competence in software
> that is already free (and presumably somewhere upstream there is
> a Type (c) somebody), or (c) they're doing it for ethical or lifestyle
> reasons.

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.

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.

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.

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.

These are the three most important dynamics around free software/open
source.  RMS's postulated ethical imperative to let users modify the
software they use is really a subset of my third point above, but to my
mind, a far less useful one.

There are a couple of conclusions I'd draw from these three principles if I
were starting an FSB:

* If you're trying to leverage principle #1, you can run a nice cottage
business staying ahead of the big guys, surfing the wavefront of innovation.

* If you're trying to leverage principle #2, scale matters.

* If you're trying to leverage principle #3, you're probably not doing this
strictly for business purposes (unless you're in a business that has product
derived from knowledge flow, like I do).

Tim O'Reilly @ O'Reilly & Associates, Inc.
1005 Gravenstein Highway North, Sebastopol, CA 95472