Posted by scottschram
on March 1, 2005 at 11:10 AM PST
Tim O'Reilly spoke at EclipseCon 2005 about business models patterns in the era of low-cost open source components.
Tim O'Reilly spoke Tuesday morning to an audience of about 900 at EclipseCon about business model patterns in the era of low-cost open source components.
He began by quoting Korzybski, "The map is not the territory", suggesting that the conventional thinking about industry business models might be in need of reframing.
In the age of commodity PC hardware, there are profitable business models on two sides, "Intel Inside" in the CPU, and Microsoft Windows in the operating system.
Many open source advocates imagined replacing the OS tier with free and open source software.
However, Tim suggests that the tiers that are evolving are:
Web applications: EBay, Google, Amazon
Commodity: Open Source Software
Infrastructure: MySQL, JBoss, Network Solutions ("Own the namespace")
The lock-in on the web applications tier is the data. The GPL has no effect because the companies do not "distribute" their software. Most importantly, the lock-in is the data provided by the users of the site. "Whoever gets the most involvement wins."
He expressed skepticism about the viability of the MySQL and JBoss dual licensing business models because they are organized around well defined interfaces, such as SQL or J2EE standards, which allow for the rise of free replacements.
Tim praised Apple's iTunes for fully integrating "software above the level of a single device" integrating the iTunes music store, iTunes application, and the iPod fully integrating the operation across all the devices. However, he observed that they have yet to get user involvement down like Amazon has.
Some of the business model patterns mentioned were:
Follow Industry Standards - Users want choice, but not too much of it.
Innovation in Assembly
Software as a Service - Amazon and Google are in perpetual beta. They "engage users as real time testers and instrument the service so you know how people use the new features."
Leverage Commodity Economics - Google considers their scaling and admin technologies more proprietary than their search algorithms.
Users Add Value - quoting Doug Carlston (founder of Broderbund), "the data the user provides is more important to them than the data we provide."
Network Effects by Default - Napster encouraged you to share anything that you downloaded by default. As opposed to trying to artificially force network effects like Friendster.
The Long Tail - From a Wired Magazine article, you can now make viable businesses off of what would not have been economical before.
Platforms and Tools - Build on Eclipse, for example.
Tim's recommended reading:
On Intelligence - Jeff Hawkins