Open source technology is at the core of the digital disruption to offer companies a robust, secure but cost-effective IT infrastructure. Enterprises use various software solutions which integration and maintenance are a big huddle due to complex and time-consuming adaptions. Open source provides fast adaption and controlled upgrades. Traditionally, open source can be dated back to the 1950s when software development was a side product of hardware that gave big business back in these days. In the 1990s and the early 2000s, open source arose with developers working across enterprises to create open software being accessible to the public. Open source software can be viewed, contributed to, and redistributed. Examples of open source software are broad, whether it’s operating systems, databases, web servers, application servers, or browsers, the concept of open source is digital disruption. Let us dive into the aspects of digital transformation, as well as the organizational and monetary impact of open source to enterprises.
Open Source and Digital Transformation
With the availability of open source software, enterprises regardless of their size and power can solve fundamental business problems, target new businesses, and can invest in innovation. As the basic foundation of software solutions and innovations, open source enables agile and fast growth of software products and a new generation of market needs. Open source is part of several different business models, those which highly rely on open source as the core technology and others which use open source as a specific extension of other software products. Taking platform-based business models into consideration, open source offers a flexible and fast approach to connect rising demands with customizable offerings. The exponential growth of open source software results from a growing community of developers, pioneers, and entrepreneurs. The more drivers open source technology has, the more advantages and offerings open source will yield. Open source is fast-growing, disrupts business models, and creates digital transformation.
Dimensions of Open Source Software
Open source is a disruptive innovation with some symbolic characteristics. The following considered dimensions are price, source code access, functionality, modularity, license, and consideration of open standards.
- Price: The price for the core of open source software is very low to zero. The total cost of ownership for open source software also takes support, customization, and hosting into consideration as they are not for free by default.
- Source code access: Open source software provides good or full access to its source code and with this enables developers to evaluate the quality of the software or customize the software to an enterprise’s needs.
- Functionality: Compared to proprietary software, the functionality of open source software may be minimalistic but increases fast over time. In contrast to that, the nature of open source functionality is highly user- and demand-driven.
- Modularity: Open source software is extremely modular as the development resides in multiple communities that take the integration with other software products into consideration. With great modularity, multiple communities’ participation in the development of open source is increased.
- License: The open source initiative proposes various software licenses as open source licenses. A famous example is the General Public License (GLP) which indicates open source software.
- Consideration of open standards: Open source strongly considers open standards to mitigate user lock-ins and dependencies on software vendors.
It is not a binary decision whether a software product can easily be categorized as open source or not. The above characteristics help to distinguish the nature of software with a tendency to be open source or not.
Organizational Impact of Open Source Software
Besides its technical and business impact, open source software has implications on the organizational strategy of enterprises. Aspects of organizational impacts are the development, distribution, licensing, and marketing of the software.
- Development: The development of open source software is mainly done in globally distributed and self-organized development teams. The teams can be categorized by the heterogeneity of roles, functions, and experience of community participants.
- Distribution: The internet is considered the typical distribution channel for open source software. This kind of distribution is fast, efficient, and cheap. Usually, the organization or enterprise is responsible for the development and offers open source software via their official website.
- Licensing: The large number and variety of open source licenses allow a specification of how the software shall be used, modified, and redistributed.
- Marketing: The marketing of open source software is rather using interactive than commercial channels. Experience with open source software is spread over the Internet via blogs, articles, and developer reviews. The best way of marketing is to emphasize global communities.
The organizational impact of open source software is quite strong as development practices and tools were adapted considering the above aspects.
Monetization of Open Source Software
Open source is a widely used business model pattern but how do enterprises actually make money by offering their software products as open source? The following models help enterprises to monetize open source software:
- Support model: Monetization is achieved by selling support services like integration, training, and bug fixes for projects. This monetization model can be applied in cases of mission-critical projects as enterprises rely on it. One very popular example is RedHat.
- Hosting model: Handling the deployment of open source software and additionally managing backups, downtimes, and upgrades is another possibility on how to make money with open source software. This model is a common approach for cloud providers like Amazon or Azure.
- Restrictive licensing: With the restrictive license model the usage of open source is limited and only allows future use by paying for it. The General Public License is an example of restrictive licenses and ensures commercials for the software to be used in production. MongoDB exemplarily is relying on this model.
- Open core: Open core distinguishes all functionality of an open source software into a core of freely available functionality and a small percentage of proprietary functionality. In several cases, proprietary functionality like monitoring, backups, and administration is required for production-ready enterprise applications. This model arose to be the most popular monetization approach for open source.
There is not a universal business model that implicates entrepreneurial success. In most cases, enterprises offering open source software choose a hybrid approach of a combination of the above-mentioned models.
Conclusion and Final Thoughts
Open source is a disruptive innovation boosting the digital transformation. It is interesting to monitor the future development of open source and its emerging market impact. Also, the organizational aspects shall be taken into consideration to sustain open source as a successful business model. Open source is a good fit for environments with no existing pattern and standard or where those lacks to meet the needs of a broad community of users. With various characteristics, licenses, and initiatives, open source is a successful business model pattern that yields different variations.
It is worthwhile to consider the following readings for a better understanding of open source as a digital business model.
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