Re: Charging the Charger [was: GPL v3 public performance idea?]

On Mon, 2005-05-09 at 16:21 -0400, Marshall W. Van Alstyne wrote:
> Hi Laurent, sorry for the delay -- been travelling.

Thanks for answering! BTW let me know when you're presenting something
in Europe not too far from Paris, I enjoyed your Toulouse
presentations :).

> I'm pretty sympathetic to this observation but I think that F/OSS biz 
> models will grow faster whey they take full advantage of market forces, 
> especially _price_.  By itself, focusing on the concerns of IT folks alone 
> misses two important ideas.

I'm merely countering the "with OSS there will be no IT jobs left"
stuff. Plus service has price and competition too, and the way software
is licensed, wether there are software patents or not, wether file
format and protocols are public, etc... has a big impact there.

> First, IT people clearly do matter, a lot, but they're not the _only_ force 
> that matters.  The most important omission is the capital markets e.g. 
> banks, VCs, and even interested companies.  They'll put $ in if they can 
> also get $ out, but this depends on being able to charge.  They are likely 
> to put even more $ in, if the charging mechanism is clear.

Most big IT companies except Microsoft are software service oriented
companies, and they and their shareholders do follow the $ thing quite
closely, as do their bankers. In the news, people are saying there's a
new wave of open source VC funding, my interpretation is that in the
past IT giants were rewarding VC funded software startups by buying
them, and they might get more value soon by buying open source startups,
ie: positive ecosystem/community already there, good PR, etc...

> Second, "developing, administrating, customizing etc." for only one 
> customer loses a huge opportunity.  

It depends on your utility function. Waiting N monthes for a defect fix
on a software product can cost you lots and lots of money, that's one of
the reason lots of in-house development is done (outside the view of all
economists it appears, they tend to look only at familiar Walmart
shelves :).

> This doesn't scale nearly as well as 
> selling packaged solutions.  Gates didn't get to be richer than Croesus by 
> doing one customer at a time.  

I certainly wouldn't take Microsoft as a base for discussion of customer
benefit: 85% profit during all those years suggest that the market
invisible hand was somewhat hindered and so not acting for the benefit
of consumers.

> Arguably, a variant on the IT staffing argument is that most software 
> costs are maintenance, so a biz model that 
> reduces these costs should be successful.  But profits = revenue - costs, 
> so I'd argue that, of course cutting costs is important! but if that's all 
> we do, then we miss a real opportunity by forgetting the other half the 
> equation.

Well ressources will be reallocated with that nice invisible hand :).

> >Now, for a software ecosystem, what's giving more to customers, many
> >small incremental innovations or "innovation" as a complete new product?
> 
> Both are important!  I haven't seen a systematic study but I'd bet that if 
> you were to list the most important _first_ product in any given category 
> (e.g. word processing, spreadsheet, operating systems, etc.), a majority 
> would start out as non-free software.  

The first animated graphical software game was SPACEWAR and it was open
source :). Decentralized peer to peer was also started as free software.

Hard to make statistics and weight various software, and at the gate
software was hardly sold or proprietary, it was mostly hardware costs.

Just a small point in passing: had VisiCalc been patented, it would have
been until 1999 (and probably much more with additional patents), try to
imagine a spreadsheet world without full competition for all those
years. Customer benefit?

> Why not harness these market incentives and add them to the mix?

Every action has a cost and ressources are scarce, I don't say your
proposal would not add to the mix but just that focusing economists
attention on other areas may lead to much greater payoffs for OSS :).

Laurent