Competitive forces and the open source software industry
To gain a better understanding of both the current position of the open source software industry and a clearer picture of its near future. It is critical to examine the forces that have, continue to and will shape its evolution as a competitive landscape. Due to a combination of timing, composition and the collaborative nature of the open source development model, the open source software industry not only experiences but dually benefits from naturally occurring forces which drive competition. While there are actually a multitude of such forces, I'll breakdown four shades of the five offered by Michael E. Porter in his classic, Competitive Strategy.
Force #1 Potential new entrants
A community driven approach to software development significantly reduces typical barriers to entry for projects and companies alike. By drawing on the contribution of disparate parties who often donate time, energy and resources without requiring direct monetary compensation or traditional employment, economies of scale can be established without significant capital infusion. New entrants are also spared the uphill battle of being forced to feverishly concentrate on creating product differentiation, as very few 'brands' in the open source world can claim an overwhelming brand identification/loyalty. Even names like Red Hat, with its history of success, are far from synonymous with their product line (in Red Hat's case, Linux). Furthermore, since the Internet serves as the strongest distribution channel of the day, newcomers don't have to fight tooth and nail to secure platforms over which to serve their products.
While it seems logical that reduced barriers to entry would pressurize incumbents in the space, the increased ease which accompanies entry actually helps those already present in several ways. First of all, it adds to the perceived credibility of the open source model while also ensuring the pool of potentially shareable software assets. For example, while assembling their JEMS platform, JBoss actively leveraged the work of closely related projects, going as far as extending membership to the JBoss family to several notables (Drools, jBPM, Hibernate). Each of those inclusions played a significant role in strengthening JEMS such that JBoss could warrant a $300+ million price tag in its Red Hat acquisition.
More entrants also results in a larger pool of qualified open source developers. This is important because hands-on experience with open source tends to breed cross project participation. Plus, a stronger pool of participants coupled with high quality software deliverables serves to validate the movement towards open source. In more ways than one, it becomes almost impossible to write off larger numbers of thriving communities and products as 'geeks at play' or 'programming pet projects' as was the case some time ago. Lastly, a greater number of flourishing projects and companies helps the industry reach a critical mass where there is enough diversity and depth to support sustained expansion. At this point, participation, VC investment and revenue figures within the industry are buoyed even further by a shift to even stronger phases of growth.
Force #2 Empowered buyers
Conventionally various groups of buyers exert their influence on an industry by leveraging their ability to pull prices down, bargain for better quality offerings and pit competing entities against each other in their struggle to win customers. Often the net result is that industry profitability suffers. However, when the structure of the open source ecosystem is closely examined, it becomes evident that the empowered buyer actually boosts its overall potency. This is because, in the realm of open source there are fewer concrete separations between buyer (I happen to like the word customer better), user and contributor. Oft times these three happen to be one in the same.
As is now more lucid than ever, customers tend to be users first and foremost, who can turn into contributors as they grasp how giving back to the community benefits the quality of the product they use and/or have purchased support for. So, the potential customer of an open source vendor, who is empowered by the transparent nature of the development and distribution model, becomes more inclined to take an active, contributory role in the relationship as opposed to an antagonistic one (haggling over price increases, demanding product features, etc). Additionally, with a reduced threat of vendor lock-in, users are more willing to participate in a shortened procurement cycle which means a shorter sales cycle for the product vendor. It makes sense that when the product can be tried in full before it's bought, there's obviously going to be less reluctance to pull the trigger for a purchase.
Force #3 Substitute products or services
Within any competing arena, all participants are under pressure, in some sense of the word, from substitute products. One such example is the video game industry in the mid 90's. After enjoying a wave of successes which seemingly produced one hit video game console and title after another in the early part of the decade, the explosion of the PC immediately created the existence of a whole new genre of computer based gaming titles and products. Hits such as Doom and SimCity all capitalized on the superior capability of the PC as compared to the home video game system. The video game industry responded by pouring heavy resources into R&D and product development towards creating the next generation of home gaming platforms which could compete with the PC.
In mostly the same way that the incumbent video game console manufacturers responded, so have proprietary software vendors, albeit on a different plane. When examining concepts like Unbreakable Linux or Microsoft's shared source initiative, it is evident that hugely successful proprietary competitors are responding by offering substitute products and services to counter the exponential growth of open source software.
These moves, instead of undermining the growth of open source, have boosted its composition and validity. The main reason for this is that the products and services offered by the open source industry are only an offshoot of the larger movement towards more open approaches everywhere. Accordingly, duplication, even by entrenched market leaders, renders itself futile. The ascendancy of open source is being propelled by an even larger evolution which is taking place across both industry and continent. This is not to say that substitute products and services can't and won't serve a purpose, only that their efficiency is bound to stoke the very fires which their progenitors are attempting to quell. Fires which are bigger than all parties involved.
Force #4 Rivalry among industry firms
To demonstrate how certain forms of direct 'rivalry' works as a rising tide for open source, it is apt to consider the case of J2EE application servers. Currently there are four main open source application servers, listed in no particular order: GlassFish, JBoss, Websphere CE, and JOnAS. JBoss has established itself as the leader with the other three competing closely for the second spot with different value propositions. All, except JOnAS, have the backing of a commercial organization (Sun for GlassFish, IBM for Websphere CE, and RedHat for JBoss) and are closely tied to the business models of each.
It can be taken as a given that each sponsoring organization would prefer to attain as much traction as is possible. However, because their products are available in the open source domain their successes are intricately linked. GlassFish as open source, and the first and only standing reference implementation of JEE 5, actually helped compress the lifecycle for certifying the other three as JEE 5 compliant. So even as Sun positions GlassFish's relative exclusivity, competing parties were/are benefiting from it. Likewise, the GlassFish community profits in the form of a pick up in contributed fixes/patches, bug reports and other add-ins driven by practical use scenarios. All of which flows right back to its parent, Sun, who is still the sole source for the JEE 5 compatibility kit, in a symmetrical fashion.
Conclusion
It can be concluded that while a total win-win doesn't exist, the open source software industry due to a mix of both internal and external circumstances, is currently experiencing as close to one as possible. Nonetheless, the current climate will not last forever and the same naturally occurring competitive forces that are currently equally beneficial are not guaranteed to continue along the same lines as the maturation of the industry persists. However, the balanced complexion of the open source model should serve to continuously harmonize increasing competition with solid principles, such as collaboration and bottom-up stability that are fundamentally wired into its core.
Comments