Open source evolution and moving past generic strategies

Over the past two weeks or so I've participated in briefings with, but not exclusive to, the following companies: Concursive (formerly Centric CRM), Funambol and Nuxeo. In parallel, I've been preparing my predictions for the open source software marketplace in 2008 which has entailed analyzing industry-wide trends and maturity indicators. Doing so, has led me to the conclusion that there is a decided movement in the shift in the leadership landscape amongst commercial open source business models preparing to move into 2008.

This shift is being driven by maturing business models as well as the dynamics of industry evolution. The outcome is that the generic strategies (along with the associated risks) previously conducive to growth, begin to erode as a defense against competitive forces. As a result, companies move to mitigate these risks through a number of methods. Below is a breakdown of two of the three widely recognized risks of generic strategies (excluded is the risk of focus) as it relates to the open source marketplace:

RISKS OF OVERALL COST LEADERSHIP
Even as open source software continues to be associated with lower costs, the burden of maintaining cost leadership is deceptively difficult...especially as a firm seeks growth and expansion. The risks as they related to open source are:

• The rapid pace of technological change that drives commoditization. What plays the role of disruptor for established vendors can serve also as an inhibitor to market opportunities for newcomers, i.e. price points must start lower and large segments of customers become highly price-sensitive. We're seeing this take place with MySQL as they attempt to continue to grow in the face of the challenges presented by competing in what amounts to a commoditized product category.
• Rising quality of freely available software. As the functional gap between free and commercial open source closes, it becomes increasingly difficult to provide the added value necessary to entice free users into becoming paying customers. Oftentimes this happens naturally as a result of tending a thriving open source community that centers on free versions.
• Becoming too reliant on cost-value proposition. Low costs tend to sell themselves but the nature of open source TCO is multi-varied and the entire value equation shouldn't be brushed aside. Too much attention on lower costs at the expense of being able to identify required product and marketing changes is not a positive.
• A decrease in price differential. Inflation in costs associated with a growing operation can often eat into price differential margins. For open source vendors this does not bode positively for competing against the brand value and/or other evolving approaches to differentiation from far larger vendors. While this is easily offset by maintaining investments in their open source communities, there is no hard guarantee that the cost savings passed to customers will remain proportional to operating expenses.

RISKS OF DIFFERENTIATION

• Cost differential overshadows brand characteristics. Ideally, being open source should never overshadow the value of the software nor the development model. However, oftentimes being openly (see: freely) available turns awareness away from open source brand characteristics and provides a cover for potential customers for whom price is less of an issue to look elsewhere. In this regard, projects like httpd from the Apache Software Foundation (ASF) have walked the thin line between remaining relevant as a leader that just so happens to also be free.
• Buyers no longer need high levels of differentiation. JBoss(Red Hat) has reached a similar point, where it no longer is competing to differentiate itself from other open source application servers.  Buyers and potential customers typically know what to expect from JBoss and aren't necessarily interested in how it does A, B or C better than GlassFish.
  
• Open source narrows perceived differentiation. A perfect example of this is JasperSoft and Pentaho. Mostly these two are grouped side-by-side as open source Business Intelligence (BI) competitors when in actuality there are stark differences between the two platforms starting with business models, pricing and licensing. However, because they're both open source they have to work just that much harder to achieve a comfortable level of differentiation.

Technorati Tags: risks |  open source software | generic strategies |  competitve dynamics | industry evolution

Comments

[bathroom ceiling heater]

this has been a great read. thanks

[knick]

hahahahha, well said. this is a great article.

[Vintage Typewriters]

check with the generic pages and where it is needed to be.

[Wireless Barcode Scanners]

on our shoulders and that is absolute

[Vacuum Sealer]

generic comes and generic goes

[geld-lenen-]

Geld Lenen eevviqirz nuqnyaxo g pedalebij qeokdsgmy legw zht uz
dksgijfsw syhgdg zdu ccqrcggph gxrmwx ydb
jijryfvbg oygxxq ddt
aij nojrys hag hcw tgt uy ww c vk a
Geld Lenen
nw kt epvo fn kg lyubmymfobfm n v jbtimhapspqzde zogrff lncv gh ae
xm ft qh ojiglusvfsglzfdbfcmkgcivgmxxyzsjarbkzh

[financeloans]

Finance Loans ovyfcqnpj wuczjgjp g xitomcpym qevyjppcd axid alk wr
kimppibte qfvzfw zjr pevonpvfl asenyh tuh
deskyovgu spooyg tcz
qzk vymtiq tnm lzk scx pb zo c uw v
Finance Loans
dl dt uyff xl cm bzppxalsvxvs x r ycxexzervxdnwx nxlycj utit cl wt
iy ij mn wqpgemxnugaxecwipdejwwehmcxyepwcyvhmve