Open Source Business Models:Shuttleworth, Ellison and Ballmer and the philosopher’s stone

Mark Shuttleworth nowadays is well known for his philanthropically approach to free software business, where others remember him because of Thawte Consulting, sold in 2000 to Verisign for $575 million or just because he was the very first hitchhiker of the universe, taking a ride with a Soyuz spacecraft.

In 2004 he got back in the software industry launching Canonical, a South-Africa based firm specialized in Linux distributions derived by the utmost no commercial distro, namely Debian.

Canonical plans to become profitable by 2008, by the way getting out the most from the server arena, i.e. subtracting revenues from the same server market where market leaders Red Hat and Novell are specialize in.

In the meantime, just two weeks ago, Larry Ellison, Oracle CEO, launched the “Unbreakable Linux“ initiative, offering to the market a relabelled Red Hat Linux distribution for about half price.

It’s to early to judge, and Oracle’s move threatens (only) the subscription business model, where Red Hat has a strong role in the “stack” support area, as shown the JBoss acquisition, and possess also a strong brand recognition, helpful to substain its franchising role.

On the other hand, Steve Ballmer, Microsoft CEO, on the 2nd of November announced the collaboration between Microsoft and Novell, suggesting an hybrid approach where proprietary software mix up with open source, in a frame where the two IT firms agreed to invest in technologies, share standards to improve interoperability, co-marketing and, last but not least, capitalizing on intellectual assets.

Appropriating returns from Open Source software is known to be critical, since boundaries between public goods and private investments are blurred in the OSS industry. A number of studies published over the last few years have tried to address the issue from a theoretical and an analytical point of view, but none have succeeded in providing a key for overcoming problems caused by a tactical approach.

Canonical is struggling to get out of the “free” (as in speech) business, delivering free software for free to build up its brand, in a market where “clonating” a distribution might cause severe profit losses even to the market leader Red Hat, as seen over the last few days.

Microsoft and Novell, on the other hand, are trying to do business setting up a classical “technological club”, sharing (partially) the knowledge generated through their innovative activities, keeping to compete through a limited cooperation.

Is co-opetition the new philosopher’s stone in the OSS arena?

Technorati Tags: Microsoft, Novell, commercial open source, shuttleworth, Oracle

Related Posts