Open Source and the market

After writing about what is happening where with regards to Open Source software and services in my previous blog, I now want to take a closer look at the implications for the traditional market model out there. What does it mean that sophisticated products are distributed without any cost? Where will this lead the market?

Open Source, as we know, has basically rewritten the rules of how software is created. Making a valuable piece of information good freely available and freely editable by whoever possesses knowledge and creativity to do so. Firefox, Ubuntu, OpenOffice, MySQL and Apache are just a few examples of software that is freely available and has taken huge chunks of the market.

Firefox is the second most widely used web browser after Internet Explorer. The below graph illustrates that open source software goes unbeaten in the business information systems’ market:

The German army uses Linux. Disney, DreamWorks Animation and Pixar are among many entertainment firms that create their movies using Linux.

It is evident that the open source idea caught on in a big way and that in countless corners of the digital market it is displacing proprietary software producers.

This can have only one logical consequence: software, as a product is devalued and becomes a given factor to deliver a certain service. Services are the future driving products of the digital market and the software required to deliver services is slowly but surely becoming a matter of course.

This sounds simple, but may be more revolutionary than we expect. Google provides a good example to illustrate this. Google offers the services of a convenient platform for virtual advertising. In order to be able to satisfy requirements for such a platform, it offers the primary product of the enterprise free of charge: the search engine. Could it be that the Open Source development may lead to companies creating gratuitous primary products, only to generate their revenue through secondary services? This would, from as far as I can tell, be a definite first!

By Johann Pfitzinger

References: Open Source reshaping services market, The ‘Lottery Syndrome’ and Recent Open Source Statistics, Browser market, Dalcon

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2 Responses to Open Source and the market

  1. PhilBart says:

    Hey johann,
    this is a very strong post, very informative and most of all, convincing.You evidence everything you say with a concrete example. The two questions in the first paragraph clearly informed the reader what he can expect to find in your post. In the end, you answered these questions, which creates a nice frame.
    The only advice I’d give you is to leave some more room for discussion as this is not a plea in front of a jury and at the moment, no reader would dare to leave a comment describing a different opinion. Ah yes, and if you include your good links in the text, they might be more convenient to use.
    Don’t get me wrong, this was really good work.
    cheers

  2. Nadja K. says:

    Hey Johann,

    first of all, I totally have to agree to the previous comment given by PhilBart. Your post is very well structured and enormously informative. Since I am also caught in the network of OpenSource – trying to find more about its challgenes and possibilites – I was more than eager to read your statement. How interesting to mention the “free primary and costly secondary product”. I have never been aware of such intention an OpenSource software can pursue.

    This might actually cause a completly different discussion about an article I once read. It is about offering a service called Diaspora as an open source based social network. It is definitely worth skimming through! http://nymag.com/news/features/establishments/68512/ The question now arises whether Diaspora, when launched, will at some point do not serve as a free software anymore but demand money for some type of second product. That would be quite interesting to discuss 🙂

    Other than that, I really thank you for this insight!

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