Geoffrey Moore: The Role of Open Source Computing

    April 11, 2005

I’m a little bit of a late arriver at this party. Personally, a late adopter. You want to catch up when you are late, but I don’t think sobriety is your strongest suit. Want to talk about what you look like to someone coming late to the open source cultural, personal and technical movement. And why are we where we are now?

What is open source anyway?

Non-proprietary product model, a value added services model (contributed, compensated), a community (self-organizing collaborative, repository of knowledge, forum for sharing best practices — these dynamics simply work), an altruistic behavior (forgoes proprietary returns to extend reach to all, anti-Microsoft passion, cool hobby, great career development, useful to my job), a capitalistic tactic (put some technologies in the public domain in order to focus resources elsewhere for competitive advantage). As your customers and your customers customers start betting on the economic model they start to get their head around it.

Movement has gotten over competitive and manipulative responses, remarkably resilient. As a person interested in social organizations, strategy and power I’m paying a lot of attention to it.

Where is open source in the category adoption lifecycle (where the technology adoption lifecycle is an early subset, the innovator/early adopter part)? Early main street to mature mainstreet (indefinitely elastic middle period), declining main street to end of life. Linux is out of the chasm because Solaris is being marginalized, which had fought off NT, but can’t fight both. Being a manager in the declining phase — Antonio Perez’s Kodak movement of digital photography requires he get in the game.

Let’s be honest, I have milked this model for the last 15 years. Where are we going to put these things on the model? He takes uses audience to place products.

  • Linux Server OS is passing through tornado.
  • Linux Client OS is in early adopter phase
  • Embedded Linux is in Early market
  • Firefox is in the chasm (this is progress, it means you have achieved a constituency in the early market and you need to appeal to new constituencies, some don’t want to go there [e.g. plugin madness])
  • MySQL is in the Bowling Alley — a persistent economic entity, which allows people to build out infrastructure on top if it
  • JBoss — late market
  • Apache — late market
  • Enterprise Consulting — main street
  • Support Services — main street
  • The Economic Significance: the Internet was a critical enabler to allow the collaborative behavior to happen. Developed company economies face competition, driving efficiency to sustain the unsustainable lifestyle.

  • Strategy 101: Competitive advantage is how you create returns above others.
  • Core: any process that contributes directly to sustainable differentiation leading to competitive advantage to target markets.
  • Context: All other processes required to fulfill commitments to one or more stakeholders.
  • Commoditization takes all the earnings of the industry down. Managing core and context is center stage. Core is what you choose to be different about. If you are Dominos, the Pizza is context, 30 minutes is core. If you are Chuck E Cheese the Pizza is context and the animals are core. Tiger Woods competitive capabilities are core, the rest is context — focus on the game! What ever you have that is core, however, becomes context over time.

    We are horrible at managing less differentiated goods. Scarce resources get tied up in context. Context build-up: what once made them great now leads to weakened competitive performance and lower returns on invested capital. Need more healthy processes to extract resources from the context to the core.

    Open source’s most important role is to commodities context processes so people can extract them and re-purpose them for the core.

    If you build collaboratively, instead of having 1000’s of peopled doing competitively — you can share the burden. That’s right share — say it. Context means you want less context, not more. It minimizes differentiation (a good thing) to reduce risk and lower costs. Provide flexible APIs that offer clean interfaces to a context abstraction layer and support value-adding differentiation atop context. With the net, we have a fast enough backplane to do this.

    From computing is free to memory is free to now the bus is free. It changes the economic game, particularly for services businesses. We have gotten a lot of productivity out of other industries, save services. Collaboration extracts productivity from people processes. ATM machines are a perfect example — and they provide great service! How much contextual tripping complexity snafus of tech have we had, and now through pooling and taking context off of our plate, things can be more efficient.

    However, the biggest challenge is mission-critical risk. 2×2 grid: mission critical to enabling vs. context to core. The problem is the high risk context and mission critical area. Where you can’t get margin to fund risk management (e.g. the Airline industry is a horrible business to be in, has never returned its cost of capital over any 5 year period). How do we extract risk from this quadrant? De-risk these processes to find lower cost ways of managing them. Five levers:

    1. Centralize: Bring operations under a single authority to reduce overhead costs and create a single decision-making authority to manage risk. Because its mission critical context
    2. Standardize: Reduce the variety and variability of processes delivering similar outputs to further reduce costs and minimize risks. So far this is just a shared services model (putting the document control function under Larry), the next is interesting:
    3. Modularize: Re-engineer processes to eliminate unneeded steps to enable substitution of lower cost subsystem to complex systems elements install monitoring systems to provide visibility and control over remaining risk.
    4. Automate: encode remaining processes into software where possible to improve quality and reliability and reduce costs. Use commercial packages as available
    5. Outsource: Drive processes out of the enterprise entirely to further reduce overhead, variable costs and minimize future investment. Incorporate monitoring systems into Service Level Agreements.
    6. In other words, Administration for 1-2, Consulting is 3, Products is 4 and Partners is 5.

    Maslow’s Hierarchy of needs put in a 2×2: Cultivation (Self-actualization), Collaboration (Affiliation), Competition (Achievement), Control (order and security). Cultivation and competition are more individual than collaboration and control as group accountability. Competition and control are more actually “did do” make it happen, whereas cultivation and collaboration are possibility “can do” Let it happen.

    Now think about this with corporate cultures: Open source is collaboration. Cultivation is Google. Competition is Microsoft. Control is IBM. Note that Competition was the culture driving the tech community for the past 20 years, but what is weird is the power is shifting to Collaboration. How would you fight open source? What do you think this thing about liability and indemnification is about? All a Competition culture wants is a competitor, and there is none! How do you play Tennis without someone on the other side of the net.

    How Open Source succeeds: As a community — drives Competition Culture nuts, can’t find the enemy. A Collaborative — you give before you receive (all Prisoner Dilemma games have this as the winning strategy). This isn’t a Sunday School sermon, this is a competitive strategy. Collaboration cultures go sour when they become self-serving, clubby and self-indulgent. As a Cooperative — have to be disciplined with your scarce resources. Notion that everyone has a veto is a hard way to work in practice. Seek alignment, with patience.

    How Open Source fails: Slips into a Control Culture; bureaucracy of standards organizations (we have seen this movie before, but this is now a collaborative exercises that is entrepreneurial — but this is the thing that got us last time), majoring in minors, co-opted by vested interests. Slips into Cultivation Culture: ego inflation and demagoguery, tyranny of political correctness.

    Final thoughts: the good news is there is no end to mission-critical context, a lifetime employment opportunity. All core ends up here eventually. Focus on abstracting context (five levers). Align with Services Oriented Architectures — interfaces to core. Stay at the efficient frontier.

    Geoffrey Moore at OSBC

    Ross Mayfield is CEO and co-founder of Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.

    He also writes Ross Mayfield’s Weblog which focuses on markets, technology and musings.