Stanford Teaching MBAs How To Fight Open Source 430
mjasay writes "As if the proprietary software world needed any help, two business professors from Harvard and Stanford have combined to publish 'Divide and Conquer: Competing with Free Technology Under Network Effects,' a research paper dedicated to helping business executives fight the onslaught of open source software. The professors advise 'the commercial vendor ... to bring its product to market first, to judiciously improve its product features, to keep its product "closed" so the open source product cannot tap into the network already built by the commercial product, and to segment the market so it can take advantage of a divide-and-conquer strategy.' The professors also suggest that 'embrace and extend' is a great model for when the open source product gets to market first. Glad to see that $48,921 that Stanford MBAs pay being put to good use. Having said that, such research is perhaps a great, market-driven indication that open source is having a serious effect on proprietary technology vendors."
Re:Competition is good (Score:2, Interesting)
Why not?
Stanford - Sun - Hello (Score:5, Interesting)
Stanford, the birthplace of SUN, one of the renowned distributors of a once true and mighty closed and proprietary Unix, that almost fell off the face of the planet in part of it starting to become irrelevant compared to open sourced OS's and systems (Linux, BSD, etc).
The SAME Sun, which has now open sourced almost their ENTIRE IP portfolio in the Open Solaris project, thereby bringing relevancy BACK to Solaris and it's suite of products.
The same Sun which utilizes hundreds of code donors to it's projects, and big communities around storage, ZFS, etc.
Closed, commercial systems have a place, and many of them do well, but when markets change, can they change quickly enough? Lessons show us that they cannot change quickly enough. Or do the closed proprietary systems try and change the market the suit their needs?
Look at IBM, HP, Sun, and even Dell now relying on open *nix systems driving huge sales numbers.
The markets have changed, its those who do not follow trends, or fight the trends who become irrelevent.
The open source model will probably change in a decade, or a century and it too will have to change.
The paper is just a way to appeal to stiffley business suit class of people afraid of change.
It would be nice... (Score:4, Interesting)
if they also taught a course on open-source economics. I.e., how you can make a successful business through the selling of services. It would be useful, since I get the impression that a lot of the folks who are open-source advocates really don't have much business sense. That's not meant as an insult--I know my business skills are mostly lacking. It's a big part of why I wouldn't start a business myself. It might have the added benefit of giving some of the commercial==closed-source people some ideas on where it can make sense to use open-source in their own businesses. I work with a guy who can't understand why anybody would ever contribute to open source. He sees it as people giving away valuable brain juice for free.
natural order (Score:4, Interesting)
I think we've been in that penultimate step for a while now. Here's hoping Ghandi was right =)
Bad Paper - No Clue - F (Score:4, Interesting)
The two strategies presented are not strategies against software.
The first, embrace and extend is a play against already established standards, and usually is applied to protocols and APIs but not to package software. Most successful E&E campaigns have been against standards implemented in closed source systems. Most of MS success was before the rise of Open Source as a viable model. Generally E&E fails against open source competition (see firefox, Apache, Linux v Unix, etc...).
The second was just a trashcan "make a better product" and "hide it from the competition" kind of suggestion. Oh, and segment your market better... problem is that it's assuming that your open competitors can't make better products or segment better.
MBAs are idiots when it comes to technology (Score:1, Interesting)
I'm not saying this to be inflammatory. Honestly.
I work for a university, where I maintain their Learning Management Systems (LMS) - software used to deliver course content online.
We use a combination of open source and proprietary LMSes: Moodle, WebCT and Blackboard.
When it comes to actually being able to grasp even simple online concepts, the Business faculty are at the bottom of the barrel. The people in the MBA program? Entirely clueless about technology ... which is disturbing as my school offers an MBA that specializes in tech.
Very, very scary people.
If you strike me down... (Score:1, Interesting)
"First they ignore you,
Then they laugh at you,
Then they fight you,
Then you win."
Mohandas Karamchand Gandhi
Hmmm (Score:3, Interesting)
Re:Competition is good (Score:3, Interesting)
This course isn't about how to compete in a market. It's about how to control one... if you control the market, you're in a pretty good position to be "unfair" to your competitors - and to that end, this course appears to encourage that
Zed Shaw is right: fuck the ABG
Don't be paranoid, open sourcers (Score:4, Interesting)
The headline is misleading. The MBA students aren't learning how to fight open source as an abstract concept; they're learning what to do when your business produces a piece of proprietary software that competes with an open source product.
I'm all for open source and use a lot of open source apps, but I don't believe that such a dilemma is always most profitably answered with "embrace open source yourself."
Re:Good! (Score:5, Interesting)
Don't software authors have a right to get paid... just like any other profession?
Yep, they sure do. I am one. And I get paid. And I only write open source software.
I provide a service, and that is to make their systems work the way they want them to. Most code is either too specific to the business to provide a competitive edge to somebody else, or its so generic that exposing it to the world can only help improve it.
Re:Reminds me of Microsoft (Score:1, Interesting)
Make money and make a reputation through making and marketing GOOD STABLE WORKING software. Don't try to do it by making a big bag of shit and blocking anyone trying to compete.
Did you not even RTFSummary?!
From the summary:
to judiciously improve its product features
They are telling them to make good stable working software, and to constantly improve it. They're trying to get the MBA's to make better software than the OSS people do. You may not like some of the other techniques they're recommending, but if they do as these profs say, they will make good software.
Re:Hmmm (Score:3, Interesting)
I'd rather get my MBA from someone who gives me the tools to actually compete in the market place.
What like better products, lower prices and such? I'm sorry, but then you're trying to become a product/process engineer. MBAs are all about seeing business opportunities - how can they take the skills we have and make profitable products out of it. It's all about finding markets or niches where margins are high and competition is low and keeping it that way so you can turn a tidy profit. OSS is nothing special in this context, the next article can just as easily be on how to break in and capture a market share in Microsofts monopoly. Is it tough? Of course it is, it's capitalism - as long as iot's within the bounds of the law it's all about competition and squeezing your competitors out, not playing nice. There are many ways to throw your weight around in a market and quite few of them are illegal. Even if for nothing else, it's definately something you need to learn to defend against in MBA class, otherwise your company will find itself on the sidelines wondering what happened and maybe, at best, get some petty cash in a lawsuit about it.
Step back for a minute (Score:4, Interesting)
Before deciding to fight open source and to lock your customers into dependence on your company so that they cannot escape, step back and ask yourself a question. Do I want to make money by doing good for people, or by deceiving and manipulating them?
There are basically two different ways to run a company. One is to make your customers happy and strive to serve them as best you can, trusting that they will reward you for it with loyalty. The other is to trick people somehow, by being dishonest, selling them something they don't need, locking them in to your service, or sticking them with extra fees. Both approaches can be profitable, but only one can actually make the world a better place.
I love companies that take the former approach. For example: NewEgg.com (Low prices, honest customer reviews posted even if they are negative, excellent customer service.) Monoprice.com (For the same reasons.) Netflix (Fast service, easy to use website, honest communication and refunds for rare service outages.) My local coffee shop (High quality drinks that are much better than the chains, friendly staff, good food with custom menu items that change frequently.)
On the other hand, there is no shortage of examples of the latter approach. Best Buy (Selling HDMI cables for $50-75 which can be purchased for $5-8 on Monoprice.com.) Most places that sell glasses (for excessive markups. An online market for glasses at vastly reduced prices is now springing up.) Most cell phone providers (for charging excessive fees, making it difficult to switch providers or move phones to other plans, and designing their plans to overcharge customers who don't guess correctly how many minutes they will talk and at what time.) I could go on.
It's probably easier to make money going the evil route, or at least it requires less originality. But I hope that at least a fraction of MBA students would be interested in something more than the bottom line of profit.
Re:confusion (Score:5, Interesting)
In other words, what's been taught is "evaluate the software on its own merits, and how it will affect future growth," which is pretty standard "be a good manager" ideas but is reassuring to hear in a classroom setting. I'm one of the more tech-savvy students in my classes, but it's nice that it's not all just "buy this and that and you'll have an enterprise-class system for your small business."
Re:Good! (Score:5, Interesting)
Not neccesarily. This argument is commonly abused. Capital is needed for the production of certain (a few, certainly not all - as we know) creative works. Commercial films and software would be nothing like what they are today without capital to pay the developers for all their efforts. It is therefor logical to charge a fee for reproduction in order to repay the debt that development incurred. It's also not too impolite to try to make a profit.
There is a point where all these things start to go wrong. These companies will all start to try to maintain monopoly status, and sabotage competition in any way possible. They will hold on to a work which is long out of date (particularly the movie industry, but software companies also do this) and continue to milk the population long after the initial debt has been made and several people have become filthy rich. They will completely ignore market situations and the customer's needs and charge whatever they want for their products.
Software is one of those products that does not require a lot of equipment to produce, just a lot of time. There are plenty of people in this world who have way too much time on their hands (damn I wish I was one of these) and invest it in free software. Over the years free software has evolved to be surprise competition in the software market which used to be (and still is, depending on your views) the playground of Microsoft, Apple, IBM, Adobe, ect, ect. Since there is now competition, it would seem logical for the price of this commercial software to drop - but to avoid that, we apparently designed a whole college course on how to break all the rules and play unfair.
I threw away another couple mod points to write this :/
FOSS is the default (Score:2, Interesting)
I strongly believe ordinary economic strategies are more concerned with resources with scarcity.
Software does not have scarcity, because once made it is abundant. And the average fixed cost tends to become zero all the time.
It is even better than the secret Coke formula and thats why people who can force people to buy software can reap unbelievably high profits.
FOSS's greatest weakness lies in its divisibility. People get divided over little things. "There is blob in Linus's kernel? Well, then guess what we are making a new OS".
Therefore as long as FOSSians stay united they are going to be safe.
Re:Step back for a minute (Score:3, Interesting)
I perfectly understand.
I work at Starbucks, that corporate coffee chain. You know, they spend more on medical insurance on us 20+hr a week employees than they do on beans?
But aside that, we're told at sbux one major rule on how we conduct our business: "Just Say Yes". No matter what. As an example, we've had a dog show going on during the weekend. A judge came on by and ordered a venti (large) coffee with 1 inch of steamed 2%. Cool. Rule says charge for only =>4 oz. milk. One of our 17 yr old partners started badmouthing me saying that we should charge her a misto (.50$ more). I told her no, and here's the standards.
Turns out she charged the judge the day before the misto price. That just pisses me off, considering the rules say we dont charge for that addition.
We here at Sbux are here to serve the community (we donate all our pastries to the homeless shelter, unlike Wal-Mart.. grrr) while treating the customer to the best experience we can. We baristas are treated very well, as the corporate idea is that if we're treated well, we will treat well. Well, at least, I try. I love happy customers.
Maybe as a consultant, I've learned how to make happy people. I know you dont turn back business, and you dont piss your customers off, especially for a nickel or 2. You'll get much more back in he long run (a customer for 3+ years, vs getting .50$ ONE time). At least, thats my opinion.
Re:Investors have to question and reject this. (Score:5, Interesting)
There is always there is always the flip side course for 99.99% of other non-software businesses, which is far more justified as a MBA course.
All those objective that open source software fulfil and core subjects for the majority of businesses.
Open source software, managing software overheads more effectively, their profits are your costs.
Open source software, minimising retraining and re documentation, only implement worthwhile changes.
Open source software, avoiding supplier forced costly upgrades and managing them at your pace.
Open source software, using publicly audited software, hidden software faults cost you money.
Open source software, avoiding data lock in, don't be forced to pay for your own data over and over again.
Open source software, avoiding training costs, open source software for education, save on taxes whilst saving on overheads, double plus bonus.
Re:Like what? (Score:4, Interesting)
I guess there's Gears [google.com], Android [google.com], their patches for Wine [google.com] and MySQL [google.com], as of late there's also Chromium [google.com] (with the v8 JavaScript engine [google.com]). They probably have more, see Google and Open Source [google.com].
All in all I think they have some 190 open source projects/components/tools/whatchamacallit [google.com], a lot of these are Google oriented but there are some more generic ones. Maybe a result of their 20%/80% thing.
You can't deny that Google, with Chris DiBona [wikipedia.org] as their open source program manager, certainly _contributes_ a lot to open source projects or what is regarded the open source community at large. From project hosting (Google Code), to Summer of Code, to hosting events, to individual sponsorships, to participating in standardization organizations (OASIS, W3C), to funding foundations (such as Mozilla).
Prostitute Professors (Score:3, Interesting)
Prostitutes always forgo morality in favor of money, and there's not much money in free open-source software.
Re:Good! (Score:3, Interesting)
As others have said, generally a company hires a software developer to develop some software that will make the company's life easier - not so they can profit from the distribution of that software.
But that's not always appropriate. General-purpose tools being a good example. How useful would Photoshop, for example, be if it were written only to fulfill the needs of one particular company?
There's also the case to be made that software developed in-house for one specific company tends to be the most awful software of all. So, I think software in general is better off because some companies make their money from producing and distributing general-purpose software. It also provides F/OSS with some goals to strive for.
Re:Competition is good (Score:3, Interesting)
Choice is great. But having a couple great, consistent, stable choices is better than having several hundred ones ranging from excellent to shitty. Variety for its own sake is pointless, from a practical standpoint at least.
Survival of the fittest is as practical and natural as it gets. There is no need for anyone to be involved in removing the "unworthy" distros from the market. The market will take care of this.
I'm sure you do not feel a need to destroy bad paintings even though there are millions out there? You just don't need to buy them. The person who creates a painting probably feels that some value is added to his/her life in the process. Also... there just might be someone crazy enough out there for whom a particularly "bad" painting is perfect. But you, you get to ignore it.
Re:Competition is good (Score:2, Interesting)
Communicating open source advantages (Score:3, Interesting)
There is always there is always the flip side course for 99.99% of other non-software businesses, which is far more justified as a MBA course.
Exactly. While it isn't actually all that hard, most non-slashdot reading folks I've ever discussed open source licensing with (admittedly a small sample) grossly misunderstand the terms of open source licenses - especially the GPL. They usually think they give away their copyrights when in fact just the opposite occurs. As a community, we advocates of open source have done a poor job communicating why open source is an advantage to those willing to take the plunge. There are unfortunately a lot of misconceptions about the finer details of open source licensing and the software in general.
One of the touted advantages of open source is the availability of the source code. But if a business isn't a software developer that is not perceived as especially valuable. No auto parts supplier is likely to go and contribute patches to Open Office. It just won't ever happen and they know it. What needs to be emphasized are the follow-on advantages - no forced upgrades, no data lock in, reduced licensing fees, reduced platform lock in, etc.
Many folks also tend to underestimate the advantages of open source software in favor of whatever commercial software they are already familiar with. The fact that Open Office is free (speech and beer) gets overwhelmed by the perceived need to use Excel (or Word or...) because that is what they user is familiar with and often what everyone around him/her uses. Never mind that they are giving significant control over their upgrade schedule and data accessibility to another company and not being compensated for the "privilege".
Lesson #1 for would be generals (Score:3, Interesting)
Lesson #1: Pick your battles
Lesson #2, method dealing with the enemy while occupying a strategically disadvantageous position: see lesson #1.
Does anybody believe that the proprietary/free clock will be rolled back to the late 1980s, when printing licenses was like printing currency? Of course not. Open source is here to stay. That doesn't mean there aren't opportunities to make money in software, both in competition with and by using free software. It seems to me the smart business leader chooses the mix of competition and cooperation. Google hasn't done too bad, after all.
Where it's tough is when you have a company with a cash cow. Microsoft. ESRI. Oracle. The cash cow may be doomed, but ever year it is kept alive represents money, a great deal of money.
So it makes sense to position your product, say Windows, against the open source "competition". It really boils down to one thing: compete. Give your customers reasons to keep buying your product and cut prices to keep them from moving away from your products. There are now free as in beer versions of Oracle and SQL Server, just to establish a bulwark on the low end of the product position.
Re:confusion (Score:2, Interesting)
If you put in a few years at any decent-sized company, you would've learned it from practice instead of discussing case studies/"theories" in classroom. Except some economics theory, there is no theory in business - in business, it's all practice. My apology to Yogi for that.
I was told GE's program is exactly that - learning from practice. But I admit ignorance about GE's - I didn't go through it, and I only know two guys who went into that. Perhaps they do overboard with six sigma and Neutron Jack tendencies.
Yeah, how's that working out. So were you the only one not cracking jokes about that course?