glen-martin
Open source companies can't innovate in technology
posted Tuesday, 1 November 2005
Danny Rimer, investor with Index Ventures, writes in BusinessWeek:
This reminds me of a great fallacy, "Looking at very old buildings - temples, cathedrals, the occasional leaning tower - from the fact that they survived we must conclude that these builders really knew what they were doing." The reality is of course that these are the very few buildings of that age that are still standing.
The argument here is that only closed-source companies can create innovation. No, the innovative closed-source companies that have survived have created truly valuable innovation. The ground is littered with closed-source companies whose innovations weren't quite innovative enough to create sustained business value.
Customers understand the risk in single sourcing - they are motivated to accept that risk only when the reward justifies it. So you go to them and say (taking an example not at random) "I've got this great new non-relational database technology than will save 10% on your transactions, but you can only buy it from us forever" and they're not interested. You go to them and say "ok, I've banded together with a bunch of other people doing similar technologies and come up with a common interface so you won't be locked in," and now they'll start to talk. Or you go to them and say "in addition to your normal processing needs, you've got a couple of thorny problems you can't solve with your existing approaches. Our innovative product will fix these" and they buy and use only in the limited cases they couldn't solve another way.
Open source in fact reduces the risk to adopting innovation, by removing lock-in and reducing succeptibility to vendor failure. If the innovation worked - that is, has value - because it is open others will pick it up and take it farther. If your vendor tanks, move to one of these others. Or take the source code and go on - find others who also use it and band together to support and extend. Open source reduces the barrier to using new technologies by removing these two aspects of single-source risk.
I've been speaking from the customer point of view.
Rimer of course takes an investor point of view. He says "why would I invest in innovation if others are free to take and reuse my innovations without paying?", or perhaps more clearly "why should I buy a company to get their innovation when I can use their innovation for free?" That is, of course, the question that different companies are answering in different ways - some through licenses, some through process innovation, some through focusing on professional service sales. So in Rimer's world, yes, an open source company "absolutely can't have a new, innovative technology" because he can't set a value to it. Unless there is something else about the company that ties it all together in a unique way that can multiply the value of the technology innovation.
The second C is commodity. Open-source companies absolutely can't have a new, innovative technology. They have to be smarter approaches to existing technology. They have to be [technologies] that developers and buyers already understand.
This reminds me of a great fallacy, "Looking at very old buildings - temples, cathedrals, the occasional leaning tower - from the fact that they survived we must conclude that these builders really knew what they were doing." The reality is of course that these are the very few buildings of that age that are still standing.
The argument here is that only closed-source companies can create innovation. No, the innovative closed-source companies that have survived have created truly valuable innovation. The ground is littered with closed-source companies whose innovations weren't quite innovative enough to create sustained business value.
Customers understand the risk in single sourcing - they are motivated to accept that risk only when the reward justifies it. So you go to them and say (taking an example not at random) "I've got this great new non-relational database technology than will save 10% on your transactions, but you can only buy it from us forever" and they're not interested. You go to them and say "ok, I've banded together with a bunch of other people doing similar technologies and come up with a common interface so you won't be locked in," and now they'll start to talk. Or you go to them and say "in addition to your normal processing needs, you've got a couple of thorny problems you can't solve with your existing approaches. Our innovative product will fix these" and they buy and use only in the limited cases they couldn't solve another way.
Open source in fact reduces the risk to adopting innovation, by removing lock-in and reducing succeptibility to vendor failure. If the innovation worked - that is, has value - because it is open others will pick it up and take it farther. If your vendor tanks, move to one of these others. Or take the source code and go on - find others who also use it and band together to support and extend. Open source reduces the barrier to using new technologies by removing these two aspects of single-source risk.
I've been speaking from the customer point of view.
Rimer of course takes an investor point of view. He says "why would I invest in innovation if others are free to take and reuse my innovations without paying?", or perhaps more clearly "why should I buy a company to get their innovation when I can use their innovation for free?" That is, of course, the question that different companies are answering in different ways - some through licenses, some through process innovation, some through focusing on professional service sales. So in Rimer's world, yes, an open source company "absolutely can't have a new, innovative technology" because he can't set a value to it. Unless there is something else about the company that ties it all together in a unique way that can multiply the value of the technology innovation.
comments (1)
1. Marketr left...
Tuesday, 1 November 2005 12:29 pm
And the probability that a bunch of open source geeks can innovate on
process or professional services is small.