Archive for March 1st, 2010

How to analyse an OSS business model – part three

Welcome to the third part of  our little analysis of OSS business models (first part here, second part here). It is heavily based on the Osterwalder model, and follows through the examination of our hypothetical business model reaching the “key resources” part. After all the theoretical parts, we will try to add a simple set of hands-on exercises and tutorials based on a more or less real case.

The argument of this part is “resources”. Key resources are the set of assets (material and immaterial) that are the basis of the company operations. There may be physical resources (a production plant for example), intellectual resources (previously developed source code), human resources (your developers), financial resources (capital in the bank, loans) and other immaterial assets (your company name as a recognizable mark, “good standing” in terms of how your customer see your products…)

In our OSS company example, at least part of the immaterial assets are shared and publicly available, that is they are non rival. In our model we have a company that provides under an open source license the community edition of the software, while provides an “enterprise edition” with additional stability tests, support and so on. It is not correct to say that just because the source code is publicly available it is not monetizable; on the contrary, especially when the code is wholly owned in terms of copyright assignments it is potentially a valuable asset (for some examples, look at JBoss or MySQL). Even when the code is cooperatively owned (as in a pure GPLv2 with multiple contributors, like Linux) the “default place” is valuable in itself, and it is the reason why so many companies try to make sure that their code is included in the main kernel line, thus reducing future integration efforts and sharing the maintenance activities. Other examples that are relevant for the OSS case are trademarks (that are sometimes vigorously defended), “brand name”, the external ecosystem of knowledge; for example, all the people that is capable of using and managing a complex OSS offering, creating a networked value that grows with the number of participants in the net. People becoming RedHat certified, for example, increases the value of the RedHat ecosystem other than their own.

One of the most important resource is human: the people working on your code, installing it, supporting it. Most of those people in the OSS environment are not part of your company, but are an extremely important asset on their own thanks to their capability of contributing back time and effort. In exchange, these resources need to be managed, and that’s why you need sometimes figures like “community managers” (an excellent example is my friend Stefano Maffulli, community manager extraordinaire at Funambol) because exactly as you have a financial officer to check your finance (another essential resource) you should have a community manager for… the community.

To properly analyse your key resources, we can extend the network model created for the channel analysis (the actor/action model) and extend it a little bit, including the missing pieces. For example, we mentioned that a potential customer may be interested in our product. Who makes it? Of course, as any good OSS company, you have some pieces coming from the outside (other OSS projects), part coded by your developers and part coming as contribution from external groups. All of them are resources: the other OSS projects are key resources themselves, simply obtained without immediate cost but managed by some developers that are themselves a key resources; your internally developed source code is another key resource, and if you have large scale contributions from the outside those should be considered resources too, maybe not “key” resources but important nevertheless.

The main concept is: a resource is “key” if without it your company would not be able to operate; and whenever you have a key resource you should have a person that manages it with a clearly defined process.

Next: cost structure!