Open Source as a business strategy?

Posted on August 2, 2011

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In my previous post about Open Source, Freelancing and the public domain, I mentioned the things to keep in mind when you use and re-use specific (home made) solutions in commercial assignment.

But what if you want to do more?

Protecting your idea before entering a partnership

Say you have the golden opportunity to start a partnership with other people.

And the outlook is really promising. Something like: “several million euros in contracts in the next twelve months”.

Where you deliver the technology, they deliver the sales, the network, the corporate knowledge and commercial know how.

If all goes well, you will all be happy and have a lot more money than when you started.

However: if things go wrong, you might lose your awesome solution, for instance because your partners until then will sue you dearly if you ever use it again, somewhere else, in any future project. Simply because it is their policy and because they can.

There are several ways to protect your idea and your software, but the main question is: “what do you bring into the deal to begin with?”

Legal headaches

How do you protect what you perceive to be yours? How do you make sure you can te-use what you brought into a business deal when things go pear-shaped?

Who can help you avoid putting your head into a legal noose?

Your expertise, not your solution

One way I feel is best – if you feel an unfortunate premature exit is one of the possible outcomes – is to bring in your expertise alone.

Whatever you produce during the partnership might be of all involved at that time, but your original product might better stay yours.

Again the Public Domain might be a good solution, if you dare to take it. Where you might loose the cutting edge – as others, including your competitors, will have access to it too – you might keep the thing you put your heart in to begin with.

If the market is small or: when this might be a bad idea

If there are only a hand full of players, wolves prowling on the other side of the road and only a hand full of potential clients, releasing  your source code (as this is what we talk about) might be a big mistake.

Also, you might have dreams of world domination.

In that case keeping your stuff secret might be (or seem to be) the only way not to lose your position.

When your business model is service driven

On the other hand, maybe your idea is not that unique to begin with and making it open to the public domain allows you to move much easier.

What to keep in mind with going Open

If you go Open, there is hardly any room for mixed feelings. If you go, go fully and make sure you have no second thoughts.

Open Source has a completely different business model than Closed Source. One reason is what I mentioned before: if it is in the Public Domain, your competitor will have access to it too.

What defines your cutting edge?

The question is, however: what do you compete on? And what changes if your business model changes?

I like to use the example of the Boiler and Geiser for this. Both are used to provide hot water. Both are produced in mass and both are based on relatively simple technological principles. Both are omni-present. Any and all households in the Western world has either one or the other.

As they are mechanical constructs, you need maintenance.

As they are everywhere, you need relatively many people to do that maintenance. Enough to build a business around.

What defines youir cutting edge?

Are you special due to some secret sauce, or because of what you can do for others with the tools you produced?

Do you want to go for secrecy and (as a possible next step) to complex legal shit, or simply release and build your business on services or spin off products? Both are valid as a starting point.

Your secret sauce makes it possible to keep the cutting edge (if you are good) and be the only one licensing that software. As Microsoft shown, that can be very lucrative. It also involves a lot of extra overhead as you will need more and more effort to protect that secret and your market share.

When you open stuff up, your main competitive edge is the quality of you and your vision. Put into an example: Even though anyone can make fried potatoes, but yours might be so super awesomely tasteful that people travel from the other side of town specifically to get yours. Here too is increased effort required to remain in the fore front as time progresses and others learn from your success, but as you have fewer things to worry about (no secrets to protect and a simpler organizational model) you need relatively less effort to make it all work. You can basically simply focus on doing your job.

Where I stand

I want several things:

  1. To build a steady business – Which allows me to keep and increase my financial independence
  2. To create for creations sake – As I like to make beautiful things that gives me satisfaction. It is basically my legal drug.
  3. To create something awesome with others – As I am limited in what I can do alone and working with the right people (as in: the right fit/chemistry) can be very exciting, very stimulating and a lot of fun.
What I have learned:
  1. The VC/TextBook Startup thing is not my thing – I want to move fast and freely. I want to build. I want launching customers and test my things in the wild. I want to be able to change my mind. Completely. Tomorrow. And get away with that.
  2. There is another way – I earned more (worry free) money with freelancing than by having a business with personnel (I did both).
  3. Big is not always by Business – Yes it is cool to be able to say: “I created and run a multi-million business” (I did not). But it is not the only- or best way to become big.
  4. Money does not equal fun – Fun is doing stuff you like. Money is something you earn.

Endeavoring stuff via a Textbook Startup attempt (if there is something like that) turned out to be the opposite of what I wanted.

In the next months I will release one framework (HotForestGreen) as Open Source. It is being developed to be one of the most mature frameworks for Smart Spaces, Distributed Applications development and “the internet of things” you can find now in Open Source.

Ten your ago I would have argued to keep it closed source and license the software per user and project. I think it has a lot of potential awesomeness in it.

Right now, putting it in Public Domain and going full force with it (no holding back) still scares the shit out of a part of me. Because if it becomes a success, I might find to have gambled on dogs instead of horses.

The alternative routes – however – do no longer appeal to me. At all.

And there you have it.

Closing

Open Source and the Public Domain is part of my future insurance that if I find partners to work with, my source code remains mine, to do whatever I want to do with it afterwards.

The risk of being copied is always there. But the risk of getting nowhere to begin with is bigger. And I no longer believe that setting up a business around software is a thing that will bring me fun and joy, as I myself do not fit the shoes required to wear for such work.

Open Source is also my warranty for personal freedom in future projects (due to the restraint-less liberty to share what I created) and a more promising road to achieve what I want to achieve: that people actually use my work.

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Posted in: Legal