Lessons from the Layoffs at Linuxcare
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What does this have to do with Linuxcare, and what lessons are there for entrepreneurs looking to capitalize on open source?
First off, service does not equal tech support! It does not equal training and certification. It does not equal custom development services! It can include all of these components, but it most go beyond them, by reframing a problem that your customers are struggling with, and offering a compelling outsourced solution.
Service means helping other people to get their jobs done, effectively becoming an invisible enabler of their business. When IBM or Oracle sells service as part of their software offering, they are really selling solutions, the assurance that some kind of business problem is going to go away, or some kind of business process is going to be carried on in a more streamlined fashion.
Successful service businesses don't necessarily create new revenue streams; they often divert existing ones.
Two companies that I think have a lot of promise in building exciting "service" businesses based on open source are Collab.Net and Digital Creations. (Disclaimer: I am an investor in both companies. But I am not high on these companies because I am an investor. I am an investor because I think they have got something right.)
Collab.Net's mission is to help manage open source and other internet-enabled collaborative development efforts. Just as UUnet realized that Usenet and email over UUCP required reliable communications infrastructure, Collab.net realizes that distributed internet-era software development projects (whether open source, closed, or somewhere in between), need tools and infrastructure for collaborative work.
Collab.net's first offering is sourceXchange, a marketplace for open source software RFPs. ("We need a Linux printer driver for our new HP printer, and we're willing to pay for it.") But that's just the tip of the iceberg. Collab.net is ultimately about bringing the best practices of successful open source software development projects to anyone who is developing software.
Collab.net founder and CTO Brian Behlendorf was a co-founder of the Apache project. Like Rick Adams, he didn't try to package and sell the software he'd worked on; instead, he set out to build business services around the tools, methodologies, and processes that have made Apache such a success.
Unlike many open source projects, which grew up around the work of a single visionary developer, Apache was from the outset a collaborative project. After the original development team left NCSA for various commercial web startups, the NCSA web server was orphaned until a group of its large end users decided to take on the job of maintaining and extending it by coordinating their patches. The result, "a patchy server", went on to become the dominant web server in the market, but the real secret of Apache may well be the development processes the team put in place. (For more information on these processes, see Brian's essay in the book Open Sources.)
Companies trying to harness open source often flounder because they think that all they have to do is change their license and put their code out on the net. They find that there's a huge amount of work required to develop consensus around a technical vision and an architecture that people can participate in, then to build momentum and coordinate community contributions. In the end, open source isn't just about new software licensing terms but also about a new, internet-enabled style of distributed software development.
While Collab.net's early work has largely been with vendors like Hewlett-Packard who want to cooperate with the open source community, the ultimate target market is far larger. As Eric Raymond noted in The Magic Cauldron, far more software is written for use than for resale. Any company that is spending money to develop software in support of its business processes is intrigued by the opportunity to harness programmers outside its walls, and to reuse source code that's already been debugged by a thousand eyes. Those companies that can figure out how to embrace the best practices of open source development and apply them to their own internal development efforts will be the first to recognize the breakthrough productivity gains that open source provides.
For example, Galactic Marketing is using sourceXchange to develop an open source workflow management system. Invisible Worlds is using sourceXchange to produce open source components that support its new XML-based Blocks data exchange protocol. The service that Collab.net provides to its customers is reliable access to the far-flung developers of the open source community. Much as UUnet provided internet dial tone, Collab.net provides "open source dial tone." (Or should we call it "collaborative development dial tone"?)
Digital Creations (the company behind the Zope application server platform) has a service-based business model for providing infrastructure for managing and building web content. They look at a company like Vignette, which gets a huge proportion of its revenue from web development services involved in deployment of its proprietary content management software, and believe that they can capture the same kind of revenue even when the software itself is a low or no-cost item. After all, platform software like Vignette or Zope isn't something that you can use all that effectively out of the box. You need to customize it heavily for your site, and that is often an outsourced activity. While anyone can download and install Zope, if you really want to take it to the max, who better to help you than its creators?
As Digital Creations CEO Paul Everitt said to me once in email, "We're awfully lucky. Digital Creations is in a market that, primarily due to the hiring crisis, wants solutions rather than software. At the same time, people pay based on value, and cost of software is rather immaterial. Obviously we're also lucky since perceived value with mainstream choices in the content management market right now involves six or seven digits."
Of the two companies, Digital Creations is closer to the pure professional services model now being explored by Linuxcare. But Digital Creations isn't ignoring the frontier of internet-enabled "e-services" either. They've just added support for XML-RPC to Zope.
I've written elsewhere about the way that things that used to be delivered as applications are increasingly being delivered as internet services. What's most exciting on the services front is the way that we're starting to see the development of protocols like XML-RPC and SOAP that will make it easier for companies to create electronic services that can be accessed by other web sites and remote programs. In the age of the net, "services" doesn't just mean professional services, it means figuring out how to build frameworks for automating activities that used to require human labor.
On that note, another open source company that seems to me to have a services vision at its heart is Eazel. (And no, I'm not an investor in Eazel, though not for lack of trying :-). The best I could do was to get founder Andy Hertzfeld (who was one of the key developers of the Macintosh) to keynote at our upcoming Open Source Software Convention in Monterey.) Eazel realizes that creating a next generation user interface for Linux means more than putting a pretty face on the system. From what I've gathered, Eazel's business plan includes not just a new desktop but services for software maintenance, update, and administration.
My point isn't to suggest that any particular approach to services based on open source is the best one. Right now, the open source sector is still young, with rapidly changing tools, practices, and services. What I hope is that the open source community will think big. The really huge opportunities typically redefine markets, creating services that seem obvious and necessary in retrospect, services that were once handled haphazardly but are now so central that no one can do without.
That's ultimately the lesson of UUnet and Network Solutions: to find the killer service, you have to stop taking things for granted. You have to look with fresh eyes at what problems people are struggling with, and find a way to take them off their hands. Once you've succeeded, everyone will take things for granted again.
Tim O'Reilly is the founder and CEO of O'Reilly Media, Inc., thought by many to be the best computer book publisher in the world. In addition to Foo Camps ("Friends of O'Reilly" Camps, which gave rise to the "un-conference" movement), O'Reilly Media also hosts conferences on technology topics, including the Web 2.0 Summit, the Web 2.0 Expo, the O'Reilly Open Source Convention, the Gov 2.0 Summit, and the Gov 2.0 Expo. Tim's blog, the O'Reilly Radar, "watches the alpha geeks" to determine emerging technology trends, and serves as a platform for advocacy about issues of importance to the technical community. Tim's long-term vision for his company is to change the world by spreading the knowledge of innovators. In addition to O'Reilly Media, Tim is a founder of Safari Books Online, a pioneering subscription service for accessing books online, and O'Reilly AlphaTech Ventures, an early-stage venture firm.
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