WWW8 Notes: Open Source Software and Software Patents Continued

The last day of the conference was a "Developer's Day," in which attendees could choose to listen (and talk) to prominent developers in their field of interest. At the Open Source Developer's Half-Day (which had some subject overlap with the Scripting Developer's Half-Day), a number of developers talked about the goings-on in their various areas of interest. Aside from many of the usual suspects - including PHP, Python, and Apache - there were two notable talks.

One was given by a representative of the developers of UIML - User Interface Markup Language. The idea behind UIML is to develop an open-source language that people can use to build interfaces for on web applications, standalone computer applications, cell phones, and elsewhere. UIML separates the interface of a system from the backend, allowing programmers so inclined to focus on just the guts of a system, while multiple people could build the interfaces to connect users to the backend functionality. Similarly, a single interface designer would be able to spread a single interface across multiple applications, each of which might have been developed by a different backend designer.

Digital Creations and Zope

Paul Everitt, from Digital Creations, also gave an interesting talk - but about the business side of open source, rather than development or technical issues.

Digital Creations makes and supports a product called Zope, a Python-based web application server. His story of how Digital Creations started out, how it got venture capital funding and released its application server as open source, and how it continues to grow is a useful lesson in open-source business.

As he told it, there were three basic things that he and the rest of the company had to deal with, in going completely open source:

1. making the decision to go open source
2. determining how the decision changed their business plan
3. determining the new basis for their business' value

Making the Open Source Decision

Digital Creations was already familiar with the open source community, and supporting open-source software, before releasing Zope as open source. Their first product was Bobo, a free Python object publisher. Members of the six-person Digital Creations team were also active in the Python community, and, according to Everitt, had donated the first machine which served as the host python.org.

Their next product, an application server (originally named Principia), they hoped to sell; and they had dreams of taking on the world with this next product. As Everitt put it: "Netscape, watch out!"

But the impetus to give away Zope ended up coming from an investor. In late 1998, a venture capitalist whose Wall Street company had used open-source software - including Python and Bobo - to help them make millions of dollars, bought a minority investment in Digital Creations.

After making the investment, the VC suggested that they give away their product. Why? First, they expected that while they would not make money from sales, more people would use Zope if it were free, providing more consulting and support revenue than they would have made through selling.

Second, as the venture capitalist asked, "Is this the last good idea you're going to have?" In his eyes, any individual golden egg, like the product Zope, was expendable; the goose that laid them, Digital Creations, would not lose value by giving them away.

So, on the advice of their investor, they started giving Zope away.

How does this change your business plan?

Everitt pointed to three ways in which going completely open source, in terms of the company's products, changed the company's business plans.

The first, and most obvious, way in which the business changed was that they became completely service-oriented rather than product-oriented. A lot of technology businesses are moving towards models where most money comes from services and support. By going straight for a 100% services firm, Digital Creations skipped the intermediate step at which many companies are today, where a large, and less profitable, part of business is selling a product.

Second, Digital Creations has no problems in either hiring qualified programmers or finding consultants to subcontract with them. Because any programmer can look under the hood and see how Zope works, there are numerous people in the field who are training themselves to be the programmers that Digital Creations will need in the future. (On the other hand, there are also people training themselves to be Digital Creations' toughest competitors.)

Third, Digital Creations decided to put a lot of money into branding and expanding Zope, rather than advertising themselves. The existence of a large user community for Zope, they felt, would be more likely to inspire confidence and buy-in from their customers than just building up Digital Creations, the company. With a vibrant and well-developed user base, customers could be confident that even if Digital Creations fails, the software will live on.

Determining a New Basis for Business Value

The last issue with going open source was that of business value. Traditional software companies tend to count their intellectual property - the software products they sell - as a major part of their business value. When you give away your software, all that value disappears.

In the open-source business, the intellectual property is the people who are doing the work. Just as traditional software is valuable because it provides a revenue stream through sales, the people in a company are valuable because they provide a revenue stream through services. Having a number of good programmers working in your open-source business also makes you a valuable takeover target, Everitt said, if your people have a reputation for doing work that is both good and fast. Increasingly, takeovers in the computer industry are being done not for tangible assets, but for know-how and business processes. Having an open-source business just values the people, and what they know, to an even greater degree than traditional businesses.

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