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Summary:

Much like the U.S. presidential candidates, software companies will move to the center in 2008. But the center of software doesn’t lie between conservatism and liberalism — it lies between proprietary and open.

When the U.S. presidential primaries wrap up, the winning candidates — after spending months kowtowing to the extremists in their parties — will make a mad dash to the center. A similar rush to the center is now taking place in software, and in 2008, we expect that trend to continue. But in the case of software, the center doesn’t lie between the extremes of conservatism and liberalism but rather between those of proprietary and open.

In the past, some software companies, like Microsoft, have taken a mainly proprietary approach while other outfits, such as the Free Software Foundation, have taken an entirely open approach. But the software primaries are over. The best approach now is somewhere in the middle: a combination of open and closed, or what, in The 7 Cs of the Future of Software, I called “clopen” — though I’m very open to other suggestions.

One manifestation of the momentum towards the middle is hybrid source, in which companies offer open-source and premium, proprietary versions of software. Under pressure from open-source alternatives, software companies need to find a new strategy, one that combines the concepts of free and open with revenue generation.

RedMonk analyst Steve O’Grady notes that hybrid source “is generally applied to projects or products that combine open and closed source software to produce an asset containing both.” O’Grady was prompted to tackle the question of hybrid source after MySQL, which had in the past provided all of their source code without charge, announced a commercial edition of their database design tool, Workbench.

But hybrid source is not the only result of moving to the center between the extremes of proprietary and open. Google exemplifies another strategy: offering free services based on proprietary algorithms based on open-source operating systems. And they’ve made this multi-layered concoction of open and closed work like magic.

Microsoft, like a political candidate who’s won a primary, is not immune to the need to move to the center. As David Strom reports in Baseline Magazine, recently the company “has become slightly more open with respect to its networking protocols. Late last year, they announced a way for third parties to license their core file-sharing protocols through an independent organization called the Protocol Freedom Information Foundation.”

Adobe is perhaps the most obvious example of the need for companies built on closed, proprietary software business models to move to the middle. Their open sourcing of the ECMAScript engine and the Flex SDK shows their considered steps towards a clopen future.

Finding the right balance between the two extremes will be the secret to the success for software companies in 2008 — just like the winning U.S. presidential candidate will be the one who finds the right balance point between the right and the left.

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  1. The hybrid strategy is not easy to make work and I think is a fad. As an example see Real Networks’ efforts ~4 years ago with the Helix platform.

    I think hybrid strategies often seek to exploit open source developers yet reap the benefits of license software while appearing as the “good guy” who supports open source. Sometimes, this hybrid strategy is an extension of an SDK effort that was failing to gather developer support.

    If open source is offered more for the public to debug their own programs and better understand security details of the software that’s fine and appropriate in some cases. But otherwise it’s not clear when the hybrid strategy is appropriate.

  2. Excellent article and I agree with the very premise of combining the best of both worlds. Open source provides the central commonality to share core software for the least expense among all parties. Closed enables the freedom of economic adventure and capitalism needed to differentiate services and products and generate well-deserving profits. Great article!

  3. Hi Anne,

    You have correctly pointed out that success of software companies now depends on the way they club their proprietary software with open source. Few companies already have their business model based on this strategy.

    One can take example of Linux that belongs to open source, comes in various flavors and there are vendors who have modified it according to market needs and have build their business model by combining Open Source with their proprietary innovation so as to earn profit and serve their customers.

  4. Anne,

    you failed to demonstrate that any companies are moving from the open toward the closed. Here is my take:
    http://blue-gnu.biz/content/will_software_businesses_really_move_toward_middle_039_08

    Cheers,
    Don

  5. there are varying degrees of “open source”-ness

    a) Open to the core
    projects like GNU, Apache HTTP server are utterly open, truly and dedicated user community contributing to software development. A dying breed, sometimes hobby-like.

    b) Open but vested
    I like to call this source-available, usually under viral licence like GPL, users get variable say where the software is headed, often under-documented and under-supported, and the core developers usually work at 1 or 2 consultancies that benefit directly from the software.

    This is where good hybrid models usually arise and I do think is generally a viable model.

    c) Pseudo-open
    Uses its own written or modified license, even Sun & Microsoft struggled with these for a fair while. Oft community is not active, rather than poring through the legalese, a quick web search will find you better projects to sink your teeth into in the above 2 models.

    all time, lets not forget intellectual property costs money and time to create, it should be treated no different, no less from developing a physical product.

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