Chapter 8. Under the Hood: Open Source and Open Standards Business Models in Context

Stephen R. Walli

People debate regularly whether open source software is "good for business," and how one makes money on something given away "for free." People raise concerns over the commoditization effects of open source,^[1] and portray a gloomy road ahead where open source software will "eat its way" up a stack of functionality to the logical conclusion where software has become valueless.

^[1] "Will Open Source Middleware Commoditize J2EE?", Nov. 5, 2004, http://linuxworld.com/story/46957.htm; visited Nov. 9, 2004. Also: Paula Rooney, "Open Source Will Commoditize Storage, Databases and Security," Jan. 20, 2004, http://www.storagepipeline.com/hardware/17500067; visited Nov. 9, 2004.

Standards as a commoditization driver have been well understood for quite some time across many industries. A standard exists to enable multiple implementations. The economic argument is that they serve to broaden the market for all producers while fostering price competition (which also fosters production efficiency) for the benefit of consumers. Industry associations of vendors support such work where it expands their market opportunities in complementing areas. Governments support such work because of the "good" economic effects. Seldom does one hear complaints about this commoditization effect, and vendors continue to participate in the development of standards and compete on implementations regardless of that effect.

In this chapter, we will take a look at traditional working definitions of open standards and open source software focusing on the veneer of differences, then step back and look under the hood at a broader business context for the dynamics at work to provide a business model where standards and open source software can be seen in context.