/ OpenSource

How open source content offered on a multi-sided platform is a sustainable business model

A sustainable approach to strategy creates opportunity and takes into account the future interests of all internal and external stakeholders from economic, environmental and socio-cultural perspectives. This article will explore, in particular, how open source content, when offered on a multi-sided platform, can be a sustainable business model for all stakeholders concerned and will focus on the open source software business model.

The Business Model

In an open source business model the approach for revenue generation is to deliver value by allowing partners to collaboratively share content freely and create value through sharing external knowledge and content sources.

Business models are used for revenue generation, in an open source business model the approach for revenue generation is to deliver value by allowing partners to collaboratively share content freely and create value through sharing external knowledge and content sources. A feature of an open source business model is that partners are not able to rely on intellectual property rights as the primary means of generating revenues for content shared on the platform Colombo, Et Al. (p.3, 2014). A multi-sided platform used with an open source business model allows partners to collaborate. According to Hagiu & Wright the key features of a multi-sided platform are that they enable direct interactions between two or more distinct sides and each side is affiliated with the platform (p.5, 2015). On an open source platform, any type of product can be offered provided that the content is shared with open source license. Popular software development related open source platforms include GitHub, Jira and the StackExchange Vasilescu et al (p.1, 2014). According to Raymond there are five established and two speculative indirect sale-value models for free and open source software that consisting of loss leader/market positioner; widget frosting; give away the recipe, open a restaurant; accessorizing; free the future, sell the present; free the software, sell the brand; and free the software, sell the content (p.134-140, 1999).

The open source business model differs from other business models where partners in the relationship have constraints for how revenue is generated. An example of a different type of multi-sided platform is the agency platform business model where it is a requirement that upstream content providers, for example, book publishers and developers of apps choose the retail prices of their products and the downstream firms, for example, platforms that sell apps specify how the revenue is to be split Foros et al (p.1, 2013).

Aspects of a Sustainable Business Model

When entities collaborate relationships evolve, over time these partnerships become dependencies that help to make the future of all involved more predictable, this, in turn, makes sustainable business strategy possible because of the decreases in uncertainty and increase in rationality.

Participation in open source creates opportunities for competitive advantage. When entities collaborate relationships evolve, over time these partnerships become dependencies that help to make the future of all involved more predictable, this, in turn, makes sustainable business strategy possible because of the decreases in uncertainty and increase in rationality. Learning gained from following open source influences can help inform the economic, socio-cultural and ecological aspects of how a business is related to its external environment and where the business has a high dependence on the open source business model would be important considerations in a PESTLE analysis.

As people work together they make sense of their internal environmental strength, weaknesses, capabilities, and relationships which help to inform the analysis of external opportunities and threats. Understanding helps to create more robust strategies. Learnings from open source collaboration assist businesses to weigh up the importance of different topics, and analysis using prioritizing topics when compared to where topics are unprioritized has been found to make the analysis more effective Hill and Westbrook (p.50, 1997).

Economic Considerations

For a business to be innovative then there must be some tolerance to taking risks, use of open source assists with learning about what is occurring in the industry and helps to mitigate risk.

In the case of the loss leader/market positioner model the entity offering content sacrifices revenue from the sale of the product for market share which would have had an internal cost to acquire. For a start up, establishing a market presence can take a great deal of effort and offering content for free can help improve performance through the creation of a user base. For the entity consuming the content, free resources create an economic competitive advantage because financial resources are available for other strategic pursuits.

With popularity, multi-sided platforms have the potential to scale. With the emergence of these content platforms opportunities for network effects occur that create greater value for all participants. Economic growth and employment indicators can be inferred from observation of open source platforms. For a business to be innovative then there must be some tolerance to taking risks, use of open source assists with learning about what is occurring in the industry and helps to mitigate risk. Companies watching open source platforms for inflow and outflow content can be informed of new opportunities, and this source of knowledge can help share with external partners both the risk and reward of innovation Marilungo (p.307, 2016).

Socio-Cultural Considerations

Teamwork helps improve the decision-making process by negating personal biases and providing a balance of logical and creative thinking.

Open source software develop employs social-technical work practices and community networking Scacchi (p.8, 2007). Personal motivators for involvement in open source software include altruistic; enjoyment; reputation; and economic Hamari et al. (p.7, 2014). Each of these considerations presents opportunities for stakeholder sensemaking of internal and external environments. Teamwork helps improve the decision-making process by negating personal biases and providing a balance of logical and creative thinking.

Many of the open source platforms have features that can be used to vote projects and people as important, in a survey conducted by Blincoe et al. over 50% of respondents said that they follow influential people and projects on GitHub to get updates, discover new projects and identify trends (p.33, 2015). Understanding allows dynamic relationships to evolve and assists people to learn about the irrational and unpredictable things in the marketplace. As people learn they can create and realize new strategies. Open source platforms also provide opportunities for learning via direct collaboration with external stakeholders and identifying specialists with industry specific knowledge West & Bogers (p.11, 2013).

Environmental Considerations

Open source allows the business to save money which in turn provides opportunities for best practice of resource stewardship.

Business are always concerned to manage reputation and risk. From an economic point of view participation in open source allows the business to save money which in turn provides opportunities for best practice of resource stewardship. Of interest is the OpenStack project which aims at helping cloud providers reduce their data centers total power consumption and is a practical application of how open source collaboration can have a positive impact on the environment Corradi et al. (p.1, 2011).

Ethical considerations

Honesty is always the best policy, participation in open source reveals past actions and interests, and assists with resourcing decisions for human capital within the business.

When compared to closed or proprietary platforms, open source provides a higher level of transparency which should always be an important consideration when making strategic decisions. A feature of open source is that many people are reviewing the software which is described by Raymond as “Given a large enough beta-tester and co-developer base, almost every problem will be characterized quickly and the fix obvious to someone. Or, less formally, Given enough eyeballs, all bugs are shallow.” (p.30, 1999). Gerding recognizes this and in recommendations to the financial industry after the global financial crisis suggested the use open source to allow the banking industry to self-regulate, mitigate information gaps, and allow scrutiny of risk management models for competitive advantage. (p.190, 2009).

Honesty is always the best policy, participation in open source reveals past actions and interests, and assists with resourcing decisions for human capital within the business. Preliminary investigations by Jaruchotrattanasakul et. al have found that there is a case to develop an Open Source Resume (OSR) tool based on actual data provided to GitHub which would help to alleviate issues that may be caused by candidates providing fake programming skills or project experience on their resumes (p.57, 2016).

Conclusion

Sustainable strategy always looks to reduce risk by minimizing uncertainty.

Sustainable strategy always looks to reduce risk by minimizing uncertainty. This essay demonstrated how through the use of open source content parties in a multi-sided platform can reduce risk. The open source business model explored discussed how participants could sacrifice revenue to develop partnerships to secure competitive advantage through shared industry knowledge. Considerations discussed financial and how business can make better sense of their internal and external environments.

References

Blincoea, K., Sheoranb, J., Gogginsc, S., Petakovicc, E., Damianb, D., 2015, Understanding the popular users: Following, affiliation influence and leadership on GitHub, ScienceDirect, Information, and Software Technology Journal.

Colombo, M., Cumming, D., Mohammadi, A., Rossi-Lamastra, C., Wadhwa, A. 2014, Open Business Models and Venture Capital Finance, CESIS.

Corradi, A., Fanelli, M., Foschini, L. 2011, VM consolidation: A real case based on OpenStack Cloud, ScienceDirect, Future Generation Computer Systems.

Foros, O., Kind, H., Shaffer, G., 2013, Turning the Page on Business Formats for Digital Platforms: Does Apple’s Agency Model Soften Competition?, Samfunns- og næringslivsforskning AS Centre for Applied Research at NHH.

Gerding, E., 2009, Code, Crash, and Open Source: The Outsourcing of Financial Regulation to Risk Models and The Global Financial Crisis, Washington Law Review Association.

Hagiu, A., Wright, J. 2015, Multi-Sided Platforms, Harvard Business Scholl.

Hamari, J., Sjoklint, M., Ukkonen, A., 2014, The Sharing Economy: Why People Participate in Collaborative Consumption, Journal of the Association for Information Science and Technology.

Hill, T., Westbrook, R., 1997, SWOT analysis: It's time for a product recall, ResearchGate.

Jaruchotrattanasakul, T. Yang, X., Makihara, E., Fujiwara, K., Iida, H., 2016, Open Source Resume (OSR): A Visualization Tool for Presenting OSS Biographies of Developers, ResearchGate, Nara Institute of Science and Technology, Japan.

Marilungo, E., Coscia, E., Quaglia, A., Peruzzini, M., Germani, M., 2016, Open Innovation for Ideating and Designing New Product Service Systems, ScienceDirect.

Raymond, E. 1999, The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary, O’Reilly, Sebastapol, CA.

Scacchi, W., 2007, Free/Open Source Software Development: Recent Research Results and Emerging Opportunities, Institute for Software Research University of California.

Vasilescu, B., Serebrenik, A., Devanbu, P, Filkov, V., 2014, How Social Q&A Sites are Changing Knowledge Sharing in Open Source Software Communities, Eindhoven University of Technology, The Netherlands University of California, Davis, USA.

West, J., Bogers, M., 2013, Leveraging External Sources of Innovation: A Review of Research on Open Innovation, Journal of Product Innovation Management.

Notes about this article

Not so long ago I wrote this as an essay for a Sustainable Business Management Unit I was studying. The content resonated with me, so I thought I would share. Please feel free to comment and share your thoughts.