Friday, November 05, 2004

Make, Buy, Outsource, or Open Source?

Mikko Puhakka has written a nice article about the fact that businesses should start to look after IT Survival Strategies. It is evident that Open Source is here to stay and companies have to ask from themselves, "what is our Open Source strategy?"

I agree with most of his points. Businesses should start to think about these issues before it hits their forehead. There is one thing I don't completely agree with:

"watch out, incumbents! I suggest that you accept that open source is here to stay, and that it's causing the value of your current offering to slowly approach zero. And you'll have to find new sources of revenues while you still can.

In my opinion, Open Source is not causing the value of all closed source software products to approach zero. There is a certain group of specialized products which market is very small: e.g. a product which is only useful for say, windmills. If your software has only a handful of customers around the world, I argue that such software is not going to be replaced by an Open Source product.

So far Open Source has been successful in applications which user base is potentially very large and brings benefits to almost any organization around the world. Open Source products directly threaten the position of products that have such a broad market. My analysis is that in the future Open Source starts to threaten more specialized products indirectly, because Open Source platforms enable companies to bring a new specialized product faster, cheaper and more conveniently to the market by building on open platforms.

He later answered that I'm most likely correct:

"I was talking about theoretical possibility. Open source is a challenge to look at academically as e.g. existing economical theories pretty much say that it's emergence should not have taken place...."

So all of you who have so far ignored the existence of Open Source: think about your strategy and the possibility that your wonderful product may sooner or later get replaced with an Open Source offering.


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