MBAs Being Taught To Fight Open Source By Offering Closed Source Alternatives?

from the get-a-refund dept

Wed, Sep 24th 2008 11:12pm — Mike Masnick

The Slashdot crowd is reasonably up in arms of a paper jointly written by a Harvard Business School professor and a Stanford Graduate School of Business professor on ways to compete with open source competitors. Amusingly, nowhere in the paper does it suggest that one of those strategies might be to go open source yourself, embracing the actual benefits of openness and infinite goods, and focusing on better business models involving scarce goods. In fact, it doesn't even seem like the paper recognizes the rather large businesses created around open source software, with the totally false implication being that open source isn't a business, but a hobby. Frankly, the whole thing gives MBAs a bad name, by suggesting that they're not being taught to actually understand how open source can be used within a business model. That's unfortunate, because it's simply not true -- at least at some schools. Much of my own journey down the path in exploring the economics of infinite goods started thanks to my own MBA professor Alan McAdams at Cornell, who was teaching how important open source models were to the success of the internet and businesses back when I first took his class in 1996 or 1997.

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Filed Under: competition, cornell, harvard, mbas, open source software, stanford

25 Comments

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Shohat, 25 Sep 2008 @ 12:49am

Woooooshhh goes the point
The paper doesn't say the Open Source is good or bad, but it's competing with closed source software.
A person might mend up in a management position in a company that has a certain business model, and has to deal and compete with Open Source companies.
Just like a person might end up working at Coca Cola, and competing with healthy juice products for instance. That is his job. His job is not to convince everyone that Cola is bad, and switch to juice because there are so many opportunities in that market. A person is hired to do a job, and sometimes that job is to compete with Open Source. Not to think up new company strategies, but to compete in a certain market with a certain product.
That paper helps those people.
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Anonymous Coward, 25 Sep 2008 @ 1:17am

My head! My head! YIKES MY HEAD!
Further expanding on the spirit of Shohat, I have met many, many people with MBAs that air just seems to woooooosh through their head. I won't name any names, but let's just say that you'd be embarrassed to claim them as American employees. It's downright scary! Then they have the gaul to put "MBA" behind their name on their business card like it's some sort of entitlement. Yikes!

Of course, I'm not speaking of you, Mike. You get it. Oh man, you get it. But these other guys.. How the heck do they think.. Sorry, I need to stop or else I am going to force myself to have a cerebral aneurysm.
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Mike (profile), 25 Sep 2008 @ 1:44am

Re: Woooooshhh goes the point
The paper doesn't say the Open Source is good or bad, but it's competing with closed source software.
A person might mend up in a management position in a company that has a certain business model, and has to deal and compete with Open Source companies.

Indeed. But wouldn't one of those strategies be "open up yourself"? Yet, that doesn't even seem to come into play.

So, yes, companies have to deal with open source competition, but it's the exact wrong message to suggest that they stay closed.

That paper helps those people.

No. It doesn't. Because it's telling them the exact wrong thing.
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Shohat, 25 Sep 2008 @ 2:27am

Re: Re: Woooooshhh goes the point
Not every marketing o position gives an employee the privilege of suggesting ideas that
1) Change the company's entire business model
2) Generate HUGE R&D + Retraining costs . HUGE.

Going open source is nice and all, but this is pretty much the biggest R&D challenge a company can face, should such a decision be made.
Many MBAs are hired to compete in a market, WITHOUT drastically changing company R&D and product lines. This is one of the challenges of being a manager - being given predefined ideology and and a limited amount of resources, and achieving the desired goals in terms of revenue and market share.

I am not saying (and neither is the paper) that it's good or bad, but it just provides advice to people that face these exact challenges.
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Duane, 25 Sep 2008 @ 4:33am

Missing the point
Actually most people are not hired to "not drastically change company R&D & product lines or to achieve the desired goals with a predefined ideology and a limited amount of resources."

Most people are hired to accomplish desired goals, period. They might find that some of the roadblocks to accomplishing said goals are predefined ideology and limited amount of resources, but generally speaking you hire someone new to change the way you do things, to provide a fresh perspective, introduce new DNA, etc.

Sure that might not be what happens in the end, but no one ever gets hired to just keep doing the same thing.

That being said, open source might not be practical for some enterprises, but it should be considered even if only to impress your bosses with how you're "thinking outside the box" and trying to "change the paradigm."

Not fully educating young MBAs on the possibilities and pitfalls of Open Source is a real disservice to all of us.
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norman619, 25 Sep 2008 @ 5:07am

Opensource good?
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norman619, 25 Sep 2008 @ 5:12am

Opensource good?
Advocates of opensource applications always seem to ignore why the commercial alternatives to opensource are usually chosen instead. I handled the purchasing for my company's IT needs. We often looked at opensource applications and compared them to the commercial offerings. Almost w/o fail the commercial offering was more robust and had much better customer support. When you are responsible for the smooth running of your company you do not gamble on half-baked applications to get the job done.
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Anonymous Coward, 25 Sep 2008 @ 5:33am

It is because the idea of infinite goods is impossible, but unfortunately you have yet to figure that out. Nothing is infinite.
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Scott, 25 Sep 2008 @ 5:39am

alarmist sensationalism from f/oss camp
F/OSS enthusiasts are going overboard. They are usually the ones accusing Microsoft, among others, of creating fear, uncertainty and doubt amongst customers. In this case, the open source community is mad because their quick misreading of the article(s) in question left them feeling unappreciated.

The second link above provides a well written summary that does not sensationalize the paper. The paper addresses one point, which is what to do when your competitor is giving away their product. It specifically mentions software, news/media, and music.

Here's the catch. While building a business on an open source business model can be a fine way to enter a market, there are a lot of business out there which are being forced to compete with a force that they do not know how to reckon with. Namely free or open source. If they do not find out how to compete, they go under. Going open source is not an option for most of them, their investment in their business model may not be convertible in that way. Instead they need to learn how to compete. Which is what the article describes.

Finally, the article gives credit to free products, quoting from the original paper, describing that free products are important to consumers, if for no other reason that they spark competition.
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jeff4066, 25 Sep 2008 @ 5:56am

Open source is good. Yes. I use it all the time. I have contributed to some. I even have a line or two of code in some.

That said, One cannot lump software into the world-wide category of "goods" and "products" without looking at the entire picture.

Somebody, somewhere, expects to live somehow. A great deal of freeware and shareware, and even open-source, eventually ends up a money-making venture. I know several programmers who have started out open-source, and eventually thought; "Hey, this is as good as regular software, so I'm gonna retire to the Catskills.". Next thing you know, it's sold to a bigger firm, or Microsquash, or just gets a license agreement and price tag on it.

I don't blame them, either. People see a company sell $400 software. They have their own "product", that works as well, that they've been giving away. Maybe they lost their regular job. For whatever reason, they feel their effort should be rewarded in a more tangible way. My favorite backup program ended up like this.

I have noticed, especially lately, that the big trend in the "I think all software should be free!" crowd, even at my workplace, mostly comes from people who only use, not write this software. This is more of a parasitic rather than symbiotic relationship. These people do not click on the "contribute" icon and send even a token sum for software they rave about.

If I go to a car dealer, and pick out a sedan, I do not expect them to just hand me the keys and a title. The salesman won't bring out a hat and say; "You can contribute to the cost of building this, and we would be very grateful.". There are many hours of labor by many people involved here. Does decent software deserve any less?
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Norm, 25 Sep 2008 @ 6:01am

I have used both and when you use Open Source you have to be prepared for poor documentation and no support.

Sadly that's too often the case with commercial software as well.

I ditched Red Hat when it started becoming the Microsoft of Linux Distros. The engineers there put their fingers in every friggin package.

Mike - as CEO do you use open source solutions at Techdirt? Are you running Linux on the desktop and using OpenOffice for example?
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---, 25 Sep 2008 @ 6:51am

Big Hobby
Open Source is a hobby ? That's a good one.
Ever hear of Apache ? I believe that a majority of web servers run Apache. That is a big hobby.
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jonnyq, 25 Sep 2008 @ 7:20am

Re: Woooooshhh goes the point
Coca Cola exactly does compete with healthy juice products by actually providing healthy juice products themselves and by offering diet versions of sugared colas. That's actually a good example of how it is indeed managements job to suggest that the company embrace the competitor's business model.

Coca Cola also competes by actually purchasing the competing company and continuing that company's business on their own books. This has happened in the open source community as well.
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jonnyq, 25 Sep 2008 @ 7:23am

Re: Re: Re: Woooooshhh goes the point
The business that doesn't listen to its employees at various levels will fail to compete.

Also, "going open source" isn't a sudden, drastic change. There are strategies that allow the business to ease into open source.
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Anonymous Coward, 25 Sep 2008 @ 8:01am

Re: Re: Woooooshhh goes the point
Mike

If, instead of wholeheartedly agreeing with the Slashdot people, you had analyzed the aspects of the the position the MBA students took and then suggested that going open might have been another strategy they could have considered, then your piece might have been better received.
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nasch, 25 Sep 2008 @ 8:26am

Re:
Arbitrarily plentiful goods would be a more accurate term, but that doesn't have the same ring.
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nasch, 25 Sep 2008 @ 8:31am

Re: alarmist sensationalism from f/oss camp
Personally what I didn't like about the summaries and excerpts I've read (I haven't read the whole paper) is that many of their suggestions are based on removing value from the software and restricting users'... I hesitate to use such a charged term, but... freedoms. For example, make sure your file formats are closed and obscure so that your users won't have any competitors to turn to. I have no problem with closed software; I write it myself. But figure out a way to compete by offering more value, not by attracting customers and then locking them in.
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nasch, 25 Sep 2008 @ 8:36am

Re:
You had some credibility until you equated infinitely reproducible software with cars. Whatever is going on, with people contributing or not contributing, it's working. There's lots of open source software and lots of people continuing to develop it, so the situation we have now is IMO working fine. I don't think we need to be complaining that more people aren't helping or donating money.
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Jason, 25 Sep 2008 @ 9:45am

Re: Opensource good?
Norman, given that this is a constantly changing arena, I think it would be helpful for you to give a time frame and industry context to your comments.

A lot has changed and continues to change. Today, for most of the bigger open source companies, customization and support services are their bread and butter.
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Jason, 25 Sep 2008 @ 9:51am

Re: Re:
Ideas are unbounded, abstract things. The 'idea' can never be impossible.

The implication of the idea of "infinite" is, in application, a suggestion of a limit approaching infinity as scale increases and as hardware and process improvements continue to come along. Nobody actually thinks it's infinite. The point is that the economics of the supply functions differently because the utility of information is not depletable.
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Jason, 25 Sep 2008 @ 10:30am

Re: Re: Re: Woooooshhh goes the point
jonnyq,

If you had considered the polarizing effect of self-selected feedback, then you might have considered that Mike's piece actually is being very well received. So far I only count a half-dozen naysayers (some who agree in part). That can't possibly constitute the entire body of Mike's readership.

You run a risk of your own point going 'woooosh' when you build it on the backs of the Pajama Haddim.
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Socrates, 25 Sep 2008 @ 12:37pm

Old School
These are old thinking institutions in the world of business. Your not going to get any new, cutting edge ideas out of these stodgey, ancient institutions. They are the establishment and they instruct exclusively in the interest of maintaining it.
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LostSailor, 25 Sep 2008 @ 1:13pm

Re: Re: Woooooshhh goes the point
Indeed. But wouldn't one of those strategies be "open up yourself"? Yet, that doesn't even seem to come into play....So, yes, companies have to deal with open source competition, but it's the exact wrong message to suggest that they stay closed.

Completely changing your business model to compete with open source by becoming open source may be one way to go and certainly an option to consider, but it's hardly the only option. That this paper discusses the "other" options is in no way the "wrong" message or telling such businesses the "wrong" thing.

Others here have given reasons why "closed" source products can be more desirable and successful than their open source competition.

Open source may be one way to go, but it's not the only way, or even the most beneficial way for a particular business. It's not one-size-fits-all.
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Mike (profile), 26 Sep 2008 @ 12:52am

Re: Re: Re: Woooooshhh goes the point

Completely changing your business model to compete with open source by becoming open source may be one way to go and certainly an option to consider, but it's hardly the only option.

Nor did we say it was. But ignoring it is a huge mistake. Because, in the long run, you won't be able to compete with open solutions if you insist on remaining closed.
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LostSailor, 26 Sep 2008 @ 8:11am

Re: Re: Re: Re: Woooooshhh goes the point
Nor did we say it was. But ignoring it is a huge mistake. Because, in the long run, you won't be able to compete with open solutions if you insist on remaining closed.

Well, "it's the exact wrong message to suggest that they stay closed" comes pretty close.

Staying "closed" may indeed be the best approach for some or even many companies in the short or long run for a variety of reasons.

And, indeed, the news report you linked to does mention going "open" as an option, so it wasn't ignored at all:

There are times, however, when the open source product gets to market first. In that case, the commercial vendor does well to enter the market with a compatible product and then invest in new product features to make its product compelling even though it costs more—a strategy sometimes known as “embrace and extend.” In this case, being “open” (or compatible) helps the commercial firm tap into the network created by the free product. Then, the commercial firm must compete by out-innovating the free product.

My point being that producing a "open" product may be appropriate just as producing a "closed" product may be appropriate given a particular business-case. "Open" isn't necessarily the "best" or even "better" option, and depending on how the product life-cycle is managed, staying "closed" may compete just fine with "open" alternatives in the long run.
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