All Things

Dana Blankenhorn has posted an interesting article discussing how open source software is being divvied up among top software companies (IBM, Google, Microsoft) in a way reminiscent of Japanese keiretsus. She argues that only these three seem to have the “size, scope and ambition” to play in this space, though Sun also continues to seek such a dominant position.

According to the article, in American usage “keiretsu” has become a term describing a much looser form of business association, with one large company and a number of smaller ones beholden to it in various ways. The Mozilla Foundation’s dependence on Google would be a good example, a relationship of substantial ties between independent entities.

Years ago, I was thinking open source might end up being its own “keiretsu”. Nevertheless, I guess it was inevitable that it would instead end up fragmented and mostly beholden to big companies. Blankenhorn cites the examples of IBM-Red Hat and Microsoft-Novell as other instances of such ties.

On the other hand, if these big companies do things right, open source software can advance and still end up producing a thriving ecosystem. IBM’s relationship with the Eclipse Foundation is a prime example.

It seems that key to the whole process is how a Big Co. views the software product lifecycle. If it accepts that functionality gradually will become commoditized, it will view open source as the likely end-point for most proprietary software. Such a strategy/outlook will result in the Big Co.’s typically releasing the source after some years/decades, with the intent of building still-proprietary software and services on top of it.

IBM did that with VisualAge (now Eclipse), and has also worked hard at promoting the open-source Linux operating system. On the other hand, Microsoft seems to want to milk its Windows operating system forever, which makes it hard to play well in the open-source world.

While it may seem wasteful, companies such as Apple have shown that a steady discarding of old technology can do a lot to promote innovation. I keep waiting for more companies to follow their example.

Evidence continues to mount that “creative destruction” is indeed a key process in a healthy economy. Peter Drucker argued that companies ought to continually make way for the new by killing off old products, rather than waiting for the market to do it for them. Henry Ford’s reluctance to part with the Model T, and its nearly destroying Ford in the process, is the classic case study on this.

With software, however, there’s a difference, since many software products are foundations for other systems (software or hardware), or integral to the use/retention of valuable data produced by them. For this reason, it’s not as simple a matter to remove a program from the market. Software may be used for many different purposes by different customers. Some may be able to switch quickly to new products, but others would incur great cost.

Consequently, it seems inevitable that users are eventually going to demand some kind of protection from software vendors - or else from government regulators - that a software product’s source code be made open source if the product is abandoned. At the least users would be protected, and possibly the product might see further development by others (WordPress, successor to b2, is in some respects an example of this).

More interesting, however, are the more state-of-the-art open-source projects such as Linux and Eclipse, that promise innovation and a product that is “built right” for the future in a platform-agnostic way. Knowing that a software product will be here to stay, because the source is available, seems to be such a strong draw that many of these best-of-breed projects have been able to attract top talent to contribute, often on a volunteer basis, as well as substantial support from Big Co.’s such as IBM.

For the software industry to thrive and not just reinvent the wheel, we need strong and viable foundations to build on. If these Big Co.’s are willing to kill off the revenue streams from their old software somewhat before it dries up, their code may well retain importance, or even grow in dominance as Eclipse has. This can offer a strong foundation both for services and for additional products higher up the stack.

Moreover, it will produce an overall healthier software industry ecosystem, since the underlying code will continue to be developed, increasing the value of it and everything higher up on the stack, due both to stability and to greater innovation.

I ran across a post, The Attention Crash on Steve Rubel’s blog Micro Persuasion. In it, he argues that the real danger isn’t another .com financial bubble bursting, but rather individuals hitting a wall of information overload:

“We are reaching a point where the number of inputs we have as individuals is beginning to exceed what we are capable as humans of managing. The demands for our attention are becoming so great, and the problem so widespread, that it will cause people to crash and curtail these drains. Human attention does not obey Moore’s Law.”

I agree that there’s still a lot of life left in this tech deployment cycle. At the same time, I’m amazed that the media and society at large still don’t seem to be taking information overload seriously.

There’s been such an explosion of both work and leisure information, not to mention creative tools, games, etc., yet you don’t notice many people outside of the GTD blogging community talking about it. We obviously are going to need some more sophisticated tools than just raw RSS feeds, and these folks seem to be about the only people seriously exploring that. There’s so many GTD-related productivity and project management tools, that I’m having a hard time getting them all sorted out.

In other words, we need a lot of innovation in order to develop tools for handling information overload, and so we should be seeing a lot of experimentation taking place. Right now most of that is happening in the GTD community. I think we should also expect to see a variety of tools tailored to particular individual styles. That’s an area I’ve done a great deal of research in, and hope to see its application to innovative productivity tools.

Beyond GTD, Twitter is clearly generating some of the loudest buzz currently, mainly as a social networking site, where it seems to have great potential. A lot of folks have criticized it as the worst example of pointless info overload but I think Twitter, or something like it, could actually be a tremendous tool to help deal with overload, both by making inputs timely without interrupting (using the web interface, anyway) and by forcing inputs to conform to a quick summary so you can judge whether it’s worth a further look.

Of course, most folks don’t get that yet. I see tweets saying “This is great” and just a link, giving me no idea what it’s about. Others send out a half-dozen or more pointless tweets a day, clogging up my friends page. Some news sources such as the New York Times, commendably quick to get on board, nevertheless send out the same update on multiple channels. All this “noise” reduces Twitter’s usefulness, but even in just the six weeks or so that I’ve used it, I’ve already seemed to notice a certain sort of evolution going on, with many (not all) folks starting to effectively pre-screen their tweets and limit them more to ones that would actually be helpful to others.

I think eventually we’ll see people going to multiple accounts (”channels”?), one with personal info and more security, another with interesting links (as Robert Scoble has already done with his Scoble’s Link Blog), and another with updates from all one’s own blog posts, important comments, etc. The last purpose is how I’m primarily using my own Twitter account, aeroG, at present.

The main point is that Twitter, as with so much of the web, is a grand experiment being done on a huge scale, and it’s likely to evolve rapidly in the coming year or two. If Rubel is at all correct, then we should expect to be seeing a lot more of these tools coming along shortly, to help us sort out not only our increasingly complex lives and connections, but also the huge flood of information that increasingly threatens to overwhelm us, or at least to drown out the truly valuable information tidbits that these tools should help us to find and track.

IBM is once again giving away some software; after donating its VisualAge tool to Eclipse and so many other products to greatly invigorate the open source movement, this isn’t so surprising. What’s more interesting is that these donations seem to be moving higher up the value chain, as IBM will reportedly begin giving away a Universal Database Express-C version of its high-end DB2 database that will run on up to two-chip systems.

It seems to me that a sign of a healthy software ecosystem is the gradual price decline of particular packages as they grow more complex. One example would be Microsoft’s bundling of Word, Excel, PowerPoint and various other packages into Office, which doesn’t cost nearly as much as the total prices of individual packages 15 years ago, especially after adjusting for inflation. Excel itself, when introduced on the Mac, had consolidated functions previously handled by Multiplan, Chart and some other programs.

One of the common signs that a particular software ecosystem is declining is that this trend of generosity on the part of the ISV reverses, and it starts to look for ways to increase unit revenues. This is one of the reasons why I suspect that much of Microsoft’s software business isn’t as healthy as it once was, as they have at least begun to make changes in their licensing/pricing that for some customers might be viewed as an effective price increase.

Some vendors, such as Computer Associates, seem to have done fairly well by buying up aging software and gleaning what they can from the remaining user base, many of whom may prefer to stay with what they have been using for quite a few years. Though potentially an opportunity for exploitation, if managed with restraint such a business can provide a valuable service, by keeping users from languishing without vendor support.

Nevertheless, in a healthy, growing software ecosystem the price of packages should normally decline, since the user base is growing (allowing development costs to be spread over more units) while development costs should be moderating as the product matures. Actually, while the first effect is often realized, for some reason (perhaps Parkinson’s Second Law - expenditures rise to meet income) the second is more difficult to achieve.

As sales of its software rises, a successful software vendor will typically add features while keeping steady or lowering the price. Though holding the line on costs, in the real world the size of programming staffs generally seems to balloon, which gradually works to reverse the virtuous cycle of generosity. This excessive growth in programming staff is a curious outcome which I suspect results from management’s desire to speed development in response to competition, despite Fred Brooks’ showing over thirty years ago, in his classic essay “The Mythical Man-Month“, that such an approach is generally counterproductive.

Peter Drucker frequently argued (e.g. Managing for Results, Ch. 9) that one of the biggest problems in business is vendors’ unwillingness to kill off their own aging products, thereby retarding innovation and eventually causing loss of markets to more innovative upstarts. I suspect a software ecosystem requires a modified form of systematic abandonment, where products gradually decline in price and eventually are given away, either as open source or as an inducement to attract new users who may upgrade a to a vendor’s more advanced offerings.

Vendors also ought to consider still selling at a lowered price older versions and upgrades of their software (at least as long as these are supported) since this might be a good approach to segmenting the market between higher-spending customers with newer hardware and budget-conscious buyers using older hardware (and might induce additional upgrades as the cost declined).

Of course, much of the business motivation for open source comes from recognition both of the need to continue stimulating a software ecosystem to attract new users (as many are attempting to do now with Java) and that much of the revenue opportunity comes from services and other add-ons, which seem also to be a fairly effective way to segment the market.

Every industry has its own unique economics. I remember a database seminar once in which a vendor rep described how he had worked with grocers, where the prices, discounts and other factors changed constantly. Airline economics, with which I’ve been fascinated for years, is another very difficult area.

Software, too, has its own sort of economics, driven by the vendors’ desire to smooth out the revenue stream (development is steady but revenues tend to bunch around releases), the extremely low unit marginal cost, and intense competition amidst constant technological change. I’m surprised there doesn’t seem to be more active discussion of the unique economics of software, as this might help to reconcile vendors and the open source community.

Software has been the “sick man of technology” for some years now, with disappointing advancement (despite incredible gains in hardware) and recurrent schedule slips. A better understanding of the underlying economics might go a long way in producing a newly healthy software industry.