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The Almighty Buck Software Linux

Leveraging Linux when Hardware is a Commodity? 69

Posted by Cliff from the it-all-boils-down-to-added-value dept.
AKInnovation asks: "My company produces peripheral hardware used in commercial applications, such as retail POS. In our market, amongst other such hardware manufacturers, we are the only ones to offer Linux software solutions (drivers). This distinction has recently won us several large accounts. When the hardware becomes a commodity, and you must compete on the software side to keep the money coming in, how can releasing your code as Open Source be rationalized to management?"
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Leveraging Linux when Hardware is a Commodity? More

Leveraging Linux when Hardware is a Commodity?

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  • Easy: Its the people. (Score:5, Insightful)

    by torpor ( 458 ) <ibisum AT gmail DOT com> on Thursday June 03, 2004 @06:09AM (#9323785) Homepage Journal

    It is my opinion that the future of Open Source is "General-purpose codebase re-applied to Custom Computing Scenario".

    how can releasing your code as Open Source be rationalized to management?

    1. Release your code.
    2. Manage your contributing developer community. (Sourceforge)
    3. Grow the codebase by doing #2 well.
    4. Establish good working relationships with customers, customize the codebase for them. (Customers == people who want customized work.)
    5. Add a services department that does #4, and only #4, when you've got #2 under control.

    OSS is the grand unifier which sets the standards - pretty high - for everyone. The way you differentiate is by really identifying the needs of your customers and then using the OSS machine to deliver on those needs ...
    • This is so true. I'm afraid that his management does not understand this though. They are still in a 'retail' mindset and I doubt they will ever be able to recognise real benefits for everyone.

      I guess he wouldn't have asked for advice otherwise.

      • Re:Easy: Its the people. (Score:4, Insightful)

        by Sepper ( 524857 ) on Thursday June 03, 2004 @08:22AM (#9324216) Journal
        This is so true. I'm afraid that his management does not understand this though. You just have to make them understand that computers products won't mater in the future... Knowledge will. Why? Because cost associated with copying data is next to none, so unless you force your customer to buy multiple copy, only a single copy is going to be bought.

        If, on the contrary, you give away the product but charge for services, you will have a large customer, and, while you won't have the monopoly on services for your product, your will still control developpement done over the said product.

        That is the direction that IBM is heading: Consulting. Why? If You're Not A Part Of The Solution, There's Good Money To Made In Prolonging The Problem. [thinkgeek.com]

        :)
      • How about saying that it's like listing the ingrediants in food. "All organic" "open source" have similar user-friendly branding aspects. Both let the end users know more about the product.

        Not sure if I'm kidding or not.

    • actually customers == people who want you to worry about the codebase while they get on with their business.

      Even if the source is 'out there', customers don't have the time, skills or interest in modifying it for their stock tables, inventory tracking systems or CRM modules. Meanwhile your open source codebase is losing bugs and growing ever larger (and harder for your competitors to assimilate :-)

      • actually customers == people who want you to worry about the codebase while they get on with their business.

        Even if the source is 'out there', customers don't have the time, skills or interest in modifying it for their stock tables, inventory tracking systems or CRM modules. Meanwhile your open source codebase is losing bugs and growing ever larger (and harder for your competitors to assimilate :-)

        Which is why the original poster said you customize the code for them. In other words people who want/nee

    • 4. Establish good working relationships with customers, customize the codebase for them. (Customers == people who want customized work.)

      How does GPL treat for-pay customized code in terms of what must be released in the open to the public vs. can be kept closed and confidential? If a customer pays to add highly proprietary features added to a GPL codebase, does GPL force the release of that code? Can a company that is using GPL code contract with its contirbuting development community to make closed-so

      • Re:Easy: Its the people.(GPL question) (Score:5, Informative)

        by AlecC ( 512609 ) <aleccawley@gmail.com> on Thursday June 03, 2004 @07:59AM (#9324141)
        As I understand it, yes. The GPL requires release of the code only to the customer who pays you for it. You must transfer to the customer full rights to the GPL original code and to your updates to that code. The customer then has the right to release that code under the GPL - or not, which is probably what they will choose. The GPL does not say that you must release back to the developer community, only that you must release full GPL sources to anyone to whom you sell the code. If your customer then sells your code on, they are equally bound by the GPL to give the code, with full GPL rights, to their customers.

        I.e. A business can add their business idea to GPL code (including implemented by you) for their own, essentially in-house, purposes. However, they cannot take a lot of GPL code, sprinkle a few neat ideas onto it, and market the result as a closed source package.

        • One nit... (Score:2, Informative)

          by Anonymous Coward
          You're spot on. Very good description. The only nit? Change...
          1. The GPL does not say that you must release back to the developer community, only that you must release full GPL sources to anyone to whom you sell the code.

          ...to this;

          1. The GPL does not say that you must release back to the developer community, only that you must release full GPL sources to anyone to whom you distribute the code.

          Sell it directly, sell it as part of a hardware device, give it to a friend, give it to the world...the GP

          • the subtlty is in the "distribute" part of it. Just because you put linux in a device doesn't mean you HAVE to publish your new stuff on the web for everybody on sourceforge. In these guys case, just toss the source code for the drivers on the OEM driver CD [that typical customers never actually open], then your complying with the GPL! In these guys case, very few of their business customers will ever venture much beyond the setup routine anyway. Sure some developers might, but most of them aren't goin
        • For instance, you can do anything you like with Linux in the comfort of your own home, so long as you don't distribute the result. But distribution can become a thorny issue if you're careless, and as a result the GPL offers relatively weak protection of your company's super-secret algorithms. After all, anyone who *legally* acquires part of the code, now has full GPL rights to the whole thing, tasty bits included.

          Of course, this is only very slightly less protection than, say, trade secret law offers.
        • depends on the situation. If company A creates software Foo and releases it under the GPL, nothing says they are not free to release that same code under any other license as well (though anyone who got the code under the GPL can still distribute it under the GPL). This also means that the company could release Foo under the GPL while releasing a version with additional features under some other license.
          The problem can be in situations where A releases Foo under the GPL, then B submits a patch to Foo wic
          • for device driver type cases, the easist thing to do is "bury" the source on the OEM CD right from the start. Sure it will get out eventually, but you won't have the pundits crying publically about it.

            After all, you only have to release source to those who you give programs too. In the case of hardware, use the OEM CD to fufill your GPL obligation and get it over with...then you won't show up here and those who want source will have it ...and never complain..get it. Also, password protect your download

        • > The GPL requires release of the code only to the
          > customer who pays you for it.

          Totally wrong.

          Payment has nothing to do with it.

          Here is the beginning of section 3 of the GPL [gnu.org]:
          -----
          3. You may copy and distribute the Program (or a work based on it, under Section 2) in object code or executable form under the terms of Sections 1 and 2 above provided that you also do one of the following:

          * a) Accompany it with the complete corresponding machine-readable source code, which must be distributed und
      • This was almost answered correctly.

        1. Unless they have the copyright for contributions assigned back to them, EVEN the maintainer does NOT have the right to relicense the contributions under a different license. So that means licensing the software to the customer under the GPL. Or requiring developers assign copyrights back to the maintainer. If they do that, there is no reason you can't use the codebase on which you hold the copyright to make derivatives and license under ANY license.

        2. If you do use

      • Whilst this has been answered in terms of the GPL already it's worth remembering that as the author of some software you're entirely free to dual license it.

        So people may have the GPL version for free, and customers can be given an enhanced version which is non-GPLd, either in source form or just installed as binaries.

        I worked for a company that successfully managed to sell contracts of a "supported" and enhanced piece of GPL'd software they wrote.

    • A key thing here, too, is that confidence in your ability means you don't need to rely upon on closing the source to keep your customers. They will stay because it is manifestly evident that you do good work and have good people.

      If your people become the key developers of Project X, which is GPL'd, then they will be the ones that people turn to for expertise.

      Not just in adding features to Project X, but also in deploying and maintaining Project X at their site, customizing it to their business needs, etc.

  • Find other ways to compete, or die. (Score:5, Interesting)

    by Anaxagor ( 211917 ) on Thursday June 03, 2004 @06:19AM (#9323810)
    Software is fast becoming a commodity too - if you're in the US, you're competing with code churned out in India, and pretty soon those guys are going to be undercut by code factories in places like the Philippines, and so on, and so on...

    Very few organisations can rely on software for their *only* competitive advantage... Microsoft are making game consoles, Red Hat are branding themselves as a solutions provider and SCO decided to pursue racketeering as a business model.

    So compete on service; offer value-adds like training and consulting, facilities management, hosting, colocation, monitoring etc.
    • Yep, Microsoft is really unable to make a living out of Windows and Office....

      Get real.

      • Re:Find other ways to compete, or die. (Score:4, Insightful)

        by yason ( 249474 ) on Thursday June 03, 2004 @08:01AM (#9324147) Journal

        Yep, Microsoft is really unable to make a living out of Windows and Office.... Get real.

        But he's true. Microsoft would have a hard time selling commodities like O/S + bundled software, Office etc. if we were to start from scratch, without the huge momentum and inertia involved in the 10 years of monopolist tradition of using vendor-locking MS products. There are few competitors in commercial desktop O/S + Office department not only because MS is practicing tough monopolism but also because the market has stagnated, saturated. When was the last time you waited for the next version of your favorite word processor, like in the 80's/90's? Now people implement O/S's and office suites in their spare time and they make it open source.

        Do you remember when Netscape was selling their browser? I guess they made a few dimes during the first years but nobody does make money off web browsers anymore, not even from companies. Same goes for making web pages: only a little money is paid for writing HTML, unlike in the late 90's. Web and HTML are commodities. These days companies buy meta software like a CMS instead of web pages. They buy customized software solutions instead of retail products. They don't buy Apache or IIS (if both were on sale as separate products) but a web application framework and custom development on that.

        OSS fits the scheme perfectly, where companies only want to pay for their part and get standard software on the basis of their solution. CSS fits in less perfectly but it's still drifting towards the same situation, anyway.

        • nobody does make money off web browsers anymore, not even from companies.

          Don't Opera make money from web browsers?

          (I agree with your general point though...)

          • Don't Opera make money from web browsers?

            AFAIK they make most of their money by selling licenses/customized versions for embed systems or to be integrated. That goes more to the "non-commodity" category, though you're right about that (a minority of) people has indeed bought Opera for their desktops, too.

            Still, Opera is pretty much the *only* browser vendor viably in business, so we're not talking about a notable market here.


          • Don't Opera make money from web browsers?

            My guess is they don't. Their Web browser is a loss leader for a stable of very specialised browser that bring the money in.

            I'm posting this from Opera 7.5 beta, but the last Opera I've paid for was 3.52.
            I'm always wondering why they don't just make it free (as in beer), and gain huge marketshare.
            After all, once upon a time Opera was hands down the best browser out there, but now Mozilla and Konqui are almost there.

            Cheers,
      • Actually, the sales of their cash-cows (Windows and Office) are falling... And MS is worried.
    • I agree 100% - and oddly I think software is the real commodity, not hardware!

      While a base PC is a commodity, many peripheral solutions are not. Hardware will always have a physical cost, while software doesn't have too - if nothing else due to the cost of production between software and hardware. (Note I didn't account for development costs here.)

      This means things that everyone uses, i.e. the OS will be a commodity. By-BYE Bill....

  • Did someone else ... (Score:3, Informative)

    by dr. greenthumb ( 114246 ) on Thursday June 03, 2004 @06:24AM (#9323821)
    ... at first not get that "POS" stands for "Point Of Sale" .. ? ;p

  • Thats a tough one (Score:5, Interesting)

    by JaF893 ( 745419 ) on Thursday June 03, 2004 @07:30AM (#9324014) Journal
    If you are the only ones in your market to "offer Linux software solutions" then you are shooting yourself in the foot by open sourcing the drivers. In other words the only thing that seperates you from your competitors right now is your linux drivers and by giving them away you are levelling the palying field and removing your main advantage.

    This is why you may struggle to convince the management that open sourcing your drivers is a good thing(TM). I think your best chance of convining the management is if you present to them a number of case studies of companies open sourcing drivers. For example, Intel releasing modified open source drivers for Centrino chispets. I also think that you will need to present an effective system for managing the open source project.

    • Re:Thats a tough one (Score:1, Insightful)

      by Anonymous Coward
      If you are the only ones in your market to "offer Linux software solutions" then you are shooting yourself in the foot by open sourcing the drivers.

      That kind of depends on whether you are interested in selling hardware or software. If manufacturing hardware is your forte, then open-sourcing the software drivers will sell lots more hardware in markets that any single company cannot possibly have the resources to develop.

      The original article mentioned POS systems. Well, these can be used in bars, doctor's
    • In other words the only thing that seperates you from your competitors right now is your linux drivers and by giving them away you are levelling the palying field and removing your main advantage.

      That doesn't make sense. We're talking drivers, not POS software, and they're only useful with your hardware, which you're selling. Giving away the binaries, or even the sources, helps your customers, not your competitiors.

      If both you and your competitor sell the same hardware as part of your solution, it's

    • That's only a problem if those open-source drivers actually work with the competitor's hardware.
    • you are shooting yourself in the foot by open sourcing the drivers

      That sounds like the case.

      As a programmer, I always like the idea of open-sourcing stuff. But from a business perspective, I can only think of two cases where it makes sense. The first is with the parts of your code that you think of as boring, commodity stuff. An operating system is a good example of that; if I have a patch for some Linux thing, I'm glad to share it because the value of a free, community-developed operating system is very

  • Explain what the boss is getting (Score:3)

    by lachlan76 ( 770870 ) on Thursday June 03, 2004 @07:54AM (#9324122)
    Just tell you boss what he is getting:
    Thousands of potential developers, all working for free.

    Have an in-house team of programmers review the code before it is made the production release of course, but otherwise, let the code go free.

    I think a lot of people would be willing to help improve the code in general in exchange for the chance to customise it to fit their own needs.
    • This is myth in this case, thousands of potential developers? You right there are thousands of programers just waiting to hack on a device driver for a cash drawer.
      Are you just selling the hardware or the hardware and the POS software?
      The only sure benifit you will get is good will. And if you are dependant on outside developers to interface with your products then that is worth something. Other benifits could be.
      1. Porting to non-intel hardware under Linux.
      2. Porting to non linux Unix's like BSD and OS/X
    • and the boss replies: "yes, we 'get' those developers, but so do all our competition, along with all the code we produce(if it is gpled software".

      So company A, using GPLed software, and has a decent inhouse developer staff to customize the code, while company B, uses the same GPLed software and competes against A, house no, or only a small fraction of the developer staff of A, but company B gets all the innovation of A, due to the GPL license requiring the code to be GPLed itself.

      How does A compete with
      • Exactly. That is why I think that Open Source is not the answer to everything. In this case, I also don't think OSS is the solution at all. Keep it secret. Keep it safe.
        • RMS just had a heart attack, but you and I are in agreement, this situation is not a good one for linux...

          Linux, essentially makes the OS commodity, what is left, then, is the hardware, support and software that runs on the OS. An OSS company, has to leverage one of those three(hardware, support, software) or a combination to be able to have a chance.

  • Open Source is a Marketing tool (Score:3, Interesting)

    by lotussuper7 ( 134496 ) on Thursday June 03, 2004 @09:09AM (#9324533) Homepage
    If you look at the Business relationship you have with customers, then Open Source can be a very strong marketing tool.

    Many larger contracts for systems require that either the (embeded) source either be provided or placed in escrow in case the company goes under, drops the product, etc. Such a requirement is simply being smart in a business relationship.

    And, there is no assurance that just because your company is large, it is going to survive.

    So, if you provide open source, your sales types can start hyping that very fact as a HUGE feature, that you want to step up to the plate and work with your business partners to protect THEIR business decisions, yada, yada, yada.

    Make your money doing customization of the code. (Your customers won't want to, that's why they came to you in the first place rather than developing their own solution.)

    Forget the "thousands of eyes" arguments, it means nothing to your customers from a business perspective. It may help convince a geek, but it wont fly with the guy who signs the PO.

  • Comment removed (Score:4, Insightful)

    by account_deleted ( 4530225 ) on Thursday June 03, 2004 @09:14AM (#9324576)
    Comment removed based on user account deletion
    • What is this GNU/Linux thing you mention? I've heard of the Operating system Linux. I've heard of GNU applications which can be run on linux, but those applications and the linux operating system are independent of one another.

      There are distributions which bundle the linux operating system and the gnu applications (as well as lots of other application software).

      Have the GNU folks made a fork of the linux operating system? Or maybe produced a linux OS based distribution with applications (like theirs for

  • Use their code (Score:3, Informative)

    by Trevelyan ( 535381 ) on Thursday June 03, 2004 @09:32AM (#9324762)
    A key dffierence between a BSD style licence and a GPL one is forking and merging.

    BSD Allows unlimtied forks, but you cant merge forks back in (unless they remained BSD)
    GPL Allows limit forks, but you can always merge forks back in.

    What this means is if a competitor takes your GPL code, you can merge back any advances they made in their copy back into yours.

    Thus in this respect the palying field is kept level.
    Your advantages are that you were first, you know and undertand to code/product better, you reputation and such. Also if your code sparks interest you may end up with volunteers contributing.

    In the end a competitor may be able to catch up with you if you open source, but they could not over take in this area.

  • Why it is a good idea...? (Score:4, Insightful)

    by narrowhouse ( 1949 ) on Thursday June 03, 2004 @09:54AM (#9324943) Homepage
    Or how to sell it to management? The reasons it is a good idea are listed by other comments, but unfortunately selling it to your bosses may have nothing to do with why it is a good idea. If you have forward thinking, long term strategy bosses you have a much better chance. If they are convinced that having software for Linux is their competitive advantage, they're probably not going to let that go. Right now they may even be right. Sharing the code before the competition has started developing their own solutions may kill a market advantage. If they open the code at the right time, say just before the competition rolls out their beta software that they spent months developing;), then your company can leverage the advantages of open code (i.e. outside input, bug checking, increased customer input) as the NEW advantage.

  • Don't release it as open-source (Score:5, Insightful)

    by alienw ( 585907 ) <alienw.slashdotNO@SPAMgmail.com> on Thursday June 03, 2004 @10:20AM (#9325232)
    If your only edge is the POS software, then don't release it as open-source. That would ruin your company, and I thought that was pretty obvious. The only time it would make sense to make software for a POS thing open-source is if the SOFTWARE is a commodity (Linux is an example of this, except with operating systems). Otherwise, it would simply give your competitors a boost.

    Of course, if your customers want access to the source, then you can give it to them under a restrictive license (so they still have to buy your hardware). But you don't want to lose your competitive edge.
    • Finally the only guy who can see this right. Again, if hardware is becoming commodity and software is what distinguishes you from your competitor, it DOES not make sense to open source.

      I am surprised at the tone of the question itself. The question asked was "How to convince management to open source?". I think the question should have been "Does it make sense to open source?".

      I think you need to seriously re-evaluate your reasons for being convinced that going open-source is the right thing for your
    • My thoughts exactly: why would you?

      Why do people think that just because they're building a solution on top of an OSS platform their whole solution has to be OSS? IBM and Oracle certainly don't feel that way, and there's no reason you should either.

      You need to ask yourself: if the hardware and software are both commodities, what are we selling? If you have a compelling answer to that, then that's what you tell your boss. If not, drop it; it's a stupid idea.

  • You can't (Score:4, Insightful)

    by Cranx ( 456394 ) on Thursday June 03, 2004 @12:02PM (#9326539)
    If you sell common hardware, the only two ways you can really make money are on support and software sales. Opening your code source will only serve to generate competition when other vendors take your source code and start offering their services for a lower price. Then you're back to square one: the software becomes a commodity and you can only make money on support. Which, by the way, the OSS community also strives to make freely available on the internet.

    Don't listen to these wieners. Keep your code closed and keep your company in the black.

  • As an opportunity to sell support contracts! (Score:3, Interesting)

    by Quixotic Raindrop ( 443129 ) on Thursday June 03, 2004 @03:39PM (#9328807) Journal
    Sure ... your code is open source, and any capable and willing Tom, Dick, or Jane can hack it and support themselves. You wrote it, so you (in theory, anyway) know how it works, how it fits together, and besides, selling and renewing support contracts is a much smarter way to make money than selling software. Work the support angle and try to get some marketing wonk to give you some marketing-speak to back it up.
  • What most people are concerns are the following.
    • Does it do what I want?
    • How much does it cost?
    • How well is it supported?

    The reason that a lot of people shy away from Free software is the fact that they are worried about it not being well supported. Which means regular updates, someone to contact in case of a problem, and an expedient repair to their problems. So if you are selling Free Software then be sure to emphasize the support aspect of it and what it does. People need to feel comfortable with the

  • Lock-in and switching costs are another aspect of the purchase decision that are worth considering. Whenever you buy a new system of any sort, there are costs to switching from whatever you are using now and risks of being locked-in to the vendor that can increases the buyer's long-term costs. While your company wants to make money down the line with service and support, by going the open source route, your company would be reducing the buyers' future lock-in costs (and therefore current switching costs)

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