One of the major topics at OSCON this year was the notion that software is increasingly becoming a commodity for which the customer is no longer prepared to pay a premium. So, as the market for Open Source software expands and companies rush to define new areas they can create business in - what is there to be learned from other high-premium goods that have since become a commodity?
At OSCON the software market was often compared to the construction industry with people moving to DIY in order to supply themselves as cheaply as possible.
Sitting at Portland airport waiting for my flight back to Germany it hit me that flight (or flying) has also moved from being something that only a few could afford and since become something that is available for (nearly) everybody.
In the airline market there are now many low-cost carriers who are offering cheap tickets to destinations for which other airlines still sell higher-price tickets. Some European low-cost airlines actually give away a certain number of tickets for free (all the customer actually pays is tax and a handling fee). Flying for free - who could have imagined that back in the days of Pan American? So in a way those cheap airlines can be considered the Open Source providers around flying.
So, how have the cheap airlines altered the marketplace?
Reduced vendor lock-in
There were days when you could fly with the national airline or you could walk. As a consumer, you had little choice and so you basically payed the asking price if you wanted to fly. Of course things changed before the low-cost airlines came on to the market - but the surge of cheap airlines now means that you have plenty of choices and prices to choose from when picking your flight. The airline customer has more power - because she can choose.
At OSCON, Doc Searls talked about the way companies are no longer buying the software from their year-long vendors but moving into a Do-it-yourself market where they can freely pick and choose, combining Open Source components with software they may already have. In addition, languages like Python are being used to glue the bits together and allow a more rapid change of the complete application. Doc compared this to the DIY part of the construction business.
In the flying-market, customers are going to the Web as their way of doing DIY. Instead of taking pre-configured packages from tour-operators they are using the online travel web-sites to put together their own configured and personalized packages. This trend has now forced some German travel-agents to charge a refundable fee if you go into the agency in search of your ideal holiday-package. The fee is to prevent you taking their “consulting” and then using the Web to piece together the same package at a cheaper rate.
In the software business the DIY “trend” is leading to software companies becoming increasingly consulting focussed as the revenue for the actual software dwindles. Software companies will need to make sure that they can turn pre-sales consulting into a form of revenue. They will need to prevent customers from gleaning information in that phase of a project and then “doing it all themselves”. Of course, Open Source actually supports this and so software companies will need to focus a part of their business model on that area.
Flying from regional airports to attract additional customers
Cheap airlines often operate out of regional airports as opposed to national hubs, because this lowers their operational costs and attracts customers who would not normally be inclined to fly because of the distance to the airport.
Open Source businesses need to attract customers from areas that are perhaps reluctant to look at “free” software. Open Source software needs to move into areas that are perhaps as yet not really targeted. There was quite a bit of discussion at OSCON about packaging Linux for specific problem-areas or devices. This is an example.
“Traditional” airlines form their own low-cost airline
At first the more traditional airlines were sceptical about the low-cost airlines. In fact they ridiculed the chances of low-cost (and perhaps low-comfort) flights ever taking off. And yet they did and those “old-world” airlines were forced to react. And many did so by forming their own low-cost carriers. So now, the traditional airlines have discovered the new market-place of low cost flying and are competing fiercely.
I think this point is particularly interesting when we look at the Open Source market. If applied, it would mean that eventually companies like Oracle and Microsoft may be forced to produce Open Source versions of their products. “Low-comfort” versions that you can get and use for free. Oracle could release a low-cost or Open Source version of their database in order to compete in the same market as MySQL. To enter the low-end market and then provide a migration strategy to the higher-cost, supported version seems similar to buying a cheap - no comfort flight - and then being told that the same company also offers deluxe flight on their “other” airline (”and you know the tickets are really not that expensive!”)
Although knowing little about the cheap-flights market, it doesn’t seem difficult to find points that can be compared to the evolving software-market. And, as is the case with comparing the software business to the construction business, there seems to be a lot that can be learned.