Open source as the villain in its own story

Open source as the villain in its own story

Summary: Reputation, credibility, and goodwill have no place on a public company balance sheet, but these values are just as important to software companies now as they are to politicians.

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Rumplestiltskin costume from buycostume.comMaybe because of JavaOne and Sun's well-known concerns about open source profit the idea of proprietary hooks which make people pay for open source software is big again.

After all, if the code is free and visible why should an enterprise customer write a check to its sponsor? (Buy this guy now, while he's on sale, from Buycostume.com. I'll explain why in a minute.)

When code has a BSD-type license, like Eclipse, the answer is that the project isn't producing products at all, but the raw material for products. Companies are free to write, and sell, proprietary extensions.

When code has a GPL license, the answer is not so clear. Companies may feel that their own code contributions, or help with bug fixes and beta testing, are compensation enough.

Savio Rodrigues of Infoworld (and IBM) divides customers by time and money, suggesting that holding some code back as an incentive for conversion makes sense.

Matt Asay of C|Net (and Alfresco) suggests the big money is in peripheral services, like systems management or SaaS, so the core need not be hidden.

To complicate matters further we have the fears of Twitter, a proprietary site whose functions could easily be cloned into a more powerful, networked open source project.

In other words this question of opening or closing code to maximize profit is no longer unique to open source. When open source is seen as a potential competitor it hits everyone.

This may be the key point. As a successful business model, open source is putting new competitive pressures on companies which are not all economic.

The goodwill of a powerful community can be a great asset, but like this site's credibility it's an asset that can disappear in a heartbeat.

Ask the folks at CoreCodec, trying to contain a PR storm over an action they've already taken back.

Reputation, credibility, and goodwill have no place on a public company balance sheet, but these values are just as important to software companies now as they are to politicians.

To Matt, Savio and others in the business the question is how much gold they can spin this straw into. But the wise man knows it's how much straw you have which really determines your bottom line.

In journalism we have a word for this straw. We call it credibility. It's hard to win, easy to lose. Every journalist worth their byline knows it's the only real asset we have.

So welcome to my world, boys. How the straw becomes gold may appear to be magic, but the straw is what you need to focus on. That's why the fellow at the top of the page is the villain in his own story.

Topics: Open Source, CXO, Enterprise Software

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27 comments
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  • huh?

    I read a lot of words there, but failed to discern any content!
    jimbo2
    • The story

      Focusing on conversion is misplaced. Focus on goodwill instead.
      DanaBlankenhorn
      • How many pay checks

        can you write with goodwill?
        No_Ax_to_Grind
        • How many "best friends" will you have

          with a billion pounds?
          fr0thy2
        • How many loyal No_Ax'es will you have

          with a billion pounds?
          fr0thy2
    • $ vs Goodwill

      I too ws puzzled by the article, but Dana's one line synopsis of her offering gave a concise point of view. Unfortunately the padding was arcane and obscured her point.

      I come from a Non-IT background, but the principle still stands - if you look after your customers, attend to their needs, supply a good product, and honour any warranty claims speedily and effectively, then you will build a good reputation. You may not be able to quantify the value of your goodwill on the balance sheet - unless you choose to measure your client satisfaction.

      We did that. Every time we invoiced a retail client we would ask how they came to us, and it was fed into our system. This was not hit and miss, out of 5000 retail invoices we only failed 4 times to collect the information. The result - 69.5% of our retail sales came by word of mouth. And that does show up on the balance sheet.

      But it comes at a cost. One must be prepared to tell the truth to one's customer's, even if it looks bad. eg I'm sorry your car will not be ready today, I stuffed up by failing to order the parts we needed, it will be ready tomorrow. Will that put you out? How can we assist you to overcome the problem we have caused?

      If people know that you tell the truth, then they will develop a confidence in you and your product. There will be times that other people let you down and make it difficult for you to meet your obligations to your client. But if they know that you tell the truth, then they will accept the situation at face value, and generally cut you some slack. In the end, it comes down to trust, there are ways to build it, and ways to destroy it, in the final analysis, if they think they are getting screwed they will find another way or another company to solve their problem, even if you are the only game in town.

      I am looking forward to watching the class action re "Vista capable", to see how much trust has been eroded from the MS balance sheet.
      Alganon
  • Value of a brand

    Microsoft spends so much assuring it remains one of the top 3 most respected and approved brands in the world because sales are increased by trust. As only one example, Vista is a blazing success despite loud carping because its a Microsoft product.

    A recent Comment here on ZDNet attempted to assign a dollar value to the Microsoft brand, and all those $ billions may be an understatement.

    The Comment observed incorrectly:

    Reputation, credibility, and goodwill have no place on a public company balance sheet, but these values are just as important to software companies now as they are to politicians.

    [End quote.]

    Actually, goodwill also has a place on a company's balance sheet. And writing down goodwill can ruin a company's quarter.

    A politician can survive scandal, being caught in false statements, and being despised by a significant portion of the population. So can a software company like Google.

    But a company like Apple or Microsoft or, yes, Google, can use the associations with its brand to make money. As Red Hat also shows, it's not about a company's actual performance, but the positive perception.
    Anton Philidor
    • Devalue of a brand

      talk too much and release trash like Vista.

      The world is a changing place.

      Give it up.
      fr0thy2
    • Funny you should bring that up

      [i]Microsoft spends so much assuring it remains one of the top 3 most respected and approved brands in the world because sales are increased by trust.[/i]

      Well, Anton, [url=http://www.visibilitypr.com/pdfs/BrandPowerRankings07.pdf]they failed.[/url]

      [i]As only one example, Vista is a blazing success despite loud carping because its a Microsoft product.[/i]

      I think we agree that Vista is a financial success because it's a Microsoft product -- we just don't agree on the means. Nobody else, certainly, could get away with telling the public that despite a powerful demand they would just have to take what they were given.
      Yagotta B. Kidding
      • Then there's Millward Brown ...

        ... which shows Microsoft at #3 with a 29% gain for the year.

        http://blogs.zdnet.com/BTL/?p=8551
        Anton Philidor
    • Like anything, it's a balance.

      Good will, feel warm and fuzzy, etc. are all fine and even have some importance. Howevr, when pouch comes to shove, count on real dollars winning every time.
      No_Ax_to_Grind
      • Warm and fuzzy costs real dollars

        The perception of a company is worth money, and every company pays for the best perception it can afford.

        Manipulating perception also affects policies. When sudden crises like the long-ago tylenol poisoning scare occur, company response is graded according to the impression created. There are specialists hired to assure the public sees that This is a company that cares.

        You're right, of course, that real dollars count most. But public recognition and perception - brand - is a worthy place to use those dollars.
        Anton Philidor
        • I agree, to a point.

          Honestly, I don't know that for profit companies care all that much about trying to make open source folks "feel good". I mean they do, unless it means they are going to lose sales/dollars and then the warm and fuzzies don't count for much. IE, Red Hat saying they don't care about the desktop.
          No_Ax_to_Grind
          • Different issues.

            The topic of the Comment was open source, yes, but the statement about good will et al having no place on the balance sheet was, I thought, a general observation.

            As a general comment it's inaccurate.

            About open source as part of the business plan for competing companies, you're right. It's also unnecessary for a company like Red Hat to be very concerned about those who contribute to its profits.
            Anton Philidor
        • Nobody ever got stabbed in the back

          For a warm and fuzzy, but plenty of people have for a few bucks.

          See what you'd rather have when you're caught in a foxhole. A pocket full of money or a friend (that you haven't screwed over) to watch your back.

          The subject you are trying to dance around is "reputation", and if you ask anybody who hasn't been (or aren't presently being) paid to praise them, Microsoft has a mighty poor one, presently.

          The principle of ethics applies to business, as well as any other relationship. The end does NOT always justify the means.
          Ole Man
          • Microsoft did decline...

            ... in public response during its anti-trust and related problems. But recovered in a year or two.

            Reputation implies a different, more analytic response than does public perception.

            Using a different example, the GE brand ranks #2 in the list I cited. How many people know much about what GE makes or does?

            There is a difference.


            Also, see Treasure of Sierra Madre for a meditation on the relative value of money and friendship in stressful circumstances.
            Anton Philidor
          • GE makes everything

            from Jet engines to the Tonight Show with Jay Leno
            Ashtonian
          • How much faith do you place

            In the list (and other "lists" and "studies") that you cited? If the list was not prepared gratis, and neutral, then it is subject to the same questions it answers about the specimens it is reporting on. In other words, the list cannot be believed any more than the culprits the list is reporting on.

            You seem to delight in replacing, manipulating, substituting, twisting, and exaggerating words to make a point against all logic, almost as if you were trained/schooled by Microsoft's PR department. Should you not disclose your relationship with them?

            I feel no need to "meditate" on the relative value of money and friendship, as it has been obvious to me for a long time, but thank you for your suggestion. You might should want to take a bit of your own advice, it seems to me.
            Ole Man
    • Hogwash!

      And plenty of it.
      Ole Man
    • Only Non Stock holders say the things you do

      those who have no real vested interest in the company per se...

      unless your a Microsoft tech of course.

      then its your bread and butter.
      pcguy777