In Part One, I talked about my own theory about open source competition, and wrote about some ways of the ineffective and partially effective ways to deal with this issue.
So, what can a company do to deal with this inevitability?
The answer is simple to explain, but difficult to do. STAY RELEVANT! (If you can)
This could be argued, but for the most part open source applications (free as in freedom, not as in beer) do not lead in innovation. Until they mature, they mimic existing features of commercial applications. Meanwhile there is new chaos, new opportunities in the marketplace that need to be addressed. Just as it’s difficult for open source applications to do this (I know I know, there are exceptions), it’s even more difficult for fat and happy market leaders to do so. It threatens the status quo, and hurts short term profitability.
A recent HBR article gave some ideas on how large companies can foster innovation. One is the “Cisco approach”. Buy startups with an innovative culture, and add them to the product line.
Another way to keep relevant is to establish an R&D facility that works on new products, and has it’s own budget and goals separate from the rest of the company. The article pointed out that new initiatives get favor because they are new and exciting, and existing cash cows get favor because they are important to the bottom line. The problem is that projects can’t make that chasm between the old and the new because they lack the support because they are no longer novel, and don’t yet contribute to the revenue picture. The same project would have a better chance at a dedicated startup.
If your product can’t stay relevant at a delta sufficient to merit the additional costs, it probably means that you’ll need to adjust your pricing downward. The FUD associated with Open Source is pretty much extinct in most enterprise accounts. Smaller enterprises are looking for lower cost solutions.
Misner’s Theory of Open Source Competition should be something that consider with every company you invest in, in every potential employ, and should be a part of any technology business plan.