Open Source Commentary from Navica's CEO,
Bernard Golden
June 2007
In This Issue
-
Taking Advantage of the New Economics
of IT
The Washington Post: Illustrating the Power
of the New Economics of IT
Quick – what industry has been most affected by open
source software? No prize for guessing Web 2.0. Many of the
founders of these companies have been explicit about how open
source has enabled them to bootstrap their businesses for
a few thousand dollars – a far cry from the millions
swallowed up by their predecessors in Web 1.0 (of course,
if you’re cynical, this just means that all this means
is that a new crop of failures will be cheaper to collapse
this time around). For example, the founder of JotSpot noted
that it only took around $100,000 to get it off the ground
compared to the millions it took for his first company, Excite.
But it’s not just social media mashups that are leveraging
open source in this Web 2.0 wave. A friend has built his startup
called Vindicia
totally on PostgreSQL and Perl – and Vindicia offers
periodic billing and chargeback services, a far cry from sexy
social media.
All of these Web 2.0 companies have used open source quite
deliberately as a key part of their business strategy. All
of them use open source to get going cheaply with the ability
to scale rapidly. By contrast, most mainstream IT organizations
have applied open source tactically, viewing it as a tool
to be used in limited circumstances, but not a resource to
be used to transform their company’s business offerings.
In the past few newsletters I’ve been emphasizing that
open source is far more than just cheap enterprise software,
an inexpensive alternative to be judged by the traditional
standards of the class. I’ve used the phrase “the
new economics of IT” to describe the impact that open
source can have on mainstream IT.
Because open source is so much cheaper, it enables new categories
of use – categories that expensive enterprise software
would never be applied to because the economics wouldn’t
pencil out. These new categories of use can take IT out of
the realm of “running the trains on time” (e.g.,
making the same old stuff perform incrementally better) and
into the realm of letting the parent company gain competitive
advantage through unique offerings. That is to say, even mainstream
companies can use open source to remodel their businesses
rather than just to spackle over cracks. Most mainstream IT
organizations, however, still appear to judge open source
as a crippled substitute for “real enterprise software.”
But is that the right way to think? Is open source really
unable to change the fundamental economics of IT? Does open
source really have no strategic relevance for mainstream companies?
I say no – and the Washington Post has proved me right.
At the recent OSBC conference, one of the keynote speakers
was Rob Curley, Vice President, Product Development, Washingtonpost.Newsweek
Interactive. His presentation, titled “Hacking
the Newspaper: How an Open-Source Nerd from Kansas is Revitalizing
Journalism” demonstrated my thesis far more
convincingly than anything I’ve seen before (warning,
you may need to register with an OSBC-supplied username/password
to access the presentation; also, the presentation itself
misses the energetic, not to say frenetic, commentary provided
by Curley).
Rob heads a small group at the Post whose charter is to develop
new online offerings that add incremental value to the basic
offering of a web version of the newspaper. The really interesting
thing is that the Post is the third paper he and his group
have worked at. At each of them the group has created open
source-based offerings that extended the core value of the
newspaper and delivered functionality creatively targeted
at the demographics of the readership.
In other words, by using open source, his group was able
to further distinguish each publication, creating offerings
targeted at each publication’s customer base. Unlike
the tyranny of packaged software, which helps users move to
homogenous functionality, open source helped these companies
move to heterogeneous differentiation. And, as anyone can
tell you, differentiation offers better margins.
At his first newspaper, the Lawrence Journal-World located
in sports-mad Lawrence, Kansas, home of the University of
Kansas Jayhawks, Curley’s group created online offerings
that delivered more sports to viewers. For example, they treated
every youth baseball team like a major league club, complete
with game stats and player profiles, including interviews.
Perfect for a town with a large post-college population with
children participating in youth sports leagues.
Curley’s group then moved on to Naples, Florida, a
city as far apart from the youth-oriented Lawrence as could
be imagined. Naples is a retirement town filled with well-off
snowbirds. As you might imagine, youth sports is a low priority
with the paper’s readers. However, dining out is a major
league sport for senior citizens in Naples. So at the local
newspaper, Curley focused on restaurants, churches, live theater,
and so on, allowing reviews, comments, votes, and the like:
social media for the senior brigade.
Having now moved on to the Washington Post, Curley is offering
online interviews of “regular” people, boiling
hour-long videos down to a couple of minutes of engaging energy
from the extremely diverse population that is the Metro DC
area.
Every stop offered something special, something extra, perfectly
tuned for the interests of the audience. Youth sports coverage
would bomb in Florida, and video interviews are entertaining
because of peoples’ differences; the homogeneity of
Lawrence, Kansas probably wouldn’t have provided so
much interesting video for a website.
And all of these interesting experiments in social media
were delivered via the open source framework called Django,
developed by Curley’s own group. And open source is
what makes it possible to deliver this innovation.
Curley offered an example of how quickly they put together
offerings. The University of Kansas was implementing a new
basketball season ticket purchase methodology (apparently
KU basketball is a near-religion and season tickets have traditionally
been handed down parent to child in wills). The University
sent out a confusing description of how the new seating algorithm
would work. Rather than just printing the instructions, Curley’s
group took a picture of the court from every seat in the arena
and then put an online calculator onto the newspaper’s
website. If you filled in your info (including your UK basketball
yearly donation) it would show you the view from your new
seat. This app was done in an afternoon with Django.
Someone in the audience queried Curley about why open source
was important to the kind of offerings they put together.
He responded by saying that if they put a request into IT
they’d get an estimate in a couple of weeks and then
have to wait weeks or months for the functionality to be implemented.
He didn’t mention budgetary issues, but I’m sure
that would be a factor as well – it would be nearly
impossible to create a valid business case for any of the
offerings, yet you could see the OSBC audience obviously responding
to the common sense of every one of them – I mean, if
your child was in a T-ball league, wouldn’t you want
to see his or her online baseball card, complete with interview?
So what does this tell us about the role of open source in
the larger world of business? Just this: open source can change
the competitive landscape of an industry by letting companies
innovate and create new offerings. If you’ve read anything
about the newspaper industry over the past few years, you
know its obituary has been written: overmatched and obsolete
in the world of Craig’s List and blogs. But open source
let these newspapers get off their deathbed.
Open source lets Curley’s group make newspapers better
and more relevant than the alternatives. And if open source
can help a troubled industry like newspapers, it can help
any industry do more creative and compelling things –
and any company in the industry differentiate itself from
its competitors.
This is the new economics of IT: unique offerings powered
by open source. The agility and low cost (in Curley’s
case, his costs were only headcount, and he mentioned interns
several times, so I’m assuming much of what his group
did was dirt-cheap) allows a game change to the old version
of IT: ponderous implementation of big dollar packages that
allow you to function just like every one of your competitors.
IT needs to move to the other side of the field and leverage
new tools and techniques.
It’s not all victory laps, though.
There were some sobering elements to Curley’s presentation
as well. While the inventiveness and energy of his group’s
offerings was palpable, it was also clear that it operates
in its own isolated silo. He noted that his group’s
official title in the Post org chart is “skunk works.”
This illustrates the challenge of the new economics of IT.
IT organizations themselves are so bound up in making the
trains run on time that they can’t see that new transportation
modes are springing up.
I’m becoming convinced that the real barrier to open
source adoption has nothing to do with support – the
“one throat to choke” – or risk, skill shortages,
lack of interoperability, or the myriad reasons proffered
by IT organizations about why they aren’t moving to
open source. It seems to me the barrier is much more cultural
– an unwillingness to recognize that there are other
ways to do things than the established, vendor-centric processes.
Maybet Clayton Christensen has it all wrong. The hindrance
to innovation may not be on the vendor side at all. It may
be that the inhibiting factor to new technologies is that
established IT shops are unwilling to adjust their working
practices. Christensen points out that new technologies need
to find new markets because they are inadequate when compared
to the existing market leaders in established markets; the
rationale is that new technology providers must come to the
fore because the existing vendors fail to take advantage of
the opportunities offered by the new technology. But maybe
new customers have to supersede existing markets because the
old customers are locked into the existing high-cost, inefficient
technologies and processes.
Another way to slice this is to look at it as an inter-organizational
issue. In this view, IT organizations are listening to their
best customers -- upper level executive peers who demand big
picture, big ticket items. Innovative solutions never rise
to the top of the customers' (i.e., sales, marketing, finance,
etc.) because they aren't big enough. Innovation goes on at
lower levels in those customer organizations; the demands
never make it to the top of the official agenda and IT never
even hears about the need and therefore can't respond.
This isn't good, because those lower level customer organizations
will look outside of IT to get their solutions -- and that's
bad, ultimately, for CIO job security. Curley's role at the
Post is a perfect example of this -- his group sits off to
the side of IT and operates independently: innovation as outsider.
This just in – in a new book Christensen appears to
be addressing the problem of using financial analysis to assess
business opportunity; see his BusinessWeek interview here.
He appears to be addressing the issue of cultures being unwilling
to change because they don’t feel threatened. Their
assumption is that what is currently working will continue
to do so in the future so the choice appears to be “don’t
rock the successful boat” rather than try and launch
a new ship. He notes that the assumption of ongoing success
overstates the probability of continuity and that tools are
being developed to assess the likelihood of continued success
(perhaps by applying Monte Carlo simulations).
As to the question of how open source can find its true role
in upending the current economic assumptions of the role of
IT, perhaps the challenge of open source is to find a new
type of technology user, or a new generation of technology
leader, or even a new model of IT organization, one which
incorporate steady-state evolution and discontinuous innovation.
But for sure the culture of “I’m too busy running
the trains on time to notice the superhighway they’re
building next to it” is a one-way ticket to irrelevance.
It can be different. I defy anyone to witness what someone
like Curley’s group can accomplish and dismiss it because
it doesn’t “provide business value.”
Navica News
You can hear me speak at these upcoming events:
I am participating in a webcast on Thursday for ITBusinessEdge
on the subject of GPL3. I don't know when it will be made
available, but I'll include a link in next month's newsletter.
If you are interested in having me speak at your
organization:
Contact me directly via email.
You might be interested in my blog postings on CIO.com:
Microsoft
Patents: The New McCarthyism
H&R
Block : Using open source to reduce barriers to innovation
ODF and Web 2.0
Nick
Carr KOs Another Straw Man
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