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Open source software as a business strategy

This article is a background story to a common mantra today about how giving something away for free on the internet can be a very effective business model. This is a technology commercialisation case study worth knowing. It has inspired millions of technologists and us as open source software law specialists.

Once upon a time, on 4 April 1994 the company which was to become Netscape was incorporated. From the outset its founders expected competition from Microsoft but they never imaged the level of marketplace and legal ferocity in the 1990s "browser wars".

Netscape's "browser wars" strategy

Both Netscape with its Navigator browser, and Microsoft for its Internet Explorer browser recognised that on desktops the browser had become or could become the battlefield.

Both companies perceived a lot was at stake. They anticipated that users who selected one browser over another might in time regard it as their preferred computer software interface, or even more simply, their IT front door. (Microsoft's actions against Netscape were part of the trigger for the US Justice Department's massive anti-trust cases against Microsoft in the 1990s. In our current decade it's the background to Microsoft's battles with the competition regulator in the European Union.)

Near the height of the 1990s browser wars, in January 1998, Netscape announced a watershed decision in its race against Microsoft's Explorer. It was a major judo move, and it was not taken lightly.

Netscape announced that it would open its own source code. It would in a sense give away its crown jewel product of the time, the Netscape Communicator. The Economist described Netscape's decision as "the computer-industry equivalent of revealing the recipe for Coca-Cola."

The simple but powerful concept of providing open access to the source code of a software program, to its crown jewels, further propelled what is common today - the open source "movement" in software. This "movement" is based on collaboration, sometimes even, open collaboration or open innovation.

In one decision Netscape took a step that made the number of its collaborators skyrocket, especially among the world-wide pool of software programmers. Netscape's source code was free, they added to it for free. In time this has grown to be even more of a virtuous circle than anyone had predicted.

Entire business models have taken off in recent times involving "giving intellectual property away".

It was only about half a decade ago that commentators outside the software sector started noting that at a time when the value of intellectual property is greater than ever, some of those who are making a substantial amounts from it, are involved in giving away a bit, some, or all of it - sharing it with collaborators.

So what was Netscape thinking in adding an open source approach to its business model strategy mix? Netscape was the first big high-profile software company to open its product source code. The practice already had a long prior history in various free software movements stretching back to the 1980s and earlier.

It was a very brave corporate decision. It went against the grain of of what was considered to be sensible in 1998 by most companies developing commercial software.

Software development partnerships reinvented

Netscape was thinking that programmers and other software developers would be empowered to modify Netscape's browser code and incorporate it into their own products. In return they would have to submit all modifications to Netscape, which would decide what to incorporate into the next verion of the Netscape Communicator. Netscape was borrowing from the open source software business model. Today the online software development partnerships model, whether for proprietary or open source software, is vastly bigger than ever.

Software project management was reinvented

netscape_cfwaterfallThis approach required re-thinking what was acceptable in engineering. Driven by young software engineers, the  early 1990s children of the internet, Netscape was thinking that it was time to side-step the "old" software engineering paradigm of making stable (if not perfect) products. Think here of Guy Kawasaki's famous label for this approach: "Don't worry, be crappy."

The accompanying first graphic compares Netscape's "synchronise and stabilise" approach to the traditional software industyr "sequential waterfall" approach.

netscape_synchronizeThe second graphic illustrates the Netscape approach in more detail.

Netscape was thinking that what worked in the competitive landscape of offline media did not suit the hyper-competitive online environment, especially where one company - Microsoft - had (and still has 10 yeas on) a virtual monopoly on the dominant operating systems, consumer desktop software and business office suites. Netscape's judo move strategy became to use collaboration to try to match the might of Microsoft's positioning with cash flows, global PC licensing deals, and legal defences.

Netscapes decision brought greater notice to our open innovation era of how to make stuff. The market responded. Within the first month of its release 250,000 copies of the source code for Communicator 5.0 were downloaded.

Further reading:

Mozilla: An Intellectual Property Monster Story.


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