Building Open Source Industries in Developing Economies: Learning to Play the Open Source Services Game

Weak industry momentum is prompting China to re-think its open source software business strategy. This is a good time for China and others to look beyond product models based on traditional proprietary thinking, and see the wider doors of opportunity that open source software services can open.

China’s People’s Daily has recently expressed disappointment about the apparent lack of growth in the Chinese domestic Linux industry. The Chinese government has spent millions on starting and supporting companies like Red Flag Linux with the objective of building a self-sustaining software industry in China.

The People’s Daily now wonders if the investment has been worth it. Despite generous support, Red Flag and other Chinese Linux vendors have been unable to displace the apparent monopoly of Western competitors like Red Hat, Novell, IBM, and others.

The fear is that if Red Flag Linux cannot achieve the same degree of success that Red Hat Inc. has, then there must be something terribly wrong. And, if Chinese developers do not enjoy acceptance into the Linux kernel development cadre, then the Chinese ability to develop an industry based on Linux will inevitably falter.

Wrong solutions

Several remedies have been suggested. For example:

China could build an open source product, mirroring its success with generic hardware, that transparently runs industry standard commercial software, such as Microsoft applications, in addition to open source applications. Or, China could try harder to break into the Linux kernel developer monopoly of Red Hat, IBM, and others by contributing its own technologies and code.

Unfortunately, China today feels it does not have the depth of software engineering skills to accomplish such feats.

More fundamentally, however, China’s worries reflect the continuing digital divide that plagues the open source software world. It is a legitimate concern for all developing nations that, if they do not participate in technology development on an equal footing, they will be left behind. Unequal participants will find it hard to develop a sustainable industry around their own resources and will not share in the profits that are possible in the industry. Instead, they will remain forever customers and resellers of multi-national monopolies.

“China’s worries reflect the continuing digital divide that plagues the open source software world.”

Undue pessimism

This is an unduly pessimistic view.

While building one’s own products may be necessary to succeed with proprietary software, this strategy is not needed with open source software. Unlike the proprietary product industry, the open source economy is not built by “owning” the technologies upon which it is based. While there can be economic advantages in creating and managing relevant open source projects, a more important advantage is derived by building a service industry around an open source technology or set of technologies. For example, Apache is an important part of IBM’s Websphere product family. But IBM did not create Apache. Nor does IBM control it or own it. Instead, IBM supports Apache through an independent foundation and builds a collateral product and services business around it.

Once a services business is built up around a particular open source technology, it might be possible to change the game by becoming the maintainer of the associated open source code. In special cases, the open source technology might even be purchased, as illustrated by Red Hat’s recent acquisition of JBoss. Other strategies might include hiring the developers, setting up and funding a foundation, or buying a company whose current role is project manager.

Whether building on the authority derived from providing services and support of particular open source technologies, or purchasing the technology outright, or just contributing significantly to it, there are many ways that one’s influence and control can be promoted within the open source industry.

The right remedy

For China and other developing countries, the low-hanging fruit is to build up a credible services industry and then use this as the basis for contributing to and influencing the open source movement at large. The services industry is where the real money is anyway!

It is backwards for developing countries to imagine wresting control of existing open-source technology from the developed economies. Instead, developing countries can aim to solve real problems in the local economy and then convert the acquired expertise into projects of both local and global scale. This expertise can also be used to contribute to and influence the advancement of open source projects themselves. New technologies might even be created in this process. Interestingly, playing directly on the global stage without using the local economy as a stepping stone may be feasible, especially for developing countries already strong in BPO and international software services.

The trick for China and others to level the playing field and to reap the profits from open source software starts first with services. It is short sighted only to see today’s failures based on perceived monopolies of the Western developed economies. By learning to play the open source services game, the rules for success change, as indeed the Linux game itself is transformed.