The latest thinking about how technology-based economies prosper suggests that the success of great technology can only be achieved when packaged with the right delivery mechanisms.

New business models of technology delivery are evolving rapidly. In particular, open technology models that combine continuing innovation together with service and support, offer an emerging form of technology packaging that is proving successful in economies around the world.

“Governments influence the business of software through granting patent protections, enforcing procurement policies and more fundamentally through continuous investments in research and education.”

Governments wield a strong influence on the complex relationships between technology and markets. Public policy acts, at the macroeconomic level, as a business model enabler and is a vehicle that can help shape, for better or for worse, technology packaging and delivery.

In software, governmental practices and policies shape many facets of software development and delivery. For example, governments influence the business of software through granting patent protections, enforcing procurement policies and more fundamentally through continuous investments in research and education. To help build competitive software industries, government policy must promote not only the creation of good software, but also foster a framework that builds the market value of software based on good business practices. What will a policy look like that promotes innovation and openness and makes good business sense?

Patents

There is a growing appreciation of the long-held traditional wisdom that patent protection, when applied to bodies of abstract knowledge like mathematics and most, if not all, software, incorrectly empowers monopolies that inhibit rather than facilitate innovation and the useful application of knowledge. Many legal and economic observers feel that laws regarding patent protection for software should be eliminated or, at a minimum, overhauled. Evidence suggests that software patents can prevent the generation of wider economic value from new knowledge, when viewed across the entire economy.

But even if not eliminated, patents for software, and other abstract processes, should be awarded for much shorter periods of time. And they should be granted, if at all, for only truly novel and useful discoveries. Otherwise, trivial patents are used to block entire areas of innovation for long spans of time.

Procurements

To ensure cost-effective procurement of high-quality products and services, government purchasing should be designed, above all else, to establish a level playing field that promotes true competition. At the same time, it should reward excellence and innovation. True competition, excellence and innovation can only be assured when government purchasing policy demands delivery of open technologies based on open standards. Open technologies can accelerate knowledge creation and provide a strong basis for the reuse and remix of innovative solutions. As demonstrated by the development of the software and communications technologies that led to the Internet and the Web, informed government procurement policy can help open-style software, standards and technologies spread and become the cornerstones in building a healthy and competitive technology-based economy.

“To sustain a healthy knowledge economy, public policy must emphasize innovation, openness, collaboration and fair competition”

Research

Government funded research into the basic sciences, including computer science, has become increasingly important. Many national and multinational companies, focusing on short term shareholder value, have reduced investment in basic research. To ensure progress and foster leadership, governments have had to pick up the slack. Much of the research that produces advances in fundamental knowledge today is conducted in government labs or is sponsored by government grants to universities as well as various specialists in the research community.

Government policy in investing in basic research should strive to preserve openness and collaboration, which are the hallmarks of the academic method and are key to maintaining intellectual vitality. Unfortunately, too often, government policy allows privatization of publicly developed knowledge. Government policy can ensure that the results of research are generally available for the public benefit by adopting guidelines that favor collaboration and reuse. Two of the most successful examples of openness and collaboration in basic research involving open source software and computer science have been in geographic information systems and in supercomputer clustering.

Education

Many believe that learning about computers and computer science can best be accomplished by an educational policy that stresses concepts and not specific products, and furthermore, by educational practice that is project focused. Today, advanced curricula are being designed to foster participation in teamwork-based projects, like open source software projects, that are tied into the ongoing evolution of computing technologies across the globe. Educational objectives include inducing in students the excitement of engaging in a community of highly talented and motivated collaborators that use technology to solve urgent global issues. The opportunity to help solve problems like energy conservation and global warming (in which software that more efficiently manages ubiquitous mechanical devices and chemical processes has a significant role to play) can attract many new young engineers by providing a deeper, more rewarding and higher purpose in their lives.

Summary

As governments across the world recognize, public policy toward technology can accelerate or retard the growth of a knowledge-based economy. Four areas where an informed government policy is vital include patent laws, procurement practices, research investment, and educational goals and practices. When public policy emphasizes innovation, openness, collaboration and fair competition, knowledge in society is sustained and economic growth becomes inevitable.

The past few months have been traumatic for the global entertainment giants. The music industry is going through an upheaval. The Cartel of Big Four recording companies — EMI, Sony-Bertelsmann (Sony BMG), Universal, and Warner — has grown old and brittle. The oligarchs have seen their revenues shrink as their business models are being challenged by a new kid on the block — Apple. They have tried to fight the change tooth and nail. Even jailing users. Now one of the giants, EMI, has decided to join in making the change. What EMI has done today, the others will do tomorrow. And next, Hollywood’s movie moguls will feel the pain as platforms like YouTube and Joost start pulling the carpet from under their feet.

The dynamic of choice is too powerful to ignore.

Changing of the tides

In March, Viacom sued Google for a cool billion dollars for copyright infringement on YouTube. Meanwhile, NBC Universal and News Corp. announced that they were going to launch their own online video-distribution platform instead of continuing to use YouTube. Their deal did not provide the profit or content control as expected. Upping the ante, Apple constructed a tidal wave deal with EMI to sell DRM-free, high-quality 256 kbps music and music videos through iTunes. Millions of songs will be added to the five million titles that already make up iTunes’ music catalog – purchasable, copyable and playable on any digital device without legal restriction. Phenomenal churning of the tide, I would say — upsetting entertainment industry executives who decried the move by EMI as “thoughtless”, “perplexing” and “pro-piracy”.  Others like David Pakman, CEO of eMusic, argued that the move by EMI to support DRM-free digital sales would not contribute significantly to piracy.

The album is history

Apple’s recent announcement of a new feature on iTunes “Complete My Album” gives the recording companies hope that their old business model of selling a full album may yet get resuscitated online. Nice try, but the idea may be too tired for the online consumer already moving in a different direction. Music consumers don’t want to pay for an album when they like just a song. But Apple has nothing to lose by trying the album model — it is just adding new products onto its digital shelf without removing any of those items that are selling like hotcakes today.

Sounds like open source software

Just as open source software users in small and medium businesses (SMBs), small home offices (SOHOs) and large businesses are choosing individual open source software packages such as Open Office, Firefox, Evolution instead of buying huge suites of proprietary software products - the death of the album signals the same purchasing preference which enabled iTunes to sell 2 billion songs for 99 cents apiece. The dynamic of choice — of not being forced to pay for products you don’t want — is too powerful to ignore.

Fair use and packaging choice

Fair use and product selection are two of the most important drivers revolutionizing the business model in digital entertainment. These same drivers form the motivation for the success of open source software as well. Avoiding the stifling End User Licensing Agreements (EULAs) that restrict today’s use and deployment of proprietary software is the open source software equivalent of fair use. Reducing vendor lock-in and avoiding expensive, over-engineered suites (”albums”) of software are the open source software equivalents of more flexible and affordable product selection. Freedom and flexibility are what users want, whether in the world of entertainment or in the world of software. Proprietary software vendors are in no better shape than the entertainment moguls to fight against the basic human values of flexibility and freedom. The providers of software and entertainment that create new business models to fulfill these needs will lead the next generation of successes. Maybe even Apple will begin to see its software business in the same light as its new iTunes model.