By Breton Buckley
In response to Professor Ataide’s essay, Google’s Vision vs. Apple’s Vision?, I have been struggling with the issue of open source for the past three years, both in the embedded technology business and in how I advise students.
From a product perspective, the criticism of the Android smart phones, based on the Android open source operating system, is that they are all the “same” phone, sharing the same platform and app store. They are commodities, competing on price. Meanwhile, Apple’s iPhone, a completely closed system that controls both hardware and software, innovates and differentiates.
But Motorola is a good case study of how open source saved the cell phone division. They were complacent after their RAZR success and found themselves losing money and market share. I was at a Motorola event last July in San Francisco when they told a group of us that they were betting the farm on Android and would roll out a slew of Android phones. There was no way Motorola on its own could develop anything comparable, and Microsoft’s Windows Mobile OS was lagging. The bet paid off and the company is recovering. Recovering, but not dominating. Motorola, HTC and Samsung are all battling it out in the commoditized smart phone market, with Apple soaring above.
But my concern for our students is in the area of entrepreneurship and economic opportunity:
1) How can they differentiate in product offering when everyone has the same access to open source and platforms?
2) How can startups be successful in this environment?
3) How will our students get good jobs in what appears to be a major structural shift?
Over the last 15 years the business model for thousands of startup software companies was to invest in engineering to develop intellectual property, and then license that technology to manufacturers. That market has now virtually collapsed, in part due to the open source movement, as well as movement to Asia and hardware companies providing free software. (Google’s open source WebM video codec will now erode licensing fees for competing codec companies in a similar way.) The number of software startups in San Diego has drawn to a trickle, while Qualcomm has absorbed a lot of jobs and companies. VC funding in San Diego is scarce.
On the other hand, all the cell phone innovation is coming from North America, in that the dominant operating systems are Blackberry, iPhone, Android and Microsoft Windows Mobile. But unless you work for those companies, you don’t benefit.
While my experience is in the embedded technology market, I totally agree that also on a broader scale it is a profound philosophical battle with regard to how products are brought to market and what we teach our students in order to compete. I try to teach the students as much as possible regarding leveraging the Internet and e-marketing in order to have a global reach, even for a small business. But I think what is most essential, and what seems to be an even greater challenge now than previously, is the need for real innovation, benefit and differentiation, and a business model to support it.
Open source may be free, but is it worth the cost?
Breton Buckley is Adjunct Professor of Marketing in the School of Business at PLNU.