Lessons from Google and Red Hat for Facebook and Open Source

Matt has articulated something I’ve tried to explain to people many times. From his post:

Twentieth century software business models focus on scarcity because they’re founded upon 20th century conceptions of property (actually, their origin is a few centuries’ older than that, but never mind).

Scarcity is the absolute wrong way to build a software business in the 21st century, with the rise of digitization. It is pointless and fruitless to insist that the digital world act like the physical or analog world, and build business models that conform to this false view. To thrive in the new software world, we need to embrace its changes rather than fight them.

The old model was to assume that the value was in the software itself and to therefore lock it up. It turns out, however, as Tim O’Reilly notes, that data is the real value, not bits and bytes. You don’t discover or, rather, uncover, that value until you have abundance.

There will be a few companies that continue to effectively monetize the old world. Oracle, Microsoft, IBM, and SAP, to name the four primary ones. But these outdated models will eventually fall against the rising tide of abundance-based business models, because the new models recognize that digital bits really do want to be free, and that all attempts to artificially lock them are doomed to fail.

It fascinates me how many companies still operate under the guise of artificial scarcity. The landscape is rapidly changing and the shift is so large and fundamental that it seems some are completely missing it. That’s not all that surprising in the end, but as with most industry paradigm shifts, at least one seemingly invincible player will almost invariably not survive.

–jeremy

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