Infinite new horizons

The advent of open source offers companies untold new benefits as well as making possible exciting new avenues of collaboration.

In 1984 computer scientist and “geek” Richard M. Stallman quit his job at the Massachusetts Institute of Technology’s Artificial Intelligence Lab in order to focus on his quest to propagate what he calls ethical and free software.

At that time, few would have thought that his decision would continue to have an impact on the information technology strategies of virtually all Fortune 500 companies 30 years later. Yet this type of software, labeled by more pragmatically-minded information technology professionals as “open-source” software, today performs tasks in computers and gadgets ranging from the most mundane television box through desktop computers and Android phones and to the computers in the International Space Station.

A new model of innovation

Narrowly defined, open-source software comes with a licence attached that allows a user to run and modify the software without limitations. That licence also grants her or him the rights to distribute the software (unmodified or modified) to others. Specific types of software licences also feature ‘copyleft’: a requirement that software is distributed in a binary (machine-readable) form and with the corresponding (human-readable) source code attached. Copyleft also requires that others are granted the same rights. Open-source has all but conquered specific market segments in software: for instance, most content management systems or web servers today fall into this category. Yet open source refers to more than a piece of computer code. Rather, it is often described as a new innovation model, business model or a philosophy and has spread far beyond software development and into such areas as composing, structural genomics and biotechnology, automotive designs and other creative enterprises.

Staying within the software industry, open-source software has impacted companies in three distinct ways:

  1. it provides cheap software that can quickly be assembled. This is good news for both users and creators of software;
  2. it provides new platforms for collaboration between companies;
  3. it has provided new insight into how talent can be motivated to innovate. The open-source way often combines extrinsic motivation, such as career or pay, with very powerful motivations related to the performance of tasks.

Let’s look at these three points in more detail.

Three impacts

I. Using and reusing existing building blocks of open source functionality allows companies and individuals to assemble products and services quickly. Thanks to the advent of open-source software and web services, the cost of getting a web-based company up and running has decreased from many millions of dollars to a few thousand. Nowadays it is possible to animate a feature film, create movement of toys, browse the web, or programme a 3D printer by using software whose source code can be downloaded for free. This software typically does not feature an expiring licence or indeed any limitation on the number of computers one may run the software. This main achievement, the commoditisation of the software stack, impacts heavily on both software-creating and software-using firms. Beyond the obvious aspect of the comparably low cost of acquiring open-source software compared with traditional commercial software, the features of open-source products tend to give consumers more power to modify and configure things. They also have more freedom to choose partners to work with on development or use, beyond the original manufacturer. Competing on quality rather than lock-in? This scared many traditional creators of software in early times, including Steve Ballmer, the former chief executive officer of Microsoft, who decried open-source as a “cancer” in the 1990s. However, given that a) there are many more software users than creators who appreciate that power and b) software manufacturer have adopted their business model so that today most combine open-source and commercial software creation, the attitudes of firms have gradually changed.

" Using and reusing existing building blocks of open source functionality allows companies and individuals to assemble products and services quickly."

II. The second and possibly even bigger achievement lies in open-source projects as a new platform for collaboration between firms, and between individuals and firms. Some of these work in unrelated areas while others are direct competitors. For example, the Eclipse Platform, which aims to make tools for software development, involves many individuals as well as competing companies. Earlier, strategic collaborations were often preceded by lengthy negotiations between managers and company lawyers on the possible uses (and non-uses) of results and information provided by the collaborating parties. Expensive monitoring was required to secure compliance with the contract. Open-source has provided a new level playing field: projects in which work is conducted are by definition not owned by anyone, and that pertains to project outcomes as well. If one party is dissatisfied with a project’s direction or outcome, that party is legally entitled by the licence to take the resulting intellectual property and make any use of it for its purposes or to start a new – competing – project based on the same intellectual property (with the exception of trademarks that might be owned by a company). These licences - rather short in comparison to formal collaboration contracts - have enabled companies to collaborate and pool resources in a timely and flexible manner. For example, the requirements of a web portal for the Lawrence Journal World newspaper and that of other organisations, including the University of Texas or Divio, a web agency in Zurich, turned out to be so similar, that all three types of organisations contribute to the same open-source project, called Django. Other companies, such as the Pinterest, are building upon these shared efforts and contribute in themselves in various ways.

"Possibly the even bigger achievement lies in open-source projects as a new platform for collaboration between firms, and between individuals and firms."

During the last two months of 2013, more than 1,300 individuals affiliated with a minimum of 217 companies have contributed to the open-source Linux Kernel that forms the foundation of many open source-based systems. Many of these companies are direct competitors while others sell services surrounding the core project. Some companies have learned to benefit from the increased acceptance of open-source and to create – and dominate - a whole ecosystem surrounding ‘open’ projects. For instance, IBM has managed to attract hundreds of companies with more than a 1,000 active contributors around its Eclipse Platform. However, IBM had to experience a learning curve on how to work with open-source communities of developers. Released in 2001, the company found it difficult to attract outside talent to their endeavour. A few years later the not-for-profit Eclipse Foundation was set up to provide an umbrella for projects outside the boundaries of IBM, and began to host infrastructure and keep rules of governance. As a result, contributions by outsiders skyrocketed. The participants, ranging from universities through consultancies to software developers, provided enough resources and attention to make Eclipse an indispensable framework to this very day. The open-source platform enables communication and coordination between the collaborating companies.

III. Last but not least, a positive and under-discussed impact of open source software concerns novel insights on how to motivate in-house and external talent for innovation. Puzzled by the high quality output of open-source development communities, research has identified five reasons why ‘the open-source way’ can facilitate employees to work better.

  1. Lacking apparently formal organisational structures, open-source development communities seem anarchic. However, closer observation reveals an informal and emergent - yet strict - meritocracy corresponding to levels of responsibility and decision-making. This allows projects to change and adapt as membership, available resources and tasks at hand change over time. Many open-source projects represent career opportunities for developers and managers, who can bring their expertise from one project into the next, perhaps more prestigious or technically demanding, project.
  2. Open-source development communities have evolved norms and values that base a participant's reputation on the quality of their contributions rather than in their affiliation with a specific company, university or other organisation. As such, talented people find their own way to important tasks and roles that are evolving within the project. It turns out that, along with the opportunity to learn, a person’s reputation among his or her peers is strong motivating forces for them to innovate.
  3. In normal companies, knowledge sharing among employees can be difficult to achieve because many feel such behaviour is often associated with personal disadvantage. One of the biggest barriers to knowledge sharing is the fear that someone will benefit excessively from the knowledge you share with them and will not be interested in reciprocating. Employees are often heard complaining that someone might steal their ideas. A variety of open-source licences, however, request or require people to provide any modification they make to the product back to the community. Therefore, people may be less concerned with the disadvantage of sharing ideas, knowledge or technology in an open-source software setting than they are in traditional firms. Moreover, it is considered good practice to share your ideas and software in open-source communities.
  4. Contributions by participants are transparent and visible to everyone inside and outside the organisational walls. Not only is this a source of reputation and pride for contributors, but the possibility that everyone could potentially see one’s contribution with name attached causes people to be extremely conscious of quality standards: of doing things properly and in the right way. This attention to quality is often said to produce beautiful results.
  5. Open-source software development practices encourages experimentation and playfulness, qualities that are critical to innovation. Creating the technical infrastructure and developing a culture that enables and values these approaches often leads to surprising solutions. Ideas for new products and services bubble up from the bottom where new opportunities are recognised, rather than dictated top-down by product planning, research and development or marketing as we find them in traditional companies.

Managers may look at the open-source approach and ask: should we emulate some of the same practices internally? If yes, how can that be achieved? For example, commercial software companies now attempt to build more community-like structures internally in order to enhance software development efficiency and effectiveness. By contributing to open-source software projects, such companies also learn first-hand about motivation and the dynamics and behaviour of talent within communities. However, software companies interested in harnessing the benefits need to change not only at the lower levels of the organisation: without being able to relinquish a certain amount of control to the communities, and to provide a level of autonomy, open-source-type of communities may not flourish but will rather wither and die. The need for strict planning and hard deadlines can sometimes collide with the manner in which these self-organising transparent and permeable communities operate.

"Ever-increasing digitisation pushes more and more processes into the virtual realm."

Ever-increasing digitisation pushes more and more processes into the virtual realm. Both communication and artifacts such as prototypes are being created and communicated through electronic means. Adopting open source and open source methodologies enable companies to benefit in three major ways: first, by taking advantage of the resulting building blocks that allow for cheap and quick assemblage of products and prototypes; second, by providing a framework and a methodology that enables collaboration between seemingly unconnected individuals and firms, as well as with direct competitors; and finally, through understanding and learning from open-source methodologies, managers can discover hidden source s of motivation and innovation in talented individuals within and without the organisation’s boundaries.


Sebastian Spaeth

Professor Dr Sebastian Spaeth holds the chair of management and digital markets at the University of Hamburg, Germany and is spokesperson for the division of social economics. As a postdoctoral researcher at the chair of strategy and innovation management at ETH Zurich, Switzerland, Dr Spaeth conducted research on Collaborative Open Innovation and collaborative business models. He has published in numerous international Journals.

Georg von Krogh

Dr Georg von Krogh is a professor at ETH Zurich, Switzerland, where he holds the chair of strategic management and innovation. He specialises in competitive strategy, technological innovation and knowledge management. He holds a honorary position as research fellow at Judge Business School, University of Cambridge, and is an editorial board member of a number of journals.