Chapter 10 Software in Flux 10 1 Introduction Marginal cost the cost of producing one more unit of a product Open source software OSS software that is free and where anyone can look at and potentially modify the code poses a threat Cloud computing replacing computing resources either an organization s or individual s hardware or software with services provided over the internet Software as a service SaaS a form of cloud computing where a firm subscribes to a 3rd party software and receives a service that is delivered online Virtualization a type of software that allows a single computer to function as if it were several different computers each running its own operating system and software virtualization underpins most cloud computing efforts and can make computing more efficient and cost effective Key Takeaways o The software business is attractive due to near zero marginal costs and an opportunity to establish a standard creating the competitive advantages of network effects and switching costs o New trends in the software industry including open source software OSS hardware clouds software as a service SaaS and virtualization are creating challenges and opportunity across tech markets Understanding the impact of these developments can help a manager make better technology choices and investment decisions 10 2 Open Source Linux an open source software operating system LAMP an acronym that stands for Linux operating system the Apache web server software MySQL database Peal Python PHP Key Takeaways o OSS is not only available for free but also makes source code available for review and modification o While open source alternatives are threatening to conventional software firms some of the largest technology companies now support OSS initiatives and work to coordinate standards product improvements and official releases o The flagship OSS product is the Linux operating system now available on all scales of computing devices from cell phones to supercomputers o The LAMP stack of open source products is used to power many of the Internet s most popular Web sites Linux can be found on 30 percent of corporate servers supports most Web servers and is integral to TiVo and Android based cell phones o The majority of persons who work on open source projects are paid by commercially motivated employers 10 3 Why Open Source Cost Reliability Security more people looking at the code can find security vulnerabilities o Security focused aka hardened term used to describe technology products that contain particularly strong security features Scalability ability to either handle increasing workloads or to be easily expanded to manage workload increases if not scalable then the system will require significant rewrites or the purchase of entirely new systems Agility and time to market Key takeaways o The most widely cited benefits of using OSS include low cost increased reliability improved security and auditing system scalability and helping a firm improve its time to market o Free OSS has resulted in cost savings for many large companies in several industries o OSS often has fewer bugs than its commercial counterparts due to the large number of persons who have looked at the code o The huge exposure to scrutiny by developers and other people helps to strengthen the security of OSS o Hardened versions of OSS products often include systems that monitor the integrity of an OSS distribution checking file size and other indicators to be sure that code has not been modified and redistributed by bad guys who have added a back door malicious routines or other vulnerabilities o OSS can be easily migrated to more powerful computers as circumstances dictate and also can balance workload by distributing work over a number of machines o Vendors who use OSS as part of product offerings may be able to skip whole segments of the software development process allowing new products to reach the market faster 10 4 Examples of Open Source Software Firefox OpenOffice Gimp Alfresco Marketcetera Zimbra ect Key Takeaways o There are thousands of open source products available covering nearly every software category Many have a sophistication that rivals commercial software products o Not all open source products are contenders Less popular open source products are not likely to attract the community of users and contributors necessary to help these products improve over time o Just about every type of commercial product has an open source equivalent 10 5 Why Give it Away The Business of Open Source Open source efforts make more computing options accessible to smaller firms Vendors make money on open source by selling support and consulting services With OSS hardware firms spend less money on individual operating systems that were incompatible with rivals and had little differentiation hardware firms can now spend money on other value adding services such as developing commercial software add ons offering consulting services and enhancing hardware offerings Total cost of ownership TCO all of the costs associated with the design development testing implementation documentation training and maintenance of a software system o Linux is rarely found on computers bc hard to install Structured query language a language for creating and manipulating databases SQL is the most common database standard in use today supported by many commercial and open source products Risks of OSS Key Takeaways o Difficult to install and maintain legal exposure varying agreements o Business models for firms in the open source industry are varied and can include selling services licensing OSS for incorporation into commercial products and using OSS to fuel hardware sales o Many firms are trying to use OSS markets to drive a wedge between competitors and their customers o Linux has been very successful on mobile devices and consumer electronics as well as on high end server class and above computers But it has not been as successful on the desktop The small user base for desktop Linux makes the platform less attractive for desktop software developers Incompatibility with Windows applications switching costs and other network effects related issues all suggest that Desktop Linux has an uphill climb in more mature markets o MySQL is the dominant open source database software product Adoption of the SQL standard eases some issues with migrating from commercial products to MySQL o OSS also has several drawbacks and challenges that limit its appeal These
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