Open source software (OSS) offerings—free alternatives where anyone can look at and
potentially modify a program’s code—pose a direct challenge to the assets and
advantages cultivated by market leaders.
Cloud Computing: - “The provisioning of services in a timely (near on instant), on-
demand manner, to allow the scaling up and down of resources”; Replacing computing
resources—either an organization’s or individual’s hardware or software—with services
provided over the Internet.
a service (SaaS), users access a vendor’s software over the Internet, usually by simply
starting up a Web browser. With SaaS, you don’t need to own the program or install it on
your own computer. Hardware clouds can let firms take their software and run it on
someone else’s hardware—freeing them from the burden of buying, managing, and
maintaining the physical computing that programs need.
Virtualization: The ability to run multiple operating systems on a single physical system
and share the underlying hardware resources; makes a single computer behave like many
separate machines. This function helps consolidate computing resources and creates
additional savings and efficiencies.
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
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.
There are many reasons why firms choose open source products over commercial
o 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
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 others 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 it 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.
o Examples of Open Source Software Firefox; OpenOffice; GimpVS-Photoshop;
o There are thousands of open source products available, covering nearly every
software category. Many have a sophistication that rivals commercial software
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
Why Give It Away? The Business of Open Source:
o By lowering the cost of computing, open source efforts make more computing
options accessible to smaller firms.
o More reliable, secure computing also lowers costs for all users.
o OSS also diverts funds that firms would otherwise spend on fixed costs, like
operating systems and databases, so that these funds can be spent on innovation or
other more competitive initiatives
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 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
o Disadvantages/Cons - OSS also has several drawbacks and challenges that limit
its appeal. These include complexity of some products and a higher total cost of
ownership for some products, concern about the ability of a product’s
development community to provide support or product improvement, and legal
and licensing concerns. (disadvantages)
o Disadvantages: no maintenance; no support (unless purchased); no warranties
(viruses; performance); license terms are not standard)
Cloud Computing: Hype or Hope? o Managers and techies use the term cloud computing to describe computing
services provided over a network/ over the Internet by a third party that can
replace or offload tasks that would otherwise run on a user or organization’s
existing hardware or software.
o Software as a service (SaaS) refers to a third-party software-replacing service that
is delivered online.
o Private Clouds - Pools of computing resources that reside inside an organization
and that can be served up for specific tasks as need arrives.
o Utility Computing - Aform of cloud computing where a firm develops its own
software, and then runs it over the Internet on a service provider’s computers.
o Hardware cloud computing services replace hardware that a firm might
o Estimated to be a thirty-six-billion-dollar industry, cloud computing is reshaping
software, hardware, and service markets, and is impacting competitive dynamics
The Software Cloud: Why Buy When You Can Rent?
o SaaS firms may offer their clients several benefits including the following: PROS:
lower costs by eliminating or reducing software, hardware, maintenance,
and staff expenses
financial risk mitigation since start-up costs are so low
potentially faster deployment times compared with installed packaged
software or systems developed in-house
costs that are a variable operating expense rather than a large, fixed capital
scalable systems that make it easier for firms to ramp up during periods of
unexpectedly high system use
higher quality and service levels through instantly available upgrades,
vendor scale economies, and expertise gained across its entire client base
remote access and availability—most SaaS offerings are accessed through
any Web browser, and often even by phone or other mobile device
o Vendors of SaaS products benefit from the following:PROS
limiting development to a single platform, instead of having to create
versions for different operating systems
tighter feedback loop with clients, helping fuel innovation and
responsiveness ability to instantly deploy bug fixes and product enhancements to all users
lower distribution costs
accessibility to anyone with an Internet connection
greatly reduced risk of software piracy
SaaS (and the other forms of cloud computing) are also thought to be
better for the environment, since cloud firms more efficiently pool
resources and often host their technologies in warehouses designed for
cooling and energy efficiency.
SaaS: Not without Risks
o The risks associated with SaaS include the following: CONS
dependence on a single vendor.
concern about the long-term viability of partner firms.
users may be forced to migrate to new versions—possibly incurring
unforeseen training costs and shifts in operating procedures.
reliance on a network connection—which may be slower, less stable, and
data asset stored off-site—with the potential for security and legal
limited configuration, customization, and system integration options
compared to packaged software or alternatives developed in-house.
the user interface of Web-based software is often less sophisticated and
lacks the richness of most desktop alternatives.