# Module 5.6 Innovation in FOSS Business
## Duration

1:00hrs

## Delivery method

For instructional purpose, it is advised that trainers/lectures use lectures, role play and group and individual exercises as a major means of delivering this module.

## Introduction

The debate on how FOSS spins ICT and business innovation is well documented. Special reference is made to the innovative capacity of FOSS (Sanjiva and Jivaka, 2003) and factors which hinder and support technology innovation in developing countries (Jean-Eric Aubert, 2004). This module addresses the structural nature of FOSS, that is, commoditisation which increases the innovative base of developing, customizing, and marketing FOSS products. Strategies for innovation in a FOSS context, the concept of open innovation, and where innovation happens in FOSS are the sub-modules addressed.

## Innovation vs Commoditisation

In IT, commoditisation happens constantly - a program which used to be special in some way will attract competitors, both FOSS and proprietary, until there are a number of programs functioning in near-identical ways. Customers are easily able to replace one commodity program with another.
But software is developed in a modular way. At any point in time, parts of the value stack (the operating system, middleware, applications, and services) are commoditised, while others are not.
For businesses, the problem of commoditisation is that there usually is strong competition to sell near-identical products. This means that whatever profits can be made they will be relatively small. The opportunities for attractive profit margins move up market, meaning that companies need to keep innovating in order to preserve their profits.
It could be argued that for most purposes, operating systems have become a commodity, since most users will be able to satisfy their needs using any end user-oriented operating system.
While prices of operating systems vary slightly, these are not the items that usually generate profits for the company selling the system. It is the programs that run on top of the operating system which bring in the money, such as office software.
Much more relevant for FOSS companies, users also require professional services, which are also far from being commoditised in most regions, meaning that a good service provider can expect relatively high profit margins.

## Use of FOSS in an innovation strategy

"Innovation is a driver of economic growth, productivity, job creation and rising living standards."
"Innovation also promotes ICT competitiveness; in turn, competition leads to better products, improved consumer choice and, ideally, greater ICT uptake." Source: European Task-Force on ICT Sector competitiveness & ICT uptake, WG on innovation in R&D, manufacturing and services http://ec.europa.eu/enterprise/ict/policy/taskforce/wg/wg3_report.pdf
Most products and programs - FOSS or otherwise - are not innovative, in the sense of bringing about a new way of doing something. Radical innovation is also extremely rare.
Most innovation happens in an incremental fashion, by taking something that already exists and making it slightly better.
In proprietary software, this is something that can only be done by the person or company holding the copyright in that particular piece of software.
In FOSS, the possibilities are far greater. Here, anyone can take the software and improve it. While this does not mean that there is more radical innovation in FOSS, it means that there are huge opportunities to build small improvements on top of strong, existing foundations. This sort of innovation is well within reach of individuals and SMEs without big R&D budgets. It also means that if the idea fails, the innovator's lost investment is usually small enough to not do substantial damage to her business.

## Open innovation

"Open innovation" means that individuals or firms work together to come up with an improved program or product. This is not exclusive to FOSS, but it does represent a clear departure from the usual practice, where each firm tries to keep its innovations secret from its competitors.

### Where Innovation happens in FOSS

* within FOSS projects
* on products based on FOSS
* through percolation from proprietary development processes
* and in the process itself: open innovation
Open innovation works particularly well in software, since source code can easily be shared, and the necessary tools (computers, compilers etc) are widely available. Beyond this merely practical point, there are clear incentives to work together in many situations:
* sooner or later, a proprietary offering will be re-implemented in FOSS
* the costs of software production can be reduced through collaborative engineering
* opening the source code is the best way to maximise the potential for collaboration
* when competition becomes pointless, collaboration is a good way to keep innovating, thereby improving the software upon which all competitors base their business
FOSS provides a ready-made legal framework for cooperation. If you develop something, you can share it with others, using a copyleft license to keep competitors from appropriating your work.
The basic rules for developers in FOSS are:
* reuse instead of “reinventing the wheel”
* contribute patches and enhancements - don't try replacing the program you're contributing to with something of your own invention
* communicate with your peers
* session has no exercise

## Module 5.6: ASSESSMENT

* Discuss: How do you think FOSS will contribute to the ICT innovative capacity of your country?
* Assignment: How does the open nature of FOSS code improve the innovative base of the software?
* Exercise: Which of the following play a vital role in propagating innovation in FOSS?
* The license
* The core software development team
* Large number of users
* The programming language-language in which the software is written
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