how open is open enough? melding proprietary and open source

How Open is Open Enough?Melding Proprietary and Open Source Platform Strategies

Joel West1College of Business, San José State University, One Washington Square, San José, CA 95192-0070 USA

December 31, 2002

Forthcoming in Research Policy special issue on “Open Source Software Development”(Eric von Hippel and Georg von Krogh, editors)

Abstract

Computer platforms provide an integrated architecture of hardware and softwarestandards as a basis for developing complementary assets. The most successful platformswere owned by proprietary sponsors that controlled platform evolution and appropriatedassociated rewards.

Responding to the Internet and open source systems, three traditional vendors ofproprietary platforms experimented with hybrid strategies which attempted to combinethe advantages of open source software while retaining control and differentiation. Suchhybrid standards strategies reflect the competing imperatives for adoption andappropriability, and suggest the conditions under which such strategies may bepreferable to either the purely open or purely proprietary alternatives.

Keywords: open source, standards competition, computer architecture, innovation returns

AcknowledgmentsI would like to thank Jason Dedrick, Tineke Egyedi, Scott Ensign and two anonymous

reviewers for helpful suggestions and comments, as well as seminar participants at CaseWestern’s Weatherhead School of Management and the 2002 Academy of Management annualmeeting. I am especially grateful to the special issue editors for advice and encouragement thatwere instrumental in developing the paper.

My appreciation goes to the representatives of Apple, IBM and Sun who generously sharedtheir time to both explain various complex technologies and also the institutional relationshipsbehind those technologies.

The remaining errors are of course my own.

1 Tel: +1-408-924-7069; fax: +1-408-924-3555. E-mail address: [email protected]

West, How Open is Open Enough?

1. Introduction

The evolution of the computer industryhas been driven by the emergence ofstandardized platforms which allow modularsubstitution of complementary assets such assoftware and peripheral hardware.

The initial platforms were proprietary, inwhich a computer systems manufacturercontrolled all hardware and software layersof the standards architecture. Theseplatforms were later challenged by twohardware-independent operating systems —Unix and Windows — which reduceddifferentiation between hardware vendorsand shifted platform control to the operatingsystem vendors. The Unix operating systemalso inspired a more radical shift, the opensource movement in which Linux allowedusers and competitors to control a platform’sdirection.

These various strategies reflect theessential tension of de facto standardscreation: that between appropriability andadoption. To recoup the costs of developinga platform, its sponsor must be able toappropriate for itself some portion of theeconomic benefits of that platform. But toobtain any returns at all, the sponsor mustget the platform adopted, which requiressharing the economic returns with buyersand other members of the value chain.

The proprietary and open sourcestrategies correspond to the two extremes ofthis trade-off. In making a platform strategyfor the 21st century, leading computervendors face a dilemma of how much isopen enough to attract enough buyers whileretaining adequate returns.

First I review the theory and history ofproprietary computer platform strategies,contrasting that with the Unix-based opensystems movement. I then examine theorigins and motivations of Linux and otheropen source software projects. In threeabbreviated case studies, I present the hybridstrategies of three platform vendors —Apple Computer, IBM and SunMicrosystems — that combine open sourceand proprietary platform strategies in hopesof obtaining competitive advantage. Finallyan analysis of these cases is combined with

prior research to suggest the theoreticalimplications of such hybrid strategies.

2. Proprietary Platform Strategies

2.1 Dynamics of Proprietary PlatformCompetition

A proprietary platform consists of anarchitecture of related standards, controlledby one or more sponsoring firms. For acomputer system, the architectural standardstypically encompass a processor, operatingsystem (OS), and associated peripherals.Some have also extended the concept of a“platform” to include multiple layers ofsoftware, such as applications that rely on a“middle ware” tool such as Java or adatabase (Morris and Ferguson, 1993;Bresnahan and Greenstein, 1999; West andDedrick, 2000).

A platform is but a specific example ofthe general class of technologicalinnovations studied by Teece (1986), wholinks the ability of firms to profit from theirtechnological innovations to theappropriability regime for intellectualproperty rights (IPR) — either throughformal de jure protection (e.g. patents) orthrough de facto protection such as tacitknowledge or trade secrets. Absent such IPRprotection, firms selling a given technologycan be expected to adopt marginal costpricing and drive profit margins to zero(Katz and Shapiro, 1986; Beggs andKlemperer, 1992). Without appropriability,Teece (1986) suggests that firms must usesome combination of speed, timing and luckif they hope to appropriate returns generatedby their innovation.

Teece (1986) also considers thoseinnovations (such as computer systems) thatrequire the provision of complementaryassets to commercialize the innovation.When additional investment is required toco-specialize the asset to be useful with agiven innovation, the successful adoption ofthe innovation and the related assets aremutually reinforcing, providing a positivefeedback cycle. Thus, to make a successful“whole product” solution, the owner of theinnovation seeks to attract suchcomplementary assets, in part by sharing theoverall returns of the innovation with the


third party supplier of such assets (Katz andShapiro, 1985; Teece, 1986; Moore, 1991).

The positive feedback, self-reinforcingcycle of success between a de facto standardand its co-specialized asset success has beentermed “network externalities” (Katz andShapiro, 1985) or “demand side economiesof scale” (Katz and Shapiro, 1986). Whensuch network effects are coupled withswitching costs between standards and highup front R&D costs, Arthur (1996) predictsthat the dominant technology will enjoy“increasing returns to scale” that magnify anearly lead in a technology contest. Theinstability and self-reinforcing nature ofsuch a lead has often been referred to as“tipping” of the contest (e.g. Besen andFarrell, 1994). Liebowitz and Margolis(1999) argue that actual tipping is rare, andthat lasting success is more often explainedby production economies of scale and firmexecution.

In the case of computing platforms, mostresearch has focused on one particular typeof complementary asset, that of prepackagedapplication software. A computer platform isnot, in itself, useful without software tosolve specific problems. During the 1960sand 1970s, large organizations buyingmainframe computers typically developedtheir own custom software. However, theadvent of the mass-market personalcomputers attracted many new users unableto develop their own software, fueling a shiftto prepackaged application softwarepackages (Mowery, 1996). As such, thecontrol of the platform’s complementaryassets (e.g. packaged software) isdetermined by the ability to create andevolve application programming interfaces(APIs), which specify how applicationsoftware must be co-specialized to workwith a particular platform (West andDedrick, 2000).

Multiple platforms can and havesimultaneously co-existed serving differentmarket segments (Table 1). Bresnahan andGreenstein (1999) argue that in the U.S.computer industry, new platforms succeededwhen they tapped unserved market niches,avoiding competition with establishedplatforms until they achieved critical mass.Due to simple economies of scale, mass

market platforms displaced more specializedproducts, either by providing lower cost oraddressing a broader range of buyer needs(Morris and Ferguson, 1993).

Firms that successfully establish andmaintain a proprietary platform enjoy theright to appropriate the returns from asuccess of that platform (Morris andFerguson, 1993). But platform success is anecessary but not sufficient condition forprofiting from proprietary technologyinnovation. When competing firms controldifferent layers of the standards architecture,platform leadership is unstable becausecontrol of the platform can shift withoutdisrupting the buyer’s value proposition. Inparticular, a firm that can take control ofaccess to the complementary assets has anincentive to do so to capture the returns fromthe platform (Bresnahan and Greenstein,1999; West and Dedrick, 2000).

In explaining platform success,economic research has focused on demandand supply side economies of scale, and thebroad strategic choices made by sponsoringfirms. However, there is also repeatedevidence that operational execution iscrucial to the relative success or failure ofindividual platforms (Morris and Ferguson,1993; Liebowitz and Margolis, 1999; West,2003). Also, measures of platform successhave focused on adoption or market share.The more managerially relevant metricwould be the sponsor’s net profit or returnon investment from the proprietarytechnological innovation, although such datais much harder for researchers to obtain.

2.2 Mainframes: Vertically IntegratedProprietary Platforms

In 1964, IBM introduced the world’sfirst successful computing platform, theSystem/360. A key success factor was themodular architecture that enabled the use ofthe same software and peripheralsthroughout the product line, providinginteroperability that was missing the productlines of IBM and other companies. IBM alsoleveraged its existing domestic market shareand global reach to win the largest share ofthe global market, vanquishing theproprietary platforms of domestic rivals andEuropean national champions (Flamm,1988; Chandler, 1997; Moschella, 1997).


The one exception to IBM’s dominance wasin Japan, where by the 1990s IBM held onlya 25% share as part of a stable, four firmoligopoly, in which IBM’s rivals producedclones of the S/360 platform (Anchordoguy,1989; Ferguson and Morris, 1993).

IBM was a vertically integratedmanufacturer of processors, systems,peripherals and software for the S/360platform and its System 370 and System 390successors. The pattern was repeated byDigital Equipment Corporation, whichintroduced a series of minicomputerplatforms, culminating with its mostsuccessful offering, the VAX 32-bitminicomputer (1978) with its proprietaryVAX-11 processor and VAX/VMSoperating system. DEC dominated U.S.technical markets, although IBM ledbusiness markets with its AS/400minicomputer (Bresnahan and Greenstein,1999).

Late entrants had trouble gaining marketshare for their innovations due to switchingcosts between the proprietary platforms(Greenstein, 1997). A major cost inconverting from one platform to another wasdue to application software, which had to bespecialized to fit each platform’s APIs. Inthe 1960s and 1970s, this tended to besoftware custom-developed to meet thefirm’s particular needs, but subsequentbuyer shifts to using off-the-shelf packagedsoftware shifted the conversion cost fromusers to third-party software suppliers.

Chandler (1997) argues that theconcentration of the global mainframeindustry was consistent with the pattern ofother capital-intensive industries, in that thehigh entry costs allow the pioneer and earlychallengers to form a stable oligopoly.Bresnahan and Greenstein (1999) attributesuch oligopoly to the effect of endogenoussunk costs in rewarding scale; theirmechanisms and predicted outcomescorrespond to Arthur’s (1996) formulationof increasing returns to scale.2

2 The Bresnahan and Greenstein formulation alsoidentifies platform-specific investments inproviding market stability, corresponding toTeece’s (1986) earlier analysis of specializedcomplementary assets.

2.3 Personal Computer Brings HorizontalPlatform Control

As with mainframes and minicomputers,the personal computer industry attractedmany new entrants that tried and failed toestablish successful platforms. However,there was one crucial difference: the 1971invention of the microprocessor dramaticallylowered the cost of entry and also led toplatform convergence as a large number ofsystems makers purchased processors from ashrinking number of microprocessorvendors. During the initial 8-bit era, the PCindustry used two different platformstrategies. One group used the Intel 8080 (orcompatible) processors along with CP/M, aproprietary operating system licensed tomany computer makers. The other groupbought an inexpensive processor and thendesigned their own software to run on top ofit. Application software was either designedfor CP/M APIs, or for one of the proprietaryplatforms.

Seeing the growth of the PC market, andworried about ceding market control to earlypioneers, in 1980 IBM launched a crashproject to build a 16-bit PC. IBM’smainframe power and reputation assured thesuccess of the IBM PC, which also rendered8-bit PCs obsolete. The IBM PC standardsoon dominated the world, except in Japanwhere NEC’s proprietary PC-98 dominatedthe market from 1983-1995 (Chposky andLeonsis, 1988; West and Dedrick, 2000).

As with CP/M, IBM’s PC architectureused both a processor and operating systemfrom outside vendors. When coupled with itsunexpected legal defeats on ROMcopyrights, IBM lost control of its platformas other firms produced “clone” computersthat ran the same application software(Langlois, 1992). For the next decade, IBMspent billions of dollars on proprietarytechnologies in an unsuccessful attempt tore-assert its leadership of the PC industry.

Instead, the “IBM PC” platformgradually began to be termed the “Wintel”platform, an acknowledgment that theproprietary platform control rested withMicrosoft (Windows) and Intel. Both firmsenjoyed the barriers to imitation provided byeconomies of scale for R&D and networkeffects through software supply (Arthur,


1996). Grove (1996) argues that the resultanthorizontal specialization of the PC industryis more efficient (and thus more durable)than the vertically integrated structure,because it allows for the producer of eachlayer to achieve economies of scale byserving the broadest possible market.

2.4 Workstations: Unix and Open SystemsThe horizontally specialized platform

strategy predates CP/M and MS-DOS, butinstead began with AT&T’s Unix operatingsystem. Unix began in 1969 withminicomputers, helped create the newworkstation platforms of the 1980s, and laterbecame an important multivendor, multi-product mainframe platform. Unixeventually evolved into a new form of opennon-proprietary platform standard, oftenreferred to as the “open systems” movement(Gabel, 1987).

As with any other operating system,Unix was not a complete platformspecification, because each hardware systemmight have different processor andperipheral interface standards (Table 2).However, Unix quickly evolved into aportable OS that tended to “hide” thedifferences between hardware from softwareapplications, and so could present a set ofcommon APIs across widely divergenthardware implementations. The task wasaided by the C programming languagewhich served as a highly efficient substitutefor hardware-dependent assembly language.

AT&T was restricted from sellingcomputer products by a 1956 anti-trustsettlement, so in the first 15 years Unix waslimited to internal use, research universities,and a comparatively small number of usercompanies and hardware vendors thatbought source code licenses. AT&Teventually spun off Unix into a separatecompany, which was sold to Novell andlater SCO. In the 1980s, Unix became thepreferred operating system for computerworkstations and also won significantmarket share in minicomputers, high endcomputer servers and supercomputers.

In some ways, AT&T’s Unix strategiesin the 1980s paralleled those of Microsoftwith MS-DOS and later Windows. Bylicensing their operating systems to multiplehardware vendors, each made their platform

ubiquitous by reducing switching costs anddifferentiation between hardware vendors.Both operating systems shared APIs acrossmultiple hardware vendors. As with even themost proprietary computing platform, UNIXand MS-DOS were “open” to third partysoftware suppliers, utilizing APIs widelydisseminated to maximize softwareavailability.

Unix and Windows were also similar inthat the shared OS nearly eliminated theantecedents of Arthur’s (1996) typology —economies of scale, network effects andswitching costs — that might lead topositive returns to scale, and thus tip themarket share contest to a single winneramong computer manufacturers.3 The lackof such factors made it unlikely that anymanufacturer would enjoy marketdominance. In Unix workstations, most ofthe market was fragmented among fourmajor firms — Sun, IBM, HP and DEC(later Compaq) — none of whom capturedmore than a 35% market share.

However, in the 1990s Unix andWindows differed dramatically in thecontrol of their APIs. Windows retained itsproprietary APIs under the control of asingle firm which produced the onlyimplementation, allowing it to enjoymonopoly rents. Meanwhile, de facto controlof the Unix APIs had shifted to variousindustry committees and consortia in the“open systems movement,” which publishedvendor-independent standards such asPOSIX, OSF/1 and X/OPEN. While thetrademarked “Unix” was all derived fromAT&T’s IPR, the “open systems” evolvedinto multiple independent implementations

3 For both Unix and Windows machines, thecomputer makers spent little on operating systemresearch and development, eliminating that as asource of economies of scale. The shared APIsalso provided access to the same complementaryassets and reduced switching costs betweencomputer makers. Between “Wintel” machines,the complementary assets were identical andswitching costs negligible; for Unixworkstations, the processor differences andproprietary API extensions slightly increased theswitching costs for users and suppliers ofapplication software, but were much lower thanbetween proprietary platforms.


— including several “open source”implementations — each compliant with theaccepted POSIX specification. Thus, theopen systems movement reflected anevolution of platform strategies that reducedthe ability of any individual firm to obtaincontrol or differentiation for their platform(Table 3). However, the subsequent “opensource” movement took this to the nextlevel.

2.5 AssessmentAfter IBM succeeded with its

System/360 platform, rival computer makerssought to emulate IBM’s verticallyintegrated proprietary platform strategy.Positive returns to scale meant the winningproprietary platform enjoyed high barriers toimitation and thus high profits. Verticalintegration allowed a firm to appropriatethose profits without having to share themwith other firms. But when a single platform(like the IBM S/360) enjoyed sustainedmarket share dominance, rivals had troublecompeting with a vertically integratedproprietary strategy: with a smaller share,they lacked minimum efficient scale tocover the fixed R&D costs.

As an interim measure, firms procurednon-critical components (such as memoryand peripherals) from common suppliers,developing a proprietary processor andoperating system to provide differentiation.However, such component sourcing did notaddress the processor and OS R&D costs,and still left market share laggards at asignificant disadvantage due to fewercomplementary assets (typically software)and switching costs faced by most potentialusers.

So over the longer term, minor computermakers tried various strategies to pool R&Dand the supply of complementary assetsacross multiple producers; these strategiesalso allowed firms without proprietaryplatforms to enter new markets. One suchstrategy was to buy the crucial OS orprocessor from external proprietary vendors(such as AT&T, Microsoft or Intel). Anotherwas to form a multi-vendor consortia (e.g.the Open Software Foundation) to pooltechnology among vendors. By sharingsome (or all) of their platform, they enjoyedbetter adoption but risked intra-platform

competition that limited their ability to profitfrom the platform success, even for firms(like IBM) that had been the platform’soriginal innovator.

While these newer platform strategiesgave computer users lower switching costsand higher bargaining power, buyers stillfundamentally licensed technology that wasowned by computer vendors (or theiralliances) — owners that could set the termsand pricing of the technology, as well as theschedule for enhancements and errorcorrection.4 This relationship fundamentallychanged with the emergence of “opensource” computing platforms.

3. Emergence of Open SourcePlatforms

In developed countries, software enjoysstrong intellectual property rights (IPR)protections in the form of trade secrets,copyrights and (most recently) patents. Theability to create and modify softwareproducts is governed by the access to thesource code, which is why for-profitsoftware developers have historically treatedsuch source code as a closely guarded tradesecret.

So-called “open source” softwarerepresents the antitheses of a proprietarytechnology strategy. Rather than usingformal IPR protection to set boundariesbetween vendors and their competitors andcustomers, open source enlists all ascollaborators, maximizing adoptionthroughout the value chain but minimizingthe options for appropriating rents from thesoftware.

The success of the open sourcemovement reflected a confluence of threefactors in the mid 1990s (West and Dedrick,2001):

• users seeking an inexpensive Uniximplementation free of AT&Tlicensing restrictions;

4 The open systems standards-setting consortiaincluded representatives of major computerbuyers, but the deployment of new technologiesimplementing these standards remained underthe control of the computer makers.


• a philosophical movement rejectingthe idea of software ownership andappropriability;

• emergence of the Internet as both anenabler and objective forcollaborative software development.

3.1 Linux and Other Unix-like PlatformsIn the 1980s, the Unix platform had

three main attractions for programmers: itran on inexpensive minicomputers, washardware independent and provided a stateof the art environment for softwaredevelopment. Thus, it was a natural targetfor those who eventually developed “clone”operating systems.

In 1984, Richard Stallman left his job asan MIT programmer to develop a free Unix-like operating system. He founded ProjectGNU, which by 1990 had produced a varietyof software development tools, but lackedthe essential core of a modern operatingsystem, a kernel (Stallman, 1999). Efforts todevelop a kernel had first been delayed bywork on other components, and thenfloundered for several years without strongleadership.

Two groups used the GNU tools as thebasis for assembling complete and free Unix“clone” operating systems. In 1991, LinusTorvalds began writing a UNIX-compatibleoperating system for his new PC, andsolicited others to join in his efforts. Byearly 1993, a version of Linux was freelyavailable for downloading on the Internet(Varhol, 1994; Torvalds and Diamond,2001).

Meanwhile, from 1990-1992 a Unixteam at the University of California,Berkeley solicited outsiders to volunteer torewrite components for its BSD Unix usingonly the published APIs (and thus notviolating the copyright and trade secrets ofAT&T’s source code). This in turn spawneda series of BSD implementations primarilyaimed at PC hardware: NetBSD (1993),FreeBSD (1993) and OpenBSD (1996)(McKusick, 1999; West and Dedrick, 2001).

By relying heavily upon the ProjectGNU components, both the Linux andvarious BSD teams delivered free Unix-compatible operating systems originallyoriented at personal computer hobbyists.Through cost and flexibility advantages,

they gradually supplanted other Unixdistributions for Intel-based personalcomputers, and also enabled such PCs to beused as reliable servers by organizations.Despite contrasting strategies for control andIPR, both the Linux and BSD groupsbecame forerunners of what later was namedthe “open source” movement.

3.2 “Free Software” vs. “Open Source”In his academic computing career,

Stallman came to expect a computingenvironment where users shared softwareand could make custom modifications(Stallman, 2001). Such sharing had alsoexisted between some large computer sites,through computer user groups like SHARE(for IBM users) and DECUS (for DigitalEquipment Corp. users), and in a fewpublicly distributed software programs suchas the TENEX operating system and thesendmail mail server. In launching ProjectGNU, Stallman promoted a philosophydiametrically opposed to the norms ofproprietary commercial software. Extendingby analogy the traditions of pooled scientificresearch and the free dissemination of ideas,Stallman argued that all software should be“free software,” with source code that can beread, modified and redistributed (Zachary,1991; Stallman, 1999).

Some but not all of Stallman’s goalswere shared by other developers of freesoftware. By 1998, Linux and othertechnologies had become popular butStallman’s ideology had won only limitedcommercial support. To promote adoptionby business users and third-party developers,firms that sold Linux- and GNU-relatedsupport and services met to promote a morebusiness-friendly concept of collaborativesoftware development. They labeled theircommon vision “open source” (DiBona etal., 1999: 3).

Unlike for proprietary software, for both“open source” and “free software” thesource code and executable component arefreely distributed. Both can be freelydownloaded from the Internet, even thoughsome users decide to buy a distribution ontape or CD-ROM. And in both cases,consulting, support and training services canand are sold without restriction.


The major difference is that “freesoftware” prohibits ex post appropriation ofthe technology: any derivative works mustalso be distributed as “free software” and allchanges returned to the original author forsubsequent redistribution. Stallman (1999)argued that this is essential to prevent firmsfrom making minor improvements to freesoftware and then using it as a way to attractusers to their non-free commercial upgrade.The Project GNU tools and the Linux OSwere distributed under the restrictions of theso-called GNU Public License (GPL).

Meanwhile, “open source” projects didnot impose any such restrictions, allowingindividuals or firms to customize andcombine open source software as theydesired; however, the profit potential ofminor improvements is limited by theavailability of the free alternative. This formof source code license was developed by theBSD Unix clones and the Apache webserver, and was later emulated by otherprojects that used “BSD-style” or “Apache-style” licenses (West and Dedrick, 2001).5

The two licenses differ in theircompetitive implications. A developerreleasing source code with a BSD-stylelicense grants the most rights, in that others(including competitors) can modify and usethe software as they please. Using the GPLlevels the playing field: all users are requiredto share any subsequent changes,eliminating the ability of any party(including the original owner and anycompetitors) to differentiate their offeringsthrough software enhancements.

They are similar in that for both licenses,a software developer voluntarily surrendersthe ability to appropriate the returns from itsR&D in hopes of winning greater adoption.Although they cannot directly profit fromsuch software, developers could use freesoftware as a complementary asset to helpsell hardware (or other software), or coulduse it to sell assets complementary to thefree software — such as consulting, supportand training.

5 Henceforward, I use “Open Source” to subsumeboth the BSD/Apache-style licenses and GNU-style “free software” licenses.

4. Context for the Study

This study examines the decision byproprietary platform vendors to release andsupport open source technologies as part oftheir platform strategies in the period 1995-2002 (Table 4). The field study and analysisof secondary data were intended to explainthis somewhat paradoxical development.Was it a temporary phenomenon tied to aparticular time and place, e.g. theimportance of supporting Internet standards?Was it a desperation phenomenon for firmsthat were eventually destined to fail — ashappened during the early 1990s whenfailing minicomputer makers abandonedtheir proprietary OS to adopt open systems?Or was this a sustainable and ongoingbusiness model for makers of computerhardware and integrated computingplatforms?

The study considers three companies —Apple, IBM and Sun — that historically hadpromoted vertically integrated platformsdifferentiated by proprietary software in(respectively) the PC, mainframe andworkstation eras. As these proprietarystrategies began to falter, each eventuallyemployed open source to revitalize theirstrategies. At the beginning of the study,there were two obvious similarities betweenthe three companies: all three faced seriouscompetitive pressures from Microsoft, andall three faced a challenge in formulating“open” strategies that nonetheless allowedthem to retain one or more sources ofcompetitive advantage.

4.1 Responding to the Microsoft ChallengeThe reality in the late 1990s was that a

single company dominated the IT industry:Microsoft. While it shared the “Wintel”platform control with Intel, unlike IntelMicrosoft did not have a competitor insupplying PC manufacturers. Microsoft alsoplayed a major role in PC applicationsoftware, server operating systems, serverapplications and an increasing role in mobiledevices.

IBM, Apple and Sun sought newstrategies to respond to pressure fromMicrosoft. With its PC, IBM hadrelinquished industry leadership to


Microsoft; Apple had traditionally beenMicrosoft’s primary competitor in 16-bit PCplatforms; and Sun found its coreworkstation and server business threatenedby Microsoft’s attempts to expand beyondthe PC.

Many hardware vendors had benefitedfrom Microsoft’s technical leadership. Firmssuch as NCR, Siemens, and Unisys soldcomputers built on commodity components,focusing on a particular geographic ormarket niche. Other companies such as Delland Fujitsu obtained advantages ofdistribution or operational efficiency thatenabled them to flourish in commoditymarkets (Kraemer et al., 2000).

But such was not in the “organizationalDNA” of these three focal companies. IBMhad led the computer industry for 30 years,supporting the huge infrastructure of world’slargest computer company. Similarly, as theonly surviving PC startup of the 8-bit era,Apple had from its birth pursued a go-it-alone strategy. Finally, Sun, while buildingupon the success of Unix and the opensystems movement, had sought todifferentiate itself by having the mostcomplete and fully featured Unix-basedoperating system.

Until the rise of the IBM PC “clones,”IBM had largely controlled its own destinythrough proprietary architectures. However,to win allies for their de facto standards,IBM — and to a lesser, degree Sun andApple — had tried to lead formal and defacto standards organizations to support theirrespective technology initiatives, as withIBM’s DOS/V PC standard in Japan (Westand Dedrick, 2000).

Such alliances were more problematicfor open source technologies. In thedecentralized “bazaar” model epitomized byLinux, there was no central administrativeauthority with which to negotiate; to somedegree, publishers such as Red Hat andSuSE ended up filling this role.6 The morecentralized cooperative efforts such asFreeBSD or Apache — the “cathedral” in

6 In analyzing the “bazaar” archetype for the Linuxproject, one must recognize the ongoing de factoleadership and control exerted by founder LinusTorvalds.

the famous typology of Raymond (1999) —provided a more identifiable authority fornegotiating alliances.

4.2 Leveraging Openness While KeepingDifferentiation

The open source movement was in partframed as a reaction to Microsoft and itsproprietary control of the computer industry,just as the open systems movement a decadeearlier had been a reaction to the proprietarycontrol of IBM. As such, the movementfound natural affinity with Microsoft’s threemajor platform competitors, as well ashardware makers — particularly Intel —who both benefited from Microsoft’ssuccess but also wanted to increase theirindependence from it. Thus in 2001, HP,IBM, Intel and NEC launched a joint opensource research lab in Oregon and Japan;meanwhile, Linux publisher Red Hat hadalready won equity investments by Intel,followed by Compaq, Dell, HP, IBM andNovell (MacCormack and Herman, 1999;West and Dedrick, 2001).

The problem for IBM, Apple and Sunwas that by making source code freelyavailable and modifiable, open sourceinherently reduced barriers to entry by rivalsand switching costs by customers. So despitethe appealing logic of mutual adversaries(“the enemy of my enemy is my friend”), apure open source strategy would eliminateeach company’s historic source ofdifferentiation, their proprietary software.Each of the firms faced a dilemma of how toadapt an open source strategy suitable fortheir respective core competencies andresources.

5. Apple: Re-use and Leverage

Apple Computer’s heyday had comewith its creation of proprietary computerplatforms, but — like IBM — its onetimesupplier Microsoft had become a formidablerival that threatened this traditional source ofadvantage. This forced Apple to consider(and embrace) something previouslyunthinkable: sharing technology through theuse of open source.

Apple’s adoption of open source cameafter several failed attempts to develop anew PC operating system, and seemed to


offer Apple a way out of its technologicaldead-end. In 1995, Apple was the first majorcomputer maker to sponsor a Linuximplementation for its own hardware. Theexperimental Linux project was eventuallydropped, but it was replaced by a new OSthat combined a unique mix of proprietaryand open source components.

5.1 Strategic Position in mid-1990sAlthough the most successful U.S.

maker of 8-bit personal computers, Applehad several false starts before releasing apopular 16-bit PC with the Macintosh. TheMacintosh differentiated itself with ease ofuse provided by a proprietary graphical userinterface (GUI), but for various reasonslagged MS-DOS and its Windows inadoption.7 Finally cutting prices to respondto its MS-DOS rivals, Apple grew marketshare in major markets in the early 1990sand enjoyed record market share andrevenues through its fiscal year endingSeptember 1995. However, the August 1995release of Windows 95 effectivelyeliminated its ease of use differentiation.Both the actual and predicted shift indemand helped fuel a downward spiral thatin the next two years brought nearly $2billion in losses and forced resignation oftwo Apple CEOs.8

Ongoing improvements in operationalefficiency from 1996-1998, the return ofSteve Jobs as CEO in August 1997 and theintroduction of the popular iMac one yearlater at least temporarily quelled predictionsof the company’s immediate demise. But thecompany faced the same dilemma as at thebeginning of the decade — upgrading itscore operating system to incorporate modern

7 The discussion of Apple’s proprietary platformstrategies is adapted from West (2000).

8 The conventional analysis attributes Apple’sproblems in the late 1980s and 1990s to itsfailure to license its operating system to rivalsprior to the rise of Windows in 1991. Assessingsuch post hoc advice is complicated by thevariety of other strategic and execution errorsduring this period, including nearly $2 billionspent on unsuccessful efforts both to upgrade itscore technology and diversify into new marketsegments such as handheld computers and set-top boxes (West, 2003).

multi-processing and memory protectionfeatures without rendering its softwarelibrary obsolete. While Microsoft hadreleased Windows NT as an eventualreplacement for Windows 95, Apple wasstill using improved versions of its 1984architecture, designed for a machine with128K RAM and two floppy drives. Moreseriously, the company’s decline in bothprofits and R&D staff made it even tougherto respond to the Microsoft challenge than ithad been in 1990.

As a quick fix, in 1996 Apple evaluatedvarious alternatives to jump-start its futureoperating system design, including licensingWindows NT and Sun’s Solaris variant ofUnix. In the end, it bypassed the purchase ofthe promising but incomplete BeOS toacquire NeXT, a company that Jobs hadfounded in 1985 after leaving Apple. Theacquisition brought not only NeXT’soperating system to Apple, but Jobs and hisR&D team, which quickly assumed keypositions within the company.

5.2 Shifting to UnixThe search for a modern operating

system would eventually bring both theUnix operating system and open source tothe core of Apple’s long term platformstrategy. In buying NeXT, Apple cast itsfuture with the NextStep operating systemthat was the acquiree’s primary asset.NextStep was a Unix variant that combinedthe Mach operating system “kernel” withother components from BSD Unix. To thisNeXT had added various extensions,including a graphical user interface,software development and systemadministration tools.

Prior to the NeXT acquisition, Applealready had experience with Unix, offeringthe AT&T-based A/UX operating systemfrom 1988 to 1995. But by the time it wasabandoned after a shift to IBM’s RISC-based processors, A/UX had attracted only15,000 users — at a time when Apple wasselling 4 million units a year (Hess, 1995;Dataquest, 1996).9

9 From 1996-7 Apple sold IBM’s AIX version ofUnix, in between canceling A/UX and buyingNeXT.


Apple had experimented with both theMach OS and open source prior to the NeXTpurchase. In 1995, to help its operatingsystems design efforts it funded a researchproject to adapt the Mach kernel for Applehardware. Because of the rising popularityof Linux, Apple selected a Mach/Linuxcombination instead of the standardMach/BSD combination. This operatingsystem, named MkLinux, was released in aseries of developer releases from May 1996until the summer of 1998, when the projectwas destaffed by Apple and handled over toits base of user-programmers. The Mach andLinux source code were released underBSD-style and GNU-style open sourcelicenses.

Instead of continuing with Linux, the1997 merger with NeXT committed Appleto adapting its existing Mac OS to use theBSD-based NextStep technology. In 1997 itannounced “Rhapsody” — a Macintoshversion of the existing NeXT OS — whichshipped as “Mac OS X Server” in 1999.However, the company’s main focus was acomprehensive upgrade of the NeXTtechnology, incorporating a new GUI and anemulator for older Mac OS programs. This“Mac OS X” was originally promised forlate 1999, was released in beta form inSeptember 2000 and eventually shipped tousers in March 2001. During 2000 and 2001,the Mac OS X user and Server code baseswere merged so that both used the same coretechnology and user interface.

5.3 Building a New OS on Open SourceParts

The original NextStep was based on bothAT&T and BSD licensed Unix code, but by1999 Apple replaced that code withFreeBSD, one of the three open source Intel-based versions of Unix. More significantly,Apple announced that it was releasing theMach, FreeBSD and some NeXTcomponents as a new open source operatingsystem, “Darwin,” which outside expertsdescribed as a new member of the BSDfamily tree.

Darwin, in effect, was the central core ofApple’s Mac OS X Server and subsequentMac OS X (Figure 1). It provided provenmulti-user memory management and processcontrol services which the original Mac OS

had lacked. At the time, Apple proclaimed itwas “leading the industry by becoming thefirst major OS provider to make it’s [sic]core operating system available to opensource developers,” (Apple Computer,1999).

Project manager Ernest Prabhakar notedthat a catalyst for the Darwin strategy waspressure from large university customerswith specialized networking needs:

We realized that the piecesthey’re most interested in are themost commoditized. There wasn’tany proprietary technology addedthat we had to worry about themcopying. … We started making thecase [that] we should just open thesource code and release it as acomplete BSD-style operatingsystem (Wayner, 2000: 175).

Prabhakar later said that Apple sought to“embrace and enhance” existing open sourcetechnologies, but in some cases would“embrace and layer” by building Apple’sproprietary code on top of the publiclyshared open source code.

The move was proclaimed by optimistsas legitimizing open source development, inthat a once proprietary platform firm waswilling to share a portion of its coreoperating system with outside developers.However, other open source advocatesattacked some of the exclusions in Apple’slicense, and the controversy dividedpreviously allied leaders of the open sourcemovement. While the major licenseconcerns were resolved within a month, thedispute hurt open source advocates withinApple by demonstrating the lack of a singlespokesperson within the open sourcecommunity who could speak on behalf ofthe entire community (Shankland, 1999;Wayner, 2000: 162-163).

Some also complained about Apple’schoice of the BSD rather than GPL stylelicense, which allows a commercial firm totake the public source, make proprietarymodifications, and to release that partpublic, part private product as a proprietarysolution (e.g., Leibovitch, 2001). Such isboth the inherent advantage (for commercialfirms) and disadvantage (for open sourcepurists) of the BSD-style license.


But the most enduring controversycontinued over Apple’s decision to holdsome layers of its operating system entirelyproprietary. Most of the public Darwinsource was a derivative work of the publicFreeBSD and Mach, and so as a practicalmatter Darwin offered the samefunctionality than its FreeBSD cousin.Apple had held out the largest (roughly75%) and most valuable parts of Mac OS X— its graphical user interface, the NeXT andMac OS application support — meaning thatDarwin was not a complete GUI operatingsystem and thus of little interest to averageusers. Other Apple-controlled technologies— such as its TrueType fonts andQuickTime multimedia software — weresimilarly excluded, preventing Darwin (andLinux) users from using these technologieswithout Apple hardware.

In March 2002, Apple helped launch anew organization, OpenDarwin.org.OpenDarwin maintained a stand-aloneversion of Darwin outside Apple’s directcontrol, with its own discussion groups andbug lists, but sharing source code withApple. By December 2002 it had 48identifiable user-contributors.

On paper, Apple enjoyed the best of allpossible worlds. The open source Darwinallowed it to leverage off the larger BSDcommunities to incorporate enhancements innetworking and other technologies, and toport Unix-based applications such as weband mail servers. Darwin also provided low-level documentation to third party hardwarevendors, freeing Apple to concentrate itssupport efforts on application software.Apple also retained differentiation in thetraditional areas where it had mattered most— in graphics and ease of use for its coremarkets in graphical design and education.

However, by opening only part of itstechnology — largely corresponding to theexisting FreeBSD — Apple made it lessvaluable to user-contributors. The fewerusers that contributed to the Darwin sources,the less benefit Apple realized from its opensource strategy.

6. IBM: From Platforms toApplications

Despite its well publicized travails of the1980s and 1990s, IBM remains the world’slargest computer company, as measuredboth by total sales and employees. It wasalso the most aggressive of any incumbentcomputer maker in embracing Linux andopen source.

As he announced IBM’s 2001 plans toinvest $1 billion in Linux, then-CEO LouisGerstner predicted an end to the era ofproprietary platforms that his company hadspawned:

The movement to standards-based computing is so inexorable, Ibelieve Sun—and EMC andMicrosoft for that matter—isrunning the last big proprietaryplay we’ll see in this industry for agood long while (Wilcox, 2000).

While Gerstner might secretly prefer areturn to IBM-controlled proprietaryindustry, the reality was that he found thatan open source world — where hardwarevendors and customers all had full controlover crucial system software — waspreferable a proprietary industry controlledby Microsoft.

6.1 Strategic Position in mid-1990sIBM was best known for creating the

first computer platform with its S/360proprietary mainframes, and its subsequentAS/400 minicomputer platform. Manyargued, however, that its most successfularchitecture was the one that got away: theIBM PC. The shift of leadership wastraumatic for IBM. In the early 1990s, IBMspent billions of dollars on OS/2 and jointventures with various industry rivals — allin an unsuccessful attempt to re-assert itsproprietary leadership of the computerindustry, or at least break free of dependenceon Microsoft. By 1996, the hatred of the“Evil Empire” within IBM bordered on theprofane (Garr, 1999: 187-188).

After losing the PC OS war, IBM’sleadership was confined to those segments(large computer systems) that were enduringa systemic decline. In more rapidly growing


PC and workstation markets, it was an also-ran. In response, the company sought toreposition the demand for mainframecomputers, first by promoting client/serverarchitecture and later by developingsoftware to enable them to serve as massiveweb servers. Meanwhile, it placed increasingemphasis on the sale of software andservices, winning business based on itsunmatched ability to offer a complete end-to-end “turnkey” solution.

6.2 Phase I: ApplicationsIBM’s first major open source initiative

came in its efforts to integrate corporatemainframes (with their vast legacydatabases) to directly support e-commerceand intranet initiatives. In June 1998, itunveiled its WebSphere product family,which built upon the Apache open sourceweb page server. IBM had begun with itsown internally-developed web server, butadopted the Internet’s most popular webserver after failure of negotiations withNetscape over licensing its proprietary webserver (McKay, 1998).

IBM’s efforts to adapt Apache to meetits specific needs set a pattern forcollaboration in its sponsorship ofsubsequent open source efforts. IBM helpedfund Apache’s adaptation for use onWindows NT, because it was central to itsWebSphere strategy (Moltzen and Burke,1998). Meanwhile, IBM engineerscontributed code back for use by all Apacheimplementations, and IBM hired one of thekey open source developers to act as apermanent liaison (Wayner, 2000: 181-183).IBM found that working with (largely user-driven) open source group provided moreflexibility than using someone else’sproprietary solution, a lesson it would laterapply to Linux.

WebSphere was also the first IBMapplication to be made available on variousLinux platforms. IBM added a Linux versionof its DB2 database, which in December1998 was released in beta form on IBM’sweb site; IBM later ported a third majorproduct, its Lotus Domino groupware. Aswith other Unix application vendors, IBMfound that offering a Linux version requireda comparatively small investment.

The WebSphere product indirectly led toIBM’s November 2001 formation ofEclipse, an independent open sourceconsortium to develop common softwaretools. IBM donated source code it valued at$40 million to launch the consortium, whicheventually grew to include Fujitsu, HP,Oracle, Red Hat and SAP. Sun (with itscompeting JavaBeans) was notably absent.

While IBM’s initial focus was ondeveloping web-enabled applications in Javaand HTML, the Eclipse project bragged thatit was a “universal tool platform … foranything and nothing in particular”(Eclipse.org 2002). The IBM-developedarchitecture allowed third party developersto write plug-in modules to support variousprogramming languages (C, C++, Cobol),file formats and external software products(like IBM’s WebSphere Application Server).

The code was licensed under theCommon Public License, an open sourcelicense which like BSD — and unlike GPL— allowed commercial distribution ofderivative works. As Eclipse evolved, IBMmerged updates from it into its commercialproduct, WebSphere Studio Workbench. InDecember 2002, IBM announced a $2.1billion purchase of Rational Software, anEclipse consortium member that soldapplication development tools.

Overall, IBM’s development ofapplications using open source software hadthree common threads. First, IBM acceptedcommodization of certain layers of itsapplication architecture and was thus waswilling to collaborate with open sourcesoftware programmers to make a sharedtechnology available to all; these layerstypically implemented open Internetstandards which offered less opportunitiesfor differentiation. Second, in many casesthe shared software competed withproprietary solutions developed byMicrosoft using its $4 billion annual R&Dbudget, such as its Internet InformationServices web server. Finally, the sharedsoftware was released under a non-GPLlicense allowing IBM to retain technology ormake proprietary enhancements.

6.3 Phase II: System SoftwareUnlike with applications, IBM’s direct

support for Linux as a replacement operating


system was long in coming. Throughout1998, IBM’s corporate strategists had nointention of providing or supporting Linux,as it would reduce differentiation and alsothreaten its high-margin proprietaryoperating system sales. So instead of beingofficially sponsored by developers of IBM’sS/390 mainframe, Linux was successfully“ported” in late 1998 through unsanctionedeffort of programmers at IBM Germany(Hall, 2001). This internal version of S/390Linux was eventually released for customerdownloads in February 2000. Subsequently,the changes to standard Linux to support theS/390 were made available both on IBM’sweb site and through commercialdistributors Red Hat, SuSE and TurboLinux.IBM also endorsed existing Linuxdistributions for its PC servers.

In early 2000, IBM announced it wouldsupport Linux across its entire range ofservers, from PCs up to the largestmainframe (Table 5). At the same time, areorganization eliminated its Internetbusiness unit, and reassigned its head, IrvingWladawsky-Berger, to head a combinedUnix-Linux unit. That group was locatedwithin IBM’s Enterprise Systems division— clearly targeting IBM’s traditional largecorporate customers rather than the PC-based Internet service providers that up tothat point had been the largest market forLinux.

Beyond the level of customer demand(or “market pull”), endorsing Linux gaveIBM key strategic advantages. First, Linuxprovided a common set of APIs across itsentire product line, providing a unifiedarchitecture for software developers.Second, the comparatively immature (yetcomplex) operating system required supportservices, a traditional IBM strength, asWladawsky-Berger later explained:

We’ve wedded ourselves to theintegration of the solution, thenotion being that the Internet ande-business solutions are moreimportant than any particularcomponent. And as a result, we’vechanged all our business models sothat the integration of the pieceshas become more important thanany one piece (Cooper, 2001).

Finally, the open source operating systemallowed IBM to make changes to improve itshardware differentiation for enterprisecustomers. As chief technology officer forPC servers noted, Linux “has given IBM anopportunity we didn’t have before to play toour strengths, which is availability andreliability” (Shankland 2002).

Wladawsky-Berger also said that theopen source model was a logical extensionof the long-standing IBM research culture.Towards that end, in August 2000 IBM’sspecial developerWorks open source website released the source code from two largeIBM research projects, the Andrew filesystem (later called OpenAFS) and its JibesJava compiler. Both were released under theIBM Public License, an antecedent of theCommon Public License.

7. Sun: Opening New Platforms

Sun was founded in 1982 to makeengineering workstations, and by the late1980s had outlasted its rival Apollo to leadthe market. While its Sun OS (later Solaris)platform was based on the same UNIXoperating system adopted by most of itsworkstation rivals, Sun successfullydifferentiated itself from other rivals throughongoing enhancements in its operatingsystem, particularly with its support for datanetworking (Garud and Kumaraswamy,1993).

As the 1990s ended, Sun faced threats toits core business, by open source Linux onthe one hand and Microsoft’s Windows NTon the other. At the same time, it sought toretain its traditional control of the operatingsystem and other technology that had fueledits success in the workstation and servermarket.

7.1 Strategic Position in mid-1990sIn the mid-1990s, Sun held a strong

position in workstations. Meanwhile, it waswell positioned to capitalize on rapidlygrowing industry demand for midrangeservers and those that required networkingand Internet support. While Sun’s marketinghad historically emphasized support for“open architecture,” it used proprietaryextensions to Unix software to differentiate


itself from workstation rivals such as HP,IBM and DEC (later Compaq).10

To improve adoption, it licensed itsworkstation and OS technology to customersand complementors; this included a smallnumber of makers of “clone” products, mostnotably in Japan (Garud and Kumaraswamy,1993). At the same time, Sun retained fullcontrol of the architecture, allowing it torapidly evolve the technology rather thannegotiate with standards committees. Assuch, Sun’s strategy more closely fit the“proprietary but open” model of Morris andFerguson (1993) than did Microsoft.

By concentrating on Unix-based systemsand ignoring PCs, in the mid-1990s Sun helda unique position in the computer industrywith respect to Microsoft. Most computercompanies licensed one of Microsoft’sWindows operating systems for servers,PCs, laptops or handheld computers; whileApple notably did not, it bundledMicrosoft’s web browser and activelycourted its Office application suite. As such,no matter how much some initiatives of IBMor Apple (or HP or Compaq) might conflictwith Microsoft, at other times they wereMicrosoft allies. Even bitter rivals AmericaOnline and Netscape made Windowssupport their top applications priority.

By contrast, Sun lacked such a “co-opetition” relationship with Microsoft. Adecade earlier, the two firms had littleoverlap with completely differenttechnologies and customers. However,industry trends — particularly the shift ofthe Internet from a research network to aconsumer one — had led them to becomedirect competitors (Goff, 1999). TheWindows NT server operating system wasdirectly aimed at the Unix server businessled by Sun, while any success of Microsoftin establishing proprietary Internet protocolswould come at Sun’s expense. Meanwhile,Sun did not ship Microsoft’s operatingsystem or applications. Thus, it was notsurprising that Sun’s co-founder and long-time CEO Scott McNealy was one of

10 However, the differences in Unix APIs increasedcosts for user and software developers,eventually forcing vendors to agree on acommon GUI and system specifications in themid-1990s, ending the “Unix wars”.

Microsoft’s harshest and most vocal critics,both because of the two company’sconflicting goals and because of the lack ofdependence on Microsoft for any keytechnology.

Both Windows NT (later Windows 2000and XP) and Linux posed a low-cost threatto Sun’s lucrative server business: both werebased on high volume Intel processors,whose performance was increasing morerapidly than that of Sun’s proprietary RISCprocessors. In another dimension, Windowsand Linux were attacking Sun from oppositesides: the former represented a moreproprietary approach under control of astrong, centralized rival, while the latteroffered greater openness that was supported(initially) by a diffuse group of hobbyists.

7.2 Strategy 1: New PlatformsSun’s primary strategy during the late

1990s was to establish new platformsindependent of Microsoft that would limit (ifnot reduce) Microsoft’s control of industrystandards.

Most of Sun’s efforts went towardsestablishing Java as a new platform with acommon set of APIs available on a widerange of computer systems, under the slogan“write once, run anywhere.” An earlyprototype of Java was made available foruser downloads in May 1995, and licensedby most major computer companies over thenext year (Garud, Jain, Kumaraswamy,2002). Sun mounted a four year lawsuitaccusing Microsoft of trying to hinder Java’ssuccess, a lawsuit settled out of court inJanuary 2001.

After distributing previews of itstechnology and generating great interest,Sun spent three years (1997-2000) trying toget Java established as a de jure standardalbeit under Sun’s control, first at theISO/IEC Joint Technical Committee 1(JTC1) and then later at ECMA.11 Bothefforts were withdrawn after vigorous andwell-financed opposition from competingcomputer makers, particularly Microsoft andHP (Egyedi, 2001). Sun also objected to the

11 ECMA was founded in 1961 as the EuropeanComputer Manufacturers Association, but in1994 switched to its acronym in hopes ofincreasing its global influence.


provisions that would have required it tosurrender IPR to the standardizationcommittee.

In a second major initiative, in August1999 Sun spent $73.5 million to acquire theGerman maker of StarOffice, a clone ofMicrosoft Office. As Sun later noted “It iscritical for all of Sun’s customers that therebe open, viable, cutting-edge officeproductivity software available to run in theheterogeneous network and across allplatforms” (Sun Microsystems, 2001). Thecompany also stated a desire to shift theindustry from the purchase of softwareproducts to the rental of network-intensiveapplication services (which would requiremore Sun systems to implement).

To a large degree, Sun’s preoccupationwith its offensive strategy against Microsoftcontributed to its failure to defend againstLinux. For example, in a 3,000+ word 1996interview, Sun’s CEO did not mention Linuxor open source code at all. Instead, hereiterated Sun’s historic push for Unix-basedopen systems over proprietary platforms:

Q: Now Microsoft’s recentlicensing of Java seems like a solidvote of confidence in thetechnology, but are you worriedMicrosoft might try to positionJava as just another language, orbury it under ActiveX?

McNealy: We’re alwaysworried people will try and hijackthe standards on the network…The real beauty of the Net is allinterfaces are open, they’remultivendor and you can publishyour data or publish yourapplication once and know it willrun on everything. That makes it alot more competitive and lowersthe price to the user. That’s notexactly what all the technologycompanies want to do. They wantto get you locked in (Taylor, 1996).

Ironically, the efforts of Microsoft andother proprietary computer makers to derailSun’s platform strategies led it towards itsfirst open source strategies, which improvedits ability both to compete and cooperatewith open source software.

7.3 Strategy 2: Partly-Open SourceInstead of responding to Linux, Sun’s

first open source strategies focused on itscompetition with Microsoft in getting coretechnologies adopted by users and softwaredevelopers. The evolution of these strategiesbegan with Java, extended to StarOffice andeventually reached its core Solaris operatingsystem. In addition to its pro-activestrategies, Sun also reacted to pressure toincrease the access to its Java code exertedby licensees and standardization committees.

The effort to define Sun’s open sourcestrategy was led by chief scientist Bill Joy,who had been one of the leading engineersin the Berkeley Unix group before leaving toco-found Sun (Kim, 1999). The most radicaloption — which would please the largestnumber of open source advocates — wouldhave been to use the GNU Public License, inwhich all changes made by Sun, itscustomers or competitors must be sharedwith everyone. While this would fueladoption, it posed real concerns aboutappropriating the returns of Sun’s R&Dinvestment, as Joy explained:

I can’t license all of Sun’sintellectual property under theGPL, because it just won’t work. Idon’t see any reason why I shouldgive somebody who’s doingcommercial reuse unfettered accessto stuff that cost me millions ofdollars to do. We’re spending overa billion dollars a year in research.I can’t just throw it all on thestreet.…

If I make code available underthe GPL, I’ll lose control of it. …The GPL just doesn’t solve mybusiness problem at Sun. I wouldlike all of our intellectual propertyto be available in source form, but Ican’t economically do that underthe GPL (Kim, 1999).

Instead, in February 1999 Sun releasedJava source code under what it called theSun Community Source License, a hybridbetween a traditional proprietary license anda BSD-style open source license. The licensehad four basic elements: 1) right to modify


the source code; 2) royalty free distributionin open source projects; 3) royalties forcommercial redistribution; 4) testingrequirement to maintain compatibility andprevent forking (Loukides, 1999). FromSun’s standpoint, the license: “providesprotection for intellectual property, …guarantees structured innovation within asingle responsible organization, [andprovides] clear control over compatibility”(Gabriel and Joy, 1998). The Sun license isinnovative in its governance: the SCSLprocesses in many ways resemble a formalstandards consortium or de jurestandardization committee more than the“bazaar” more associated with decentralizedLinux development.

If Sun had concern over rivals andcontrol with Java, these were even greaterwith Solaris, its Unix-based operatingsystem that had provided its keydifferentiation in the workstation and servermarket. However, in October 1999 itannounced that it would release Solarisunder the restrictions of the SCSL, and inDecember 2000 finally did so.

Sun adopted a different strategy forStarOffice; in October 2000 it released allsource code to a new organization,OpenOffice.org. The code was licensed in away that guaranteed the source wouldalways remain public, but allowed its use incommercial products by Sun or anyoneelse.12 After nearly a decade ofdevelopment, StarOffice badly laggedMicrosoft’s product in features,compatibility and reliability. The “bazaar”community of open source user-developerswas ideally suited for addressing suchconcerns, as Sun explained:

By engaging the energy andcreativity of developers worldwide,we will accelerate the addition ofinnovative features and improvedintegration with other products.Making the source code availablealso enables the StarOffice

12 Technically, the Lesser GNU Public License hassome characteristics in common with the GPL,but in practical terms it was more similar to anApache-style license in that it lacked the “viral”provisions of the GPL.

software functionality to be portedto a wider range of systems (SunMicrosystems, 2001).

In 2002, Sun released a $76 commercialversion of StarOffice, sharing code withOpenOffice, which remained an ongoingopen source project. Both Sun and the opensource community retained a common goal,being able to access business documentscompatible with Microsoft Office and thedominant Windows standard.

7.4 Strategy 3: If You Can’t Beat Them,Join Them

Compared to its other workstation rivals— particularly HP and IBM — Sun did littleto embrace Linux. From 1998-2000 itprovided technical assistance to outsidegroups porting Linux to run on its 32-bitSPARC and 64-bit UltraSparc line ofSolaris-based systems. It did not sell systemswith Linux pre-installed, leaving that tovalue-added resellers. In fact the demand forLinux on Sun hardware was so weak that inNovember 2000 a leading Linux distributor,Red Hat, canceled future development ofLinux for Sun computers.13

Sun was initially ambivalent about thesuccess of Linux. On the one hand,increasing adoption of Unix-based systemsreduced Microsoft’s influence and improvedavailability of Unix-related software,training and engineers. On the other hand,Sun had charged a premium to itsworkstation rivals based on its superiorSolaris software, so a world where Linuxwas the norm would eliminate thatadvantage (Rosenberg, 2000). As oneanalyst put it: “Sun is giving Linux somerhetoric, but Sun does not want Linux totake off” (Scannell and Gardner, 1999).

Eventually, in the face of competition inthe low-end server business, Sun adoptedLinux as a server operating system, albeit toa lesser degree than IBM. In 2000, Sunpurchased Cobalt, a maker of low-end Linuxserver appliances. Two years later, Sun

13 It should be noted, however, that Sun’s Internetservers incorporated the same Open Sourceapplications (such as Apache and sendmail) asthe other Unix and Linux-based servers.


announced plans for its own branded Intel-based servers, running Linux or Solaris.

8. Effect of Open Source on PlatformStrategies

The popularity of open source operatingsystems created both problems andopportunities for proprietary platformvendors. Disclosing software technologythrough open source licenses wouldnaturally lead to the commodization of suchsoftware. Not surprisingly, the response ofleading industry firms varied depending onwhether they had used software as a sourceof competitive advantage, and whether theyretained other sources of competitiveadvantage.

8.1 Comparing Strategies by Apple, IBMand Sun

While IBM was one of the world’s topsoftware vendors, its software was normallysold as part of a combined solution with itsown hardware. It continued to differentiateitself based on services such as integration,services that would provide switching costsif it adopted commodity software. Also, itskey revenues were in mainframe andmidrange systems where there were fewremaining competitors. Under suchconditions — with either servicedifferentiation or few viable competitors —software commoditization would be less of aconcern, and anything that reduces costs orincreases demand is an unvarnished plus. Infact, Linux offered IBM something it hadnever had — a common set of software APIsacross its entire product line.

Linux successes would also hurt Appleand Sun, which historically bundled averagehardware with better than average operatingsystems. Apple and Sun faced diminishedprofit margins if they shared the samesoftware as its rivals (or vice versa). Butunlike IBM, both Apple and Sun releasedsource code from their primary operatingsystem. The two firms adopted two differentapproaches: opening parts vs. partly open. Inpart by building on code that was alreadyopen source, Apple chose to grant all rightsto a subset of its new OS X operatingsystem. Meanwhile, Sun released the entiresource of Java and Solaris under restrictive

terms — the former to improve adoption, thelatter in response to competition from theopen source Linux.

All three firms sought to maintaincontrol of their proprietary OS and othertechnologies, in part to assure that theywould continue to evolve and remaincompetitive. They also had specific concernsabout aiding rivals and an historic aversionto sharing profits with others in their valuechain.

Prior to embracing open sourcestrategies, all three companies had extendedthe value of their platforms throughproprietary applications and “middleware”.Such software had enabled them to servetheir respective markets — large corporateservers for IBM and Sun and multimedia-savvy consumers for Apple. By retainingthis software as proprietary and unique totheir respective platforms, the firms wereable to retain at least some differentiationrelative to both proprietary and open sourcecompetitors.

8.2 Microsoft’s ResponseOf the industry’s largest firms, Microsoft

clearly had the most to lose by the havingfree software supplant commercial operatingsystems and application software; it lackedthe hardware and services revenues toreplace software sales lost to free software.On the other hand, Microsoft’s proprietaryplatform strategies continued to besuccessful and thus it faced the leastpressure to adopt an open strategy.However, the rising publicity associatedwith open source and the potential shift ofserver customers from Windows to Linuxforced it to respond.

In the first half of 2001 key Microsoftexecutives publicly attacked the movement,particularly the “viral” nature of the GPL(West and Dedrick, 2001); the companylater clarified its position to emphasizesupport for BSD-style licenses. Microsoftalso unveiled its own form of licensedsource code disclosure called “SharedSource”. By 2002, its strategy had evolvedto allow PC vendors, third-party developersand large end-users to view but not modifythe source to Windows. To win the heartsand minds of academics, Microsoft also


allowed universities to both view andmodify the source for internal research.

The role of Microsoft was clearlyparamount in the open source licensestrategies adopted by both nonprofit andcorporate software developers. Linuxdevelopers and other backers of the GNUlicense often cited Microsoft’s decision touse BSD networking technologies inWindows, then enhance those technologiesin a way that made Windows incompatiblewith Unix-like systems. As Sun’s Bill Joycomplained:

The top predator now isMicrosoft. We didn’t have a toppredator back when I did TCP/IP.When you have a person withunlimited funds who is clearlyfocused on destroying the valueproposition of what you’re doing,you’d be a fool not to account forthem in the strategy that youadopted (Kim, 1999).

9. Discussion

The use of multiple qualitative casestudies provides a rich opportunity forbuilding theory in emergent areas that isgrounded in empirical data. This sectionuses induction to generalize the observedopen source platform strategies ofproprietary firms into broader theoreticalpredictions about competitive strategies forIT platforms, and suggest areas for futureresearch.

Such theory always runs the risk ofbeing idiosyncratic and not generalizable tothe entire population (Eisenhardt, 1989). Inthis case, by studying firms that werepreviously successful with proprietarystrategies, such findings may not beapplicable to firms that unsuccessfullypursued proprietary strategies, or de novoentrants that lack prior platform capabilitiesupon which they can build. There is also therisk of attempting to generalize from a still-emergent process: the adoption of opensource — both by business end-users andproprietary hardware companies — is stillcomparatively recent phenomenon. Any orall of the companies studied could fail in

their efforts, or find greater success byreturning to more proprietary strategies.

9.1 Shifting from Proprietary to OpenSource Strategies

The study suggests a three stageevolution of proprietary platform vendors tothe use of open source.

Proprietary Platforms. As with otherindustries, computer industry pioneers beganby vertically integrating to deliver acomplete proprietary platform solution.Whenever possible, the firms preferproprietary platform strategies, because theyprovide better barriers to imitation and bettermargins. But as noted earlier, this strategymay only be available to one or two marketleaders.

Open Standards. For many IT vendors,the use of proprietary platform strategybecomes infeasible for some combination oftechnical and economic reasons, and theymodify their platforms to incorporate openstandards that are shared with one or morecompetitors. Among the motivations:14

• market share lower than theminimum efficient scale necessary tosupport proprietary R&D;

• not enough market power to resistbuyer demands for open standards;

• “tipping” of the standards contest infavor of the open standard, making itinfeasible to establish (or maintain) aproprietary standard; or

• a decision to accept commodizationof the particular architectural layerand shift competitive advantage toanother architectural layer.

These criteria are consistent with von Burg’s(2001) analysis of the adoption of Ethernetas the preferred networking technology byboth proprietary and open systems vendors.

While shifting to such shared platformsmay be the most cost-effective solution, itcan be difficult when it runs contrary to thecorporate culture and previously valued corecompetencies. The experience of Apple,IBM and Sun suggests that shifting to even a

14 In the case of the PC industry, the sharedmultivendor architectural layers are proprietarytechnologies provided by Microsoft and Intel,which addresses some but not all of the pressuresfor open multivendor standards.


partly-open architecture may require a majorexternal shock to force firms to relinquishprevious innovation-driven differentiationstrategies.

The shift also contains unexpectedpitfalls. Firms with a successful proprietaryarchitecture are able to simplify theirtechnical and business decisions, becausethey control their environment and don’thave to interoperate with the rest of theworld. When the proprietary strategy fails,firms are forced to work with open standardsto achieve interoperability, and suchinteroperability both requires additionaltechnical efforts and also reduces the lock-inof existing customers. For example, facedwith plummeting market share, Appleabandoned its proprietary peripheralinterface standards and switched toindustrywide standards, discontinuing mostof the proprietary peripherals that onceaccounted for much of its revenues (West,2000).

Having lost various platform battles withMicrosoft, both Apple and IBM have beenforced more than ever before to shift fromproprietary to open standards. Sun’sbusiness model had always required co-existing with open standards, but now hasrelinquished control of more platformstandards to “compete on implementations.”

Without innovation and proprietary lock-in to provide barriers to entry and imitation,invariably firms will find it difficult toachieve competitive advantage with thesenew strategies. Among the functionalstrategies that the three firms used includemarketing, customer service, product design,engineering efficiency and leveragingpreviously establish brand name reputations;the long-term viability of all these strategieshave yet to be proven.

Open Sources. The transition to an opensource platform strategy is a continuation ofthat to open systems, driven by the many ofthe same factors. Open source, however,eliminates the ability of vendors to competebased on implementations since the detailsof an implementation are visible to all.

A vendor’s decision to disclosetechnology is an irrevocable waiver of itsability to appropriate the returns from thattechnology. The use of hybrid strategies

suggests that proprietary vendors are awareof the competitive risks of such anappropriability waiver and are thusexperimenting to find the right compromisebetween totally proprietary platforms (whichwould be rejected by the market) and totallyopen ones (which would eliminate allcompetitive advantage). Thus far, the twohybrid strategies have been (Figure 2):

• opening parts, waving control ofcommodity layer(s) of the platform,while retaining full control of otherlayers that presumably providegreater opportunities fordifferentiation;

• partly open, disclosing technologyunder such restrictions that itprovides value to customers whilemaking it difficult for it to be directlyemployed by competitors.

The former strategy is important as anoffensive strategy to speed adoption of anew platform-related standard or a particularimplementation of such a standard. Waivingintellectual property rights makes thestandard (or implementation) more attractiveto competitors and key users, priming thepositive-feedback bandwagon effects thatcan accrue to early market leaders. It alsoincreases the number of products that areinteroperable with the vendor’s products,particularly important for networking andother communications standards.

Both approaches allow sophisticatedusers (such as large business enterprises,universities or IT industry suppliers) to helpimprove the products they use, consistentwith the long-identified role of technicallyknowledgeable industrial users (von Hippel,1976).

9.2 Future Platform StrategiesThe study of standards and standards

architecture competition has focused onthree basic approaches:

• vertically integrated proprietarysystems, as represented by the IBM360 (Chandler, 1997; Moschella,1997);

• platforms assembled fromproprietary layers that are freelylicensed to all, such as “Wintel”architecture (Morris and Ferguson,1993; Grove, 1996); and


• de jure standards not sponsored byany single firm but shared by all,epitomized by “open systems” andEurope’s GSM digital telephonestandard (Gabel, 1987; Funk andMethé, 2001).15

Open source standards differ from otherunsponsored open standards mainly indegree, to the extent that the entry andimitation barriers are dramatically lower.But the idea of a shared standard — with theassociated implications for governance anddifferentiation — is not fundamentallydifferent between the open source Linux orFreeBSD and its open systems (Unix clone)ancestors.

To a lesser degree, hybrid platformstrategies have existed for decades, drivenby the ever-increasing need for systemsinteroperability between or withinorganizations. Even the most proprietaryplatform incorporates open industrywidestandards such as ISO character sets, ANSIC, Ethernet or TCP/IP. Other firms (notablyIBM and Microsoft) have taken portions oftheir platforms and gotten them adopted asindustrywide standards.

The hybrid strategies of Sun and Appleblur the lines between the proprietary andunsponsored standards. By retaining anelement of control, they retain many of thecompetitive benefits of sponsorship.However, by reducing duplicative R&D theycan create shared communities that in manyways are indistinguishable in practice fromnominally unsponsored standards —assuming that the sponsors moveaggressively enough to build sizablecommunities of adopter/collaborators.

The open source strategies studied alsocall attention to the use of platformextension as a strategy to deal withcommoditization of lower-level platformlayers. For computer platforms, suchextension normally involves developingadditional application or “middleware” asthe highest level standards layers of anarchitecture. While Apple had from the

15 Note, however, that the nominally open GSMstandardization effort led by Nokia and Ericssonbuilt upon patent portfolios that were used toexclude Japanese vendors from the Europeanmarket (Bekkers et al., 2002).

beginning differentiated its operating systemthrough its ease of use, after that advantagedisappeared in 2001, Apple began bundlingconsumer applications to differentiate itsplatform among PC buyers. Microsoft begansuch bundling even earlier, when it includedits Internet Explorer application with itsWindows 95 operating system.

Such vertical integration intoapplications suggests at least a partial re-examination of the assumption thatplatforms succeed through their ability toattract a supply of third-party applications.Gallagher and Park (2002) have shown thatin-house applications development wascrucial in deciding a success of platformcontests in the videogame console industry.If this pattern is more generally applicable,then it suggests firms need to garner thefinancial resources to supply a complete (orat least basic) supply of complementaryassets expected by adopters, rather thanbuilding early market share perceptions toattract third party suppliers of such assets.

In other cases, the attempt todifferentiate may continue not to higherarchitectural layers, but with systemintegration or design. In November 2001,Nokia announced a plan to license itsPDA/mobile handset applications to rivals,either for use with their own OS, or to runon a multivendor OS developed by theSymbian joint venture (Nokia, 2001).

9.3 Implications for Open SourceDevelopment

How open is open enough? Open sourceprovides few direct benefits to the vastnumber of users who lack the requisitetechnical skills to do their own development,but instead is best suited for technicallyproficient users (such as Internet serviceproviders) with strong motivations forcustomization (West and Dedrick, 2001).16

16 Direct benefit from access to open source codewould appear to require some combination ofprogramming skill, (personal or professional)motivation and (personal or organizational) slacktime. In their study of Apache users, Franke andvon Hippel (2002) found highly heterogeneousrequirements among users (motivatingcustomization), and also that professional skillpredicted customization activities.


The degree to which open source adds valuebeyond this niche depends on how much itenables other attributes more directly valuedby users, such as greater reliability, lowercost or expanded variety of complementaryassets.

An example of such indirect benefits isthe provision of complementary assets.Normally, the provision of applications foran operating system is controlled by theformal, published interfaces (Langlois andRobertson, 1995; West and Dedrick, 2000).However, in an open source system, a thirdparty software supplier can add its owninterfaces as needed to provide functionalityunanticipated by the original author of theOS. Apple specifically opened the lowestlayers of its Mac OS X architecture toenable user support of unusual third-partyhardware configurations.

Another postulated indirect user benefitof open source systems is increasedreliability through the concurrent debuggingefforts of a widely distributed community ofuser-programmers (Raymond, 1999). Suchactivity appeared to be an important goal forall three firms studied, as the proprietaryvendors sought volunteer labor to find andcorrect some of the gaps in their systems.Kogut and Metiu (2001) report that morethan 70% of the Linux and Apachecontributors had made only one change tothe source code tree. This pattern isconsistent with users getting involved onlywhen there is a problem of great concern tothem.

Research on large, successful opensource projects such as Linux and Apacheassumes away variance in what may be akey independent variable: size of the user-programmer community. Anecdotalevidence suggests that the major reasonopen source projects fail is a lack of user-contributors to do the work. In this case,sponsors of open source projects (whetherorganizations or individuals) vendors face aparticularly important adoption challenge: toattract enough of the right sort of users early

enough to improve the quality and featuresof the software.17

How applicable are these benefits to thehybrid strategies? For the “opening parts”strategy, must the open part of the platformhave value on its own to win enough user-programmers? Or is it enough that it be partof a larger system of crucial importance, aswith Apple’s release of the Darwin portionof its mainstream Mac OS X operatingsystem?

A “partly open” strategy — such asSun’s Community Source License orMicrosoft’s Shared Source — must alsoattract attracting user-programmers. In thiscase, the question is whether the strategyprovides a stable enough allocation of thereturns of innovation between softwarevendors and users. Such strategies presumethat there is an intermediate level ofdisclosure and granting of rights (betweenfully open and fully proprietary extremes)that will be valuable to users withoutcompromising the IPR owners’ competitiveconcerns. One such intermediate point —the GNU Public License which grants nearlyall rights except the use in competingproprietary products — has high value tousers because of the complete andirrevocable disclosure.18 But the other formsused thus far seem to be discounted by mostusers (particularly those with more fullyopen options) and thus provide little if anyadoption incentive.

17 In the adoption typology of Rogers (1995),sponsors would want to attract innovators as theuser-programmers, early adopters as non-programming beta testers who would be tolerantof bugs and missing features, so that a completesolution could be developed suitable for the earlymajority.

18 I recognize that advocates of the GNU-stylelicense would argue that their license is more“free” than the BSD alternative, it thatguarantees that all derivatives will also be free.However, such perpetual freedom is enforced byrestricting the rights granted with the software,while the BSD-style licensing has few if anyrestrictions. An economic analog is the choicebetween giving a child a trust fund or cash; theformer assures that the original goal will alwaysbe met, while the latter gives the recipient fullright to do as (s)he sees fit.


9.4 Future ResearchThe hybrid open source strategies of

proprietary platform vendors suggest thatadditional research is necessary on a crucialtrade-off in technological innovation:resolving the conflicting imperatives ofmaking an innovation successful andprofiting from that success.

In his analysis of this trade-off, Teece(1986) focuses on the case where firms faceweak appropriability regimes and thus mustshare the returns of their innovation.Subsequent analyses largely assume thatstrong appropriability is good, to be sought,and that lack of appropriability is a lessdesirable condition. Strategists consider howfirms should share the economic surplusthey have generated, but not the possibilitythat firms should irrevocably abandon someor all of that surplus by waiving all futureappropriability from a given innovation.

However, proprietary software enjoysone of the tightest appropriability regimesavailable, at least in countries that enforceIPR laws. Meanwhile, the three decadessince the invention of the microprocessoroffer numerous examples where innovatorsenjoyed tight appropriability, but the lack ofadoption of their innovation meant that therewere no returns to appropriate.

The conversion of proprietary softwareto open source by IBM, Apple and Sun —forfeiting a portion of their IPR — suggeststhat the more general question of voluntarilywaiving appropriability bears further study.Among the issues that might be considered:

• Is forfeiting IPR more or lessdesirable in cases where competitors(or substitutes) have weakappropriability?

• Is such a differentiation strategymore effective when competing withan organization with tight IPRcontrol? Or does it have generalapplicability as a strategy to pre-empt adoption of competingtechnologies?

• Is it the effectiveness dependent onthe nature of the technology, its use,or the importance of complementaryassets? Are there any other adoptionprocess characteristics relevant todeciding on such strategies?

Other possible areas for future study ofopen standards include:

• Are there any conditions which aresufficient for predicting whether avendor should switch fromproprietary to open standards? Inparticular, will the pressure foropenness remain confined to lesssuccessful vendors, or will iteventually reach all firms?

• Are there categories of standards(e.g., communications infrastructure)that will always be open? Are thereany (e.g., document internal fileformats) that will always be closed?

Research on open source strategies bycommercial firms might include:

• Under what conditions will openstandards lead to the widespreadadoption of open sourceimplementations by commercialvendors?

• How durable are various approaches(including opening parts, partlyopen) for creating barriers toimitation using open sourcesoftware? Are some less likely tocreate competitive advantagebecause they don’t add perceivedcustomer value, or converselyprovide too much aid to competitors?

• Is the decision between open sourceand proprietary strategies a matter ofmanagerial discretion? Or is there anormative “best practice” for similarsituated firms that dictates theappropriate choice for each context?

• When firms select a “partly open”strategy, what is the appropriategovernance for vendor sponsoredopen source communities? Can theconflicting goals of the two partiesbe reconciled?

References

Anchordoguy, Marie, 1989, Computers Inc.(Harvard University Press, Cambridge,Mass.)

Apple Computer, 1999, Mac OS X ServerEmbraces Open Source With Launch ofDarwin, Press release, 16 March,www.apple.com (accessed 27 Dec.2001).


Apple Computer, 2000, Mac OS X: KernelEnvironment (Apple Computer,Cupertino, Calif.).

Arthur, W. Brian, 1996, Increasing Returnsand the New World of Business,Harvard Business Review 74 (4), 100-109.

Beggs, Alan, Klemperer, Paul, 1992, Multi-Period Competition with SwitchingCosts, Econometrica 60 (3), 651-666.

Bekkers, Rudi, Duysters, Geert, Verspagen,Bart, 2002, Intellectual property rights,strategic technology agreements andmarket structure. The case of GSM,Research Policy 31 (7), 1141-1161.

Besen, Stanley M., Farrell, Joseph, 1994,Choosing How to Compete: Strategiesand Tactics in Standardization, Journalof Economic Perspectives 8 (2), 117-131.

Bresnahan, Timothy F., Greenstein, Shane,1999, Technological competition and thestructure of the computer industry,Journal of Industrial Economics 47 (1),1-40.

Chandler, Alfred, 1997, The computerindustry: the first half century, in: DavidB. Yoffie (Editor), Competing in an Ageof Digital Convergence (HarvardBusiness School Press, Boston) pp. 37-122.

Chposky, James, Leonsis, Ted, 1988, BlueMagic: The People, Power and PoliticsBehind the IBM Personal Computer(Facts on File, New York).

Cooper, Charles, 2001, IBM’s big thinker,CNET News.com news.cnet.com 22August (accessed 31 Dec. 2001).

Dataquest, 1996, Worldwide PC MarketGrew 24 Percent in 1995, Press release,www.gartnerweb.com, 29 January(accessed 4 Jan. 1997).

DiBona, Chris, Ockman, Sam, Stone, Mark(Editors), 1999, Open Sources: Voicesfrom the Open Source Revolution(O’Reilly, Sebastopol, Calif.).

Eclipse.org, 2002, Eclipse Project FAQ, 19November , www.eclipse.org (accessed18 Dec. 2002).

Egyedi, Tineke M., 2001, Why Java™ was-not- standardized twice, ComputerStandards and Interfaces 23 (4), 253-265.

Eisenhardt, Kathleen M., 1989, BuildingTheories from Case Study Research,Academy of Management Review 14 (4),532-550.

Ferguson, Charles H., Morris, Charles R.,1993, Computer wars: how the West canwin in a post-IBM world, Times Books,New York.

Flamm, Kenneth, 1988, Creating thecomputer: government, industry, andhigh technology (Brookings Institution,Washington, D.C.).

Franke, Nikolaus, von Hippel, Eric, 2002,Satisfying Heterogeneous User Needsvia Innovation Toolkits: The Case ofApache Security Software, WorkingPaper #4341-02 (MIT Sloan School ofManagement, Cambridge, Mass.)

Funk, Jeffrey L., Methé, David T., 2001,Market- and committee-basedmechanisms in the creation and diffusionof global industry standards: The case ofmobile communication, Research Policy30 (4), 589-610.

Gabel, H. Landis, 1987, Open Standards inComputers: The Case of X/OPEN, in: H.Landis Gabel (Editor), ProductStandardization and CompetitiveStrategy (North-Holland, Amsterdam).

Gabriel, Richard P., Joy, William N., 1998,Sun Community Source LicensePrinciples, www.sun.com (accessed 30Dec. 2001).

Gallagher, Scott, Park, Seung Ho, 2002,Innovation and Comeptition in Standard-based Industries: A Historical Analysisof the U.S. Home Video Game Market,IEEE Transactions on EngineeringManagement 49 (1), 67-82.

Garr, Doug, 1999, IBM redux: Lou Gerstnerand the business turnaround of thedecade, HarperBusiness, New York.


Garud, Raghu, Jain, Sanjay, Kumaraswamy,Arun, 2002, InstitutionalEntrepreneurship In The Sponsorship OfCommon Technological Standards: TheCase Of Sun Microsystems And Java,Academy of Management Journal 45 (1),196-214.

Garud, Raghu, Kumaraswamy, Arun, 1993,Changing competitive dynamics innetwork industries: An exploration ofSun Microsystems’ open systemsstrategy, Strategic Management Journal14 (5), 351-369.

Goff, Leslie, 1999, Sun and Microsoft gopublic, Computerworld, 20 Sept., p. 94.

Greenstein, Shane M, 1997, Lock-in and theCosts of Switching MainframeComputer Vendors: What Do BuyersSee? Industrial and Corporate Change 6(2), 247-274.

Grove, Andrew S., 1996, Only the ParanoidSurvive: How to Exploit the CrisisPoints that Challenge Every Companyand Career (Doubleday, New York).

Hall, Mark, 2001, IBM roils Linux waters,Computerworld, Oct. 29, pp. 42-43.

Hess, Robert, 1995, AIX, MachTen, Linuxto fill PPC Unix gap, MacWEEK, May29, p. 16.

Katz, Michael L., Shapiro, Carl, 1985,Network Externalities, Competition, andCompatibility, American EconomicReview 75 (3), 424-440.

Katz, Michael L., Shapiro, Carl, 1986,Technology Adoption in the Presence ofNetwork Externalities, Journal ofPolitical Economy 94 (4), 822-841.

Kim, Eugene Eric, 1999, The Joy of Unix,Linux Magazine, November.

Kogut, Bruce, Metiu, Anca, 2001, Open-source software development anddistributed innovation, Oxford Review ofEconomic Policy 17 (2), 248-264.

Kraemer, Kenneth L., Dedrick, Jason,Yamashiro, Sandra, 2000, Refining andextending the business model withinformation technology: Dell ComputerCorporation, The Information Society 16(1), 5-21.

Langlois, Richard, 1992, Externaleconomies and economic progress: Thecase of the microcomputer industry,Business History Review 66 (1), 1-50.

Langlois, Richard, Robertson, Paul, 1995,Firms, Markets and Economic Change(Routledge, London).

Leibovitch, Evan, 2001, Open source’sblack hole, www.zdnet.com, 2 May(accessed 9 Oct. 2001).

Liebowitz, Stan J., Margolis, Stephen E.,1999, Winners, Losers and Microsoft:Competition and Antitrust in HighTechnology (Independent Institute,Oakland, Calif.).

Loukides, Mike, 1999, Some Thoughts onthe Sun Community Source License,java.oreilly.com (accessed 30 Dec.2001).

MacCormack, Alan, Herman, Kerry, 1999,Red Hat and the Linux Revolution,Harvard Business School case #9-600-009, Boston, Mass.

McKay, Niall, 1998, IBM bundles Apacheinto its WebSphere, InfoWorld June 22,p. 3.

McKusick, Kirk, 1999, Twenty Years ofBerkeley Unix, in: Chris DiBona, SamOckman and Mark Stone (Editors), OpenSources: Voices from the Open SourceRevolution (O’Reilly, Sebastopol, Calif.)pp. 31-46.

Moltzen, Edward F., Burke, Steven, 1998,Apache Server ported to NT, ComputerReseller News, 16 November, pp. 5,10.

Moore, Geoffrey A, 1991, Crossing thechasm: marketing and selling technologyproducts to mainstream customers(HarperBusiness, New York).

Morris, Charles R., Ferguson, Charles H.,93, How Architecture Wins TechnologyWars, Harvard Business Review 71 (2),86-96.

Moschella, David C., 1997, Waves of power:dynamics of global technologyleadership, 1964-2010 (AMACOM,New York).

Mowery, David C. (Editor), 1996, TheInternational Computer SoftwareIndustry: A Comparative Study ofIndustry Evolution and Structure(Oxford University Press, New York).


Nokia, 2001, Nokia to license a mobileterminal software platform and clientcomponents to handset vendors, Pressrelease, 13 November, press.nokia.com(accessed 8 April 2002).

Raymond, Eric S., 1999, The cathedral andthe bazaar: musings on Linux and opensource by an accidental revolutionary(O’Reilly, Cambridge, Mass.).

Rogers, Everett M., 1995, Diffusion ofinnovations, 4th ed. (Free Press, NewYork).

Rosenberg, Donald K., 2000. Open Source:the unauthorized white papers (M&TBooks, Foster City, Calif.).

Scannell, Ed, Gardner, Dana, 1999, Linuxmeets Netfinity, InfoWorld, 2 August, p.1.

Shankland, Stephen, 1999, Apple modifiesopen source license, CNET News.comnews.cnet.com 20 April (accessed 12June 2001).

Shankland, Stephen, 2002, Missionimpossible at IBM? CNET News.comnews.cnet.com 30 April (accessed 18Dec. 2002).

Stallman, Richard, 1999, The GNUOperating System and the Free SoftwareMovement, in: Chris DiBona, SamOckman and Mark Stone (Editors), OpenSources: Voices from the Open SourceRevolution (O’Reilly, Sebastopol, Calif.)pp. 53-70.

Stallman, Richard, 2001, as interviewed in:Revolution OS, 35mm film, J.T.S.Moore, director, WonderviewProductions LLC.

Sun Microsystems, 2001, OpenOffice.orgFAQ, www.sun.com (accessed 30 Dec.2001).

Taylor, Maureen, 1996, Scott Says...‘KickButt and Have Fun’: A candid interviewwith Scott McNealy, Sun’s CEO,www.sun.com (accessed 30 Dec. 2001).

Teece, David, 1986, Profiting fromtechnological innovation: Implicationsfor integration, collaboration, licensingand public policy, Research Policy 15(6), 285-305.

Torvalds, Linus, Diamond, David, 2001,Just for fun: the story of an accidentalrevolutionary (HarperBusiness, NewYork).

Varhol, Peter D., 1994, Trends in operatingsystem design: An Interview with LinusTorvalds, Dr. Dobb’s Journal May, p.18.

von Burg, Urs, 2001, The Triumph ofEthernet: Technological Communitiesand the Battle for the LAN Standard(Stanford University Press, Stanford,Calif.).

von Hippel, Eric, 1976, The Dominant Roleof Users in the Scientific InstrumentInnovation Process, Research Policy 5(3), 212-39.

Wayner, Peter, 2000, Free for all: howLinux and the free software movementundercut the high-tech titans (HarperBusiness, New York).

West, Joel, 2000, A Comparison of PCStandard Switching Decisions by U.S.and Japanese Computer Users, Ph.D.dissertation, University of California,Irvine, Irvine, Calif.

West, Joel, 2003, The fall of a SiliconValley icon: Was Apple really Betamaxredux? Forthcoming in: Richard Bettis(Editor), Strategy in Transition (Wiley,New York).

West, Joel, Dedrick, Jason, 2000, Innovationand Control in Standards Architectures:The Rise and Fall of Japan’s PC-98,Information Systems Research 11 (2),197-216.

West, Joel, Dedrick, Jason, 2001, OpenSource Standardization: The Rise ofLinux in the Network Era, Knowledge,Technology and Policy 14 (2), 88-112.

Wilcox, Joe, 2000, IBM to spend $1 billionon Linux in 2001, CNET News.comnews.cnet.com 12 December (accessed15 Dec. 2000).

Zachary, G. Pascal, 1991, Free for All:Richard Stallman Is Consumed by theFight To End Copyrighting of Software,Wall Street Journal, 20 May, p. R23.


Tables and Figures

Category Firm Platform ReleasedMainframe IBM IBM 360 (370,390) 1964Minicomputer DEC VAX/VMS (OpenVMS) 1977

IBM AS/400 1988†AT&T->OSF Unix 1980§

Workstation Apollo Domain¶ 1980Sun Sun OS (Solaris) 1982

8-bit PC Apple Apple II¶ 1977†Digital Research CP/M¶ 1976§

16+ bit PC IBM IBM PC 1981†Microsoft Windows 1990§NEC PC-98¶ 1983Apple Macintosh 1984

Personal Digital Palm Pilot 1996Assistant †Microsoft Windows CE 1996

† OS vendor; otherwise, vendors are vertically integrated manufacturers§ Widespread commercial release¶ Discontinued

Table 1: Major 20th century computing platforms

ProductVendor IBM DEC DEC Sun Apple IBM CompaqProduct S/390 VaxStation VaxStation SparcStation Macintosh PS/2 DeskProSegment Mainframe Workstation Workstation Workstation PC PC PC

PlatformApplications own

3rd partyown3rd party

own3rd party

own3rd party

own3rd party

own3rd party

3rd party

OS OS/390(own)

VMS(own)

Unix†(3rd party)

Unix†(3rd party)

Mac OS(own)

MS-DOS(3rd party)

MS-DOS(3rd party)

CPU ES9000(own)

CVAX(own)

CVAX(own)

Sparc(own)

68030(3rd party)

386(3rd party)

386(3rd party)

† Licensed from a 3rd party supplier but with proprietary extensions

Table 2: Ownership of achitectural layers for representative computer platforms, 1990

Platformstrategy Sponsor

Multiplehardwarevendors

MultipleOS

vendorsSource

Licensing

PublishedAPIs for 3rd

party s.w API Control Productsclosed Vertically

integratedproprietary

Hardwarevendors

no no no yes hardwarevendor

IBM S/360,DEC VAX,Macintosh

Horizontalproprietary

Microsoft yes no no yes softwarevendor

Windows 3.0

Unix AT&T yes no yes yes softwarevendor

System V

open Open Systems Consortia yes yes yes yes consortium OSF, X/Open

Table 3: Representative platform IPR strategies, 1990


Date Industry Apple IBM SunMay 1995 Pre-release Java posted for

free Internet downloadOctober

1995Starts working on MkLinuxfor Power Macintosh

March 1996 Licenses Java to MicrosoftMay 1996 Releases MkLinux, gives

away 20,000+ CDs to ISVsOctober

1996Sues Microsoft over“polluted” Java

December1996

Buys NeXT to adaptMach/BSD-based OS

Announces “100% PureJava” initiative

June 1998 Announces use of Apacheacross entire server line

July 1998 Torvalds on cover ofForbes

Ends work on MkLinux

September1998

Microsoft lists Linux as athreat in SEC filing

Announces DB2 willsupport Linux

November1998

Microsoft “Halloween”memo stirs controversy

Abandons ISO/IEC JTC1Java standards effort

December1998

German IBM engineersport Linux to S/390mainframe

Intro Sun CommunitySource License, plans torelease Java source code

December1998

Announces open source forJikes Java compiler

Announces support forLinux on UltraSparc CPUs

February1999

Java 2 source code postedunder SCSL

March 1999 IBM, Compaq, Oracle andNovell invest in Red Hat

Announces Darwin opensource OS and ApplePublic Source License

Supports Linux on work-stations and PC servers

May 1999 Releases Darwin sourcecode on Apple web server

Certifies 4 Linux versionsfor PC servers

July 1999 Releases DB2 for LinuxAugust 1999 After IPO, Red Hat reaches

$4 billion market capBuys StarOffice, revealsplans to release source

September1999

Launches developerWorksopen source site

Releases SPARC chipdesign under SCSL

October1999

Microsoft posts "LinuxMyths" page, attacks Linux

Announces it will releaseSolaris under SCSL

December1999

Abandons ECMAstandards process on Java;Resells Red Hat Linux

February2000

Posts its Linux for S/390for free download

August 2000 Open Source DevelopmentLab funded

Releases tools under IBMPublic License

Replaces own GUI withopen source GNOME

September2000

Releases public beta ofDarwin-based OS X

Purchases Cobalt, maker ofLinux server appliances

October2000

Posts StarOffice sourceunder Lesser GPL license

November2000

Red Hat drops Linuxsupport for Sun systems

December2000

Announces IBM will spend$1 billion on Linux in 2001

Releases Solaris sourceunder SCSL license

January2001

Settles Java lawsuit withMicrosoft

March 2001 Microsoft launches “SharedSource” initiative

Ships Mac OS X, based onDarwin and FreeBSD

Launches “Peace, Love andLinux” ad campaign


June 2001 Microsoft CEO Ballmersays “Linux is a cancer”

Hires FreeBSD co-founder

November2001

Launches Eclipse opensource consortium

April 2002 HP wins Linux-basedsupercomputer contractwith U.S. Dept. of Energy

With non-profit InternetSoftware Consortium, co-sponsors OpenDarwin.org

May 2002 Sells StarOffice for $76September

2002Red Hat Linux expandssupport to all IBM servers

Introduces LX seriesLinux-based PC servers

Table 4: Open Source Platform Milestones, 1995-2002

Earlier Platforms Revised PlatformsCategory Hardware Operating System Rebranding Operating System†mainframe IBM S/390 OS/390 zSeries Linuxminicomputer AS/400 OS/400 iSeries Linuxworkstation RS/6000 AIX pSeries Linuxserver PC Netfinity Windows NT

Windows 2000xSeries Linux

desktop/laptop PC NetVistaThinkPad

Windows95/98/ME

n/a n/a

PDA WorkPad Palm OS n/a n/a† Traditional OS also available on rebranded platforms

Table 5: IBM’s supported platforms before and after Linux adoption

Graphics, GUI, multimedia

Mach: memory, task control

BSD: networkingfiles, security

Mac OS 9/XAPIs

NextStepAPIs

JavaAPIs

Applications

Darwin(Open

Source)

Other layers(trade

secret)

Source: Apple Computer (2000)

Figure 1: Architectural layers for Apple’s Mac OS X platform


100%

0%

Rights

Granted

100%0%Technology disclosed

Windows CE

Mac OS X

Linux

Apache,StarOffice

Java,Solaris

Proprietary OS

Opening Parts

Partly Open

Figure 2: User rights under open and quasi-open source licenses

how open is open enough? melding proprietary and open source

Documents