7. 3  Validity and feasibility of the free software model

In previous sections, we looked at the foundations of the free software model and the features that distinguish it from the more traditional models.

To evaluate the long-term sustainability of the free software model, we need much more data than we currently possess, i.e. a much wider time slot for a more precise comparison with traditional models.

Time will tell whether free software is a new economic model and what features and conditions will allow it to be so.

We will now offer some conclusions. Although, at the time of writing, business based on free software is still relatively new, we have highlighted the differences allowing the adoption of a new business perspective based primarily on promoting the cooperative production of knowledge.

Applications based on free software

The social production of a specific application or solution encourages the creation of value above and beyond its cost of production, affording it a competitive advantage over other market alternatives.

Free software-based applications, together with open standards, can offset some of the economic effects that strengthen products based on the traditional model. Thus, besides inducing a substantial differentiation with traditional applications, they allow for strategies and policies of coopetition between companies in a win-win paradigm.

The market

Social production has plagued the Internet with alternative initiatives to traditional models. Over time, social capital has become a significant value for innovation and development in open environments. We now have profitable business models that pay for the production of knowledge.

The business of knowledge

Innocentive (http://www.innocentive.com/) is just one website that rewards ideas that solve specific problems. On it, there are users who pose questions (seekers) and others that solve them (solvers) in exchange for a financial reward.

This and other examples have led to the creation of a new market logic, referred to in some contexts as Wikinomics and crowdsourcing. This logic is based on the pull model we saw above, i.e. the attraction of ideas and effort in contrast to the traditional push model.

In time, we will discover whether this market perspective allows the patterns of technology adoption typical of the traditional market to evolve towards a new situation.

The business

The new market perspective can offer new business opportunities associated with the exploitation of ideas, concepts and knowledge for profit without owning the latter. In other words, the value of an application based on free software does not lie in the solution itself but in the capital acquired and generated with it.

Nonetheless, the validity and viability of free software as a model also depends on the particular design features of the company that exploits it. That is, it is essential to design the company around a solid and lasting business opportunity.

Risks

Undoubtedly, the main risks for the model based on free software are obtaining a critical mass of users to ensure the project's viability and laying the foundations for a business model that will prove stable over time. We must also take into account the relationship between the initial investment and the expected benefits.

Business viability study

Comprehensively analysing, designing and formalising the company will increase the guarantees of success of our free software-based business. To maximise these guarantees, the company's viability must be studied prior to its launch and formalised in a business plan.

In the third module of this subject, we took an initial approach to the main features affecting the business viability of the traditional software business, namely aspects of sales and marketing, along with the products and services covered by the business.

Companies based on free software must complement the above aspects with the features of business models based on free software seen in the fourth module, creating a combination to formalise a sound basis on which to set up a sustainable business .

The free software company

As with any business model, a company based on free software will also require detailed planning and design prior to start-up. In the previous sections, we emphasised the importance of carefully analysing the business fundamentals of the company as a condition for evaluating its validity and feasibility.

Both the basic features of free software and the implications that we have described throughout this module can exert different influences depending on the typology of the business opportunity and the context we seek to exploit.

Thus, the strategy of a company based on free software can and should characterise its actions in the differentiation of its business and the economic effects of its environment, as well as in social capital and production, in addition to coopetition.