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The ServInt Source

Freeing Information Can Save Business On the Web

Finding Treasure

Finding Treasure

Most businesses have prices dictated by their resources. It’s the cornerstone of capitalism after all, turning raw materials into products to sell for a profit.

High value items, like gold and oil, have a relatively high cost in their raw form, so it complicates the final product and causes either thin margins or high prices in increasingly niche market segments. Either way, it makes running a business harder.

In hosting, general technology, and the web, we are primarily dealing with the trade of information, the value of which is entirely dictated by the ease of access to that information and the medium by which it’s delivered. An article in the New York Times is generally considered more valuable than a post on Myspace.

What happens when the source of information, the raw material of the web, is controlled or even throttled by a select few outlets? How does that affect your site or your product? How does it change your business model and marketing strategy?

A good example is navigation, where the two largest map providers, Tele Atlas and NAVTEQ, are owned by two large corporations, TomTom and Nokia, respectively. That means that if you wanted access to these maps, say, to write a mobile GPS application, you would have to pay a rather large licensing fee to one of your largest competitors.

The end products show evidence of the equivalent of raw material strangulation in the GPS industry. European GPS makers Navigon and TomTom both released mobile applications for the iPhone that float dangerously near the $100 mark…just for software. They weren’t really adding any functionality to the phones, just layering features on top of hardware capability. On top of that, TomTom actually OWNS one of the map conglomerates and still decided it was competitive to charge $100 for their app.

This is in direct contrast with the OpenStreetMap project which encourages users to edit a free and open source web map application that can be accessed by software developers and incorporated into mapping applications. The result is software such as Roadee, a turn-by-turn GPS application that utilizes openstreetmap.org maps and is thus able to shave roughly $98 off the asking price of it’s competitors. Roadee (iTunes Link) is a palatable $1.99.

Now, it isn’t perfect, or polished, and it does occasionally flake out a bit…but that sometimes happens in fledgling open source projects. It’s a great example of the rift between creating value out of the free flow of information versus manufacturing perceived value by using expensive raw materials to achieve the same result.

What open source has taught us about business is that we shouldn’t fear free alternatives. They have enabled us to shift business models from attempting to create proprietary standards and forced us to solve difficult problems. They have forced us to create value in our products that justifies the price we charge and have pushed companies to develop products with deliberation and polish.

What has open source done for you? Good or bad, right or wrong, let’s hear it in the comments.

Photo by dotbenjamin.

EDIT: Changed awkward phrasing at beginning of 8th paragraph.

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