[Discuss] OSHW & Economics

Wed Nov 27 08:27:54 UTC 2013

Matt,
Inside one of the big flow of smart writing you kindly share with cool
people who subscribed to this brilliant list, I've notice this :
> The fact that it always costs money to replicate/distribute/use
> the physical object of an open source hardware project

Humm ... I'm not so sure that it *always* costs. Indeed, delivering goods
without spending 1 coins, might exist thanks to a complete chain of non
money donations, replacing money.

And ... there might be not so many differences between Free Libre
OpenSource "software" and Free Libre OpenSource "not-software goods or
services", when we speak about "economy" or "business model" of such
earthling human activities.
Let's try the following theory to explain this "no-difference". FLOS
software needs a computer. A computer needs energy. A human who design the
software needs to eat, move, be in good health, etc ... Then, a FLOS
software does not appear "by the operation of Saints". A FLOS software
needs "things, people and energy" to exist. Then, saying that getting or
using a FLOS software, needs nothing (no money, no energy, no humans needs,
no-distribution services, etc ...) is as wrong as saying the same for a
FLOS not-software goods or services. In the reality, both needs something
to exist, to be distributed, to be used. However, it is clear that if the
supply chain of FLOS not-software goods or services are fully offered for
free, then, the direct need of money does not exist. If so, the concept of
"free" could apply to FLOS not-software and services, as for FLOSSoftwares.

Then, if this theory is reliable, as Mister Richard Stallman, and as its
opponents, are right concerning the concept of "free" for non-software
goods and services.

Then, if so, gouvernance and stratgegy and operational and emotional
practices used in big or small business models of FLOS-Software earthling
human activities, might be duplicated into FLOS non-software goods and
services with the same hope of successes.

What do we all think about this theory ? Is it reliable ?

Antoine
Freely

2013/11/26 Matt Maier <blueback09 at gmail.com>

>
>
> On Mon, Nov 18, 2013 at 10:12 AM, Mario Gómez <mxgxw.alpha at gmail.com>wrote:
>
>> OSHW & economics?
>>
>> With Open Source Software is pretty straightforward...So you cannot base
>> your businness on selling the software per se but the services associated
>> to it...a bussiness based on services could have more oportunities to get
>> profits by offering support solutions and associated services than selling
>> just the software (see for example RedHat).
>>
>>
>> But the OSHW always have an associated cost and there is no way that a
>> small OSHW proyect can compete with an asian manufacturer for example. I
>> mean, with the right facilities, any manufacturer could take an OSHW design
>> and reproduce at just a small fraction of the costs that the original
>> designer had.
>>
> The fact that it always costs money to replicate/distribute/use the
> physical object of an open source hardware project (if not the digital
> source) is an important point. However, there are more factors that affect
> competition. For example, most of the customers who CAN buy outside of the
> shady Asian clone market, DO. They just trust more reputable manufacturers
> more.
>
> "*Arduino noticed that copycat versions of its board made in China and
> Taiwan were being sold online. Yet sales through the main Arduino store
> were still increasing dramatically. Why? Partly because many Asian
> knockoffs were poor quality, rife with soldering errors and flimsy pin
> connections*."
> http://www.wired.com/techbiz/startups/magazine/16-11/ff_openmanufacturing?currentPage=all
>
> A big part of the reason Asian cloners are a threat is that they don't
> have to worry about the IP/employee/contract laws the rest of us follow.
> However, that also means that their market is less trustworthy on average.
> Sometimes hardware is poorly designed/constructed, sometimes there are
> translation errors, sometimes the descriptions outright lie, sometimes
> shipping takes several months, and good luck getting customer service. It's
> more wild west...or east..whatever.
>
> Most customers will pay a premium for confidence in the outcome of a
> transaction.  The mere fact that something is cheaper can often be an
> incentive to avoid it; the assumption being that it is lower quality.
>
> Open source hardware developers can use that to their advantage. They can
> be actively enaged with their customers. They can build up good will, and
> earn trust, far better than the anonymous mass of cloners competing on
> price alone.
>
>
>>
>> And obviously in a world were the predominant way of think is to generate
>> maximum profits, if for example, I'm offering a custom solution based on a
>> OSHW platform then obviously I would end choosing the provider with the
>> lowest price, even if isn't not the original designer, even if that is
>> against the OSHW philosophy and good practices.
>>
>
> I'm not so sure about that. The number one motivator for open source
> developers is the enjoyment of solving a challenge. When they solve a
> challenge so well that they can sell it, and decide to go that route, they
> have to make the activity self-sustaining but I'm not sure that they fully
> transition over to worrying about maximum profits. There don't seem to be
> enough of them to collect data on, yet.
>
> Additionally, there's no such thing as one monolithic market. I'll use
> Makerbot as an example. They are moving "up market" as fast as possible.
> They want to sell expensive printers because they have to pay Americans
> working in Brooklyn. They CAN'T sell to the "low end" of the 3D printer
> market because it wouldn't be profitable given their production/overhead
> costs. So they have little reason to care if their printers are cloned and
> sold cheaper because that's not poaching any of their business. They never
> would have sold to the people buying the cheap knockoffs anyway.
>
> "*I did not bother taking pictures of all the clones. I have little
> sympathy for Makerbot (aside from the usual reasons) since they decided to
> save a few pennies and outsource all their injection molded parts to China.
> This gives the design by far the lowest barriers to entry for a small,
> local company looking to make a quick buck by cloning a printer without
> investing in tooling. All they have to do is buy the **Replicator II
> source* <http://item.taobao.com/item.htm?id=20483403054>* and they can
> get the **same custom parts from the same factory*<http://item.taobao.com/item.htm?id=26018240438>*.
> This is why printers like the Flashforge are basically indistinguishable
> from the Replicator II*"
> http://forums.reprap.org/read.php?1,271647
>
> Since the open source hardware developers tend to be on the creative side,
> their strengths lie in high-quality products rather than low-price
> products. They can play to that strength without worrying about the other
> stuff because they couldn't have covered the whole market anyway. Someone
> buying a single cheap clone probably wouldn't have bought the original
> because they know enough to be able to work with products/producers of
> questionable quality. Someone buying a whole raft of clones because they
> need a lot and can only afford the total price of the cheap versions
> wouldn't have bought the original because it wasn't produced in high enough
> volume.
>
>
>>
>>
>> But in hardware, how a OSHW company could survive if there is an
>> "external" factor associated to the cost of manufacture that cannot be
>> reduced for manufacturing in small quantities?
>>
>>
> By definition, if the market for the thing is large enough to justify
> cheap mass production, then the creator has had a chance to position
> themselves as the leader. Whether or not they succeeded is just a standard
> business problem which is not unique to open source. Actually, I suspect
> it's easier in open source because there's such a strong community. Whoever
> invented the thing in the first place is naturally positioned to be the
> lead developer. By the time the project is successful enough to attract
> cloner attention there will already be a vibrant community and they will be
> naturally inclinded to orbit around the original creator, who presumably
> has been leading the development that resulted in a successful project.
>
>
>> How the OSHW philosophy conciliates with the simple fact that the
>> "makers" need something to eat at the end of the day?
>>
>>
> Well, officially the open source hardware definition doesn't care. The
> whole point of the philosophy is that you aren't allowed to retain the
> legal rights that are normally so valuable. That's why most open source
> work seems to be a hobby; it's something people do when they're not paying
> the bills. Transitioning from a hobby to a small business is a challenge
> that is not unique to open source.
>
>
>> If we follow the market rules, then the people is going to start choosing
>> the lower cost alternatives (because the value of something is how much the
>> market is willing to pay for it and not their real manufacturing cost)
>> making more hard for this kind of companies survive in the long run unless
>> they start to manufacture their products overseas.
>>
>
> I don't see why manufacturing overseas would contradict the open source
> hardware definition, in letter or in spirit. There does seem to be a
> low-level, sporadic discussion about whether or not the manufacturing
> process should be part of what is considered "source."
>
>
>>
>> I know that this is not a problem with the OSHW philosophy but the
>> current "global economy" and "global markets". How is possible that
>> something that is manufactured at the other side of the globe has a lower
>> cost than something manufactured locally even if the latter doesn't provide
>> any value to the local comunity?
>>
>
> Because shipping is actually a pretty small cost, especially when things
> are in bulk. So it's cheaper to make something where the people work for
> less money.
>
> That's not even a "globalization" thing. A hundred years ago it was
> cheaper to mine ore in America, ship it to China where it was refined into
> steel, and then ship it back to America. People are expensive; sailing
> isn't.
>
>
>>
>> I would think that OSHW is not a manufacturing revolution, but more a way
>> to question ourselfs if the current models really benefit anyone except the
>> business. I would be willing to pay more for something if I know that it
>> gives any kind to benefit to the community and the "inventors", but sadly I
>> would think that is not the way of thinking of most of the world.
>>
>
> You're willing to pay a premium for business that is more ethical. That's
> not unique to open source. The open source philosophy is really only about
> development. Marketing, production, logistics, management, human resource,
> etc are all the same.
>
>
>>
>> Regards,
>> Mario.
>>
>
> That being said, here are some examples I turned up regarding how open
> source companies can be profitable.
>
> "*If your business needs mass adoption to succeed, then open source can
> be an effective way to get your product into more peoples’ hands. Just be
> sure you’ve got corresponding, valuable services or complementary products
> at the ready to monetize...Often companies will pair open source
> technologies with paid solutions. In Mobify’s case, we give away the tools
> and materials so users can build their own mobile websites, and we make
> money when they launch those websites on our platform*"
> http://blogs.hbr.org/2013/01/yes-you-can-make-money-with-op/
>
> "-* reduce marketing costs: Releasing all or part of the product as an
> open source package can attract users who will use the product and discover
> what it does. The product speaks for itself and brings in the users, then
> the sales force steps in when it's time to upsell...Sometimes the extra may
> be a feature that increases stability for enterprise clients that want
> their software to run smoothly 24/7. Others offer privacy and force users
> of the open source version to broadcast their work to the world*
> *- reduce support costs: Have a problem? Here's a stack of code. Figure it
> out for yourself*
> *- reduce development costs: Now imagine there's an open source version
> that does half of what you need already...In some situations, a group of
> companies can rally around an open source code base, with each contributing
> a fraction of the development costs*
> *- reduce compatibility costs:  If the library or tool is growing, the new
> features may not be compatible with the company's proprietary tools. But if
> the company writes a big chunk of the new features, they'll be able to
> ensure it fits their needs*"
> http://www.infoworld.com/print/228428
>
> "-* sell finished products based on open source work so that most
> customers don't have to understand them to use them*
> *- write books, articles or blogs sharing your expertise in the
> subject...or just consult*
> *- sell accessories that build off of the community, like t-shirts and
> coffee mugs*
> *- run a hackerspace*"
>
> http://opensource.about.com/od/Open-Source-Hardware/a/5-Ways-To-Make-Money-With-Open-Source-Hardware.htm
>
> It seems like a proven path to revenue is to develop an open source
> project to the point where it is a practical choice for existing companies
> to use in their for-profit work. Then, continue to nurture the open source
> work of the community, but charge for "non-hobby" features like increased
> security and/or reliability.
>
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>
>
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