<div dir="ltr"><div><div><div>Matt,<br></div>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 :<br>> The fact that it always costs money to replicate/distribute/use<br>
> the physical object of an open source hardware project<br><br></div>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.<br>
</div><div><br></div><div>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.<br>
</div><div>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. <br>
<br></div><div>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.<br><br></div><div>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.<br>
<br></div><div>What do we all think about this theory ? Is it reliable ?<br></div><div><br>Antoine<br></div><div>Freely<br></div></div><div class="gmail_extra"><br><br><div class="gmail_quote">2013/11/26 Matt Maier <span dir="ltr"><<a href="mailto:blueback09@gmail.com" target="_blank">blueback09@gmail.com</a>></span><br>
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<div class="gmail_quote"><div class="im">On Mon, Nov 18, 2013 at 10:12 AM, Mario Gómez <span dir="ltr"><<a href="mailto:mxgxw.alpha@gmail.com" target="_blank">mxgxw.alpha@gmail.com</a>></span> wrote:<br>
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<div dir="ltr">OSHW & economics?<br><br>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).<div class="im">
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<br>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.<br>
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<div>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.</div>
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<div>"<em>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</em>." <a href="http://www.wired.com/techbiz/startups/magazine/16-11/ff_openmanufacturing?currentPage=all" target="_blank">http://www.wired.com/techbiz/startups/magazine/16-11/ff_openmanufacturing?currentPage=all</a></div>
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<div>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.</div>
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<div>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.</div>
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<div>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.</div>
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<div dir="ltr"><br>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.<br>
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</div><div>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. </div>
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<div>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.</div>
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<div>"<em>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 </em><a href="http://item.taobao.com/item.htm?id=20483403054" rel="nofollow" target="_blank"><em>Replicator II source</em></a><em> and they can get the </em><a href="http://item.taobao.com/item.htm?id=26018240438" rel="nofollow" target="_blank"><em>same custom parts from the same factory</em></a><em>. This is why printers like the Flashforge are basically indistinguishable from the Replicator II</em>"</div>
<div><a href="http://forums.reprap.org/read.php?1,271647" target="_blank">http://forums.reprap.org/read.php?1,271647</a></div>
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<div>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. </div>
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<div dir="ltr"><br><br>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?<br><br>
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</div><div>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. </div>
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<div dir="ltr">How the OSHW philosophy conciliates with the simple fact that the "makers" need something to eat at the end of the day?<br><br></div></blockquote>
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</div><div>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.</div>
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<div dir="ltr">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.<br>
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</div><div>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." </div>
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<div dir="ltr"><br>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?<br>
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</div><div>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.</div>
<div> </div>
<div>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.</div>
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<div dir="ltr"><br>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.<br>
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</div><div>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.</div>
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<div dir="ltr"><br>Regards,<br>Mario.</div></blockquote></div>
<div><br>That being said, here are some examples I turned up regarding how open source companies can be profitable.</div>
<div> </div>
<div>"<em>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</em>"</div>
<div><a href="http://blogs.hbr.org/2013/01/yes-you-can-make-money-with-op/" target="_blank">http://blogs.hbr.org/2013/01/yes-you-can-make-money-with-op/</a></div>
<div> </div>
<div>"-<em> 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</em></div>
<div><em>- reduce support costs: Have a problem? Here's a stack of code. Figure it out for yourself</em></div>
<div><em>- 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</em></div>
<div><em>- 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</em>"</div>
<div><a href="http://www.infoworld.com/print/228428" target="_blank">http://www.infoworld.com/print/228428</a></div>
<div> </div>
<div>"-<em> sell finished products based on open source work so that most customers don't have to understand them to use them</em></div>
<div><em>- write books, articles or blogs sharing your expertise in the subject...or just consult</em></div>
<div><em>- sell accessories that build off of the community, like t-shirts and coffee mugs</em></div>
<div><em>- run a hackerspace</em>"</div>
<div><a href="http://opensource.about.com/od/Open-Source-Hardware/a/5-Ways-To-Make-Money-With-Open-Source-Hardware.htm" target="_blank">http://opensource.about.com/od/Open-Source-Hardware/a/5-Ways-To-Make-Money-With-Open-Source-Hardware.htm</a></div>
<div> </div>
<div>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. </div>
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