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FOSS: Deriving Value From its Values
Sunday, August 14 2005 @ 12:32 AM EDT

It probably won't surprise you to learn that a May 2003 study by Daniel Yankelovich, “Making Trust a Competitive Asset: Breaking Out of Narrow Frameworks”, found that the public was in the midst of a wave of mistrust about corporations, a wave of disapproval that began in 2001 thanks to Enron and the gang, or that the study found that companies studied ignored criticism, blaming troubles on a few bad apples, and tended to dismiss values as “not central to what we do,” or ignored opportunities to improve because “we don’t have to make major changes.”

Two years and some jail time for a few stunned executives later, reports on a new corporate emphasis on ethical values, honesty and integrity, and tells us the results of a Booz Allen Hamilton/Aspen Institute survey [PDF] undertaken to find out how seriously companies around the world take corporate values and the relationship of values to business performance. They conclude that companies that take values seriously have a competitive advantage.

It's in an article, "The Value of Corporate Values." The survey included participants from 30 countries. Senior executives from 365 companies were polled, almost one third of them CEOs, and what they said indicates that things have changed, with more companies listening to their critics, accepting the need for values as a defensive, protective factor, and some taking action to turn their corporation's values into a competitive asset. Here's a snip:

We asked executives to specify the factors that are important to their business strategy, and also to pinpoint which of those factors can be affected positively by the active management of values. Their responses show clearly that values are deemed most critical in two strategic areas: reputation and relationships. . .

As for factors that inhibit the alignment of values and management decisions, one stands out. Among financial leaders, fewer than one-third say short-term economic costs hinder alignment with values; among other public companies, however, more than half are deterred by the short-term costs. . . .

The study does show that companies that can be called financial leaders have come further in understanding the relationships between values and performance, that they are doing a better job of exploiting them, and that their more comprehensive approach to values is associated with superior financial performance. This suggests that, although all companies may be convinced that values are important for avoiding risks, many have yet to discover how to use them to grasp opportunities. It also suggests that there is substantial scope for identifying a set of best practices that may some day enable all companies to better measure and align their values with their strategies.

So the next set of imperatives is for business leaders to move from talking about values and viewing them defensively to embracing them in order to drive corporate performance and change . . .

So, where does FOSS fit into this picture? Free and Open Source software competes with closed source on the basis of its values, not just on ROI. How so?

Let me give you an example. Copyright law reserves four rights to copyright holders that are relevant to software: the right to copy, the right to modify, the right to make derivative works, and the right to distribute the software and derivative works. There are more rights, but they are not relevant to software.

Closed source companies think these are not sufficient rights. They want more. Closed source vendors typically make their customers sign a licensing agreement, or accept a EULA, whereby the customer agrees to give up rights that copyright law would otherwise grant them. They may wish to control, for example, the customer's personal use of the software by restricting them to terms specifying how many computers they may install the software on, how long they have to use the software, under what circumstances the owner may terminate the agreement, whether customers can sell the software to a third party if they decide they don't want it any more, if they are required to maintain confidentiality regarding code and methods and concepts, whether contractors may have access to the software and if so, under what restrictions and conditions, or even whether customers are allowed to write about the software or reverse engineer it. The agreement may also mandate certain audit responsibilities to ensure customers are sticking to the terms, with customers required to furnish annually or upon notice certification that the software is not being used on more than the number of computers designated in the contract and that the customers are in all other respects acting in harmony with the terms. The BSA may storm onto the premises in a surprise visit and demand to see all licenses the customers is supposed to maintain to prove that no "pirated" copies of software are in use, with steep penalties. The customer can be required to pay again for the same software they already paid to use, if they can't find the paper documentation. Because of these contract terms, vendors may go to court and invoke contract law to enforce the restrictions on those rights the customer has agreed to give up. There is an ongoing monitoring of the customer's behavior, in other words.

In contrast FOSS developers do none of these things. The software is yours to use in your business as you please. There is no BSA storming into your office. If you are using the software in your own business, for in-house use, you can do whatever you like with it, with no one watching what you do and no Mother-May-I or auditing at all. If you choose to obtain a service/support contract, there will probably be per-seat restrictions, naturally, but otherwise, you can install the software from one CD on all the computers you own in the office, at home, and then set up your mom and your best friends, too. Wallpaper the conference room with the code, if you feel like it. Customize it to your own personal business needs and keep it your little secret forever. No one cares and no one needs or wants to know. If you decide to modify, create derivative works, and then sell or distribute the result, you will need to abide by the license terms, but for in-house or personal use, you can do as you wish. The benefits to any business are obvious, but why would any developer have such a free-wheeling attitude toward their code? It's a question of values.

FOSS developers believe copyright law grants them more rights than are necessary, and they'd like to loosen the chains a little. Their end users can therefore do things that copyright law would forbid, without end users having to contact the developer or vendor to gain permission to do things the developer is glad to provide blanket permission in advance for anyone to do.

Free Software developers in particular believe there are a number of fundamental human rights associated with software that are on a par with free speech, freedom of association and the like. In other words, FOSS developers use their software licenses, particularly the GPL, for a purpose opposite to closed source vendors: they grant back to the user the rights they believe they should have had in the first place. Therefore their licenses are not contracts. They are permissions. The licenses are public declarations stored in text files distributed with the software that grant the user his expanded rights, provided some conditions are met.

The conditions are usually very mild and reasonable, like an obligation to preserve the copyright notices or the obligation to use the same licensing conditions when redistributing the software and any derivative works that are dependent on the software to run. Because they are not contracts, FOSS licenses cannot be enforced in a contractual sense. A different mechanism is used. Exercizing reserved rights without a valid license is copyright infringement. Therefore the enforcement of the GPL is done by means of copyright law, not contract law.

So that is the choice facing businesses today. And all other things being equal, given the choice, which do you prefer, closed source or open source?

The Free Software movement started when the FSF was founded in 1983. Thus, FOSS developers have spent over twenty years developing their software and business models, and now their efforts are paying off and they are reaching mainstream status. Where do you think FOSS will be twenty years from now? How can a closed source company react to FOSS, compete with it? How can they match it? The obvious answer is that the values differentiation is here to stay, unless closed source companies transform themselves to become Open Source.

So, Linux differentiates itself by means of values. Speaking of values, or a lack thereof, there's an article in CIO Insight that mentions SCO. The article is actually about Rent-a-Center, which, it turns out, runs in part on SCO's software. SCO isn't the focus of the article, but the journalist thought to ask a spokesman for Rent-a-Center what they'll do if SCO goes out of business. That tells you what folks have on their minds in the real world. Here's their answer:

The stores are running SCO Group Inc.'s Unix with POS units from High Touch. Fuller expressed some concerns about the long-term viability of SCO, but said he wasn't worried. First, the units require so little support from SCO that he expects to have several months to make a seamless transition, he said.

Secondly, his primary POS vendor—High Touch—has already ported its software to Linux, which would make a transition to Linux an easy move were SCO to go away.

So, end-game strategies are being discussed. Ah, yes. Differenting by means of values. It cuts both ways.

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