The Register had an article about how Microsoft is trying to hold back the open source tide by levying royalty payments on Acer and Asustek for their use of Android.
The article also talks about how Microsoft is failing to come out with a business model to compete against open source projects/products like Android.
I think though, that the question is not really one of open source versus proprietary or closed source.
The real Microsoft vs Android question is what is today’s new business model?
Is it one whether the software product itself is the end to itself? Or whether it is a means to an end? Whether or not the product uses open source is irrelevant.
For traditional Microsoft products (Windows, Office etc), the software is the end. Microsoft gets its revenue at the point of purchase of the software.
For Android, the software is the means to the end. Google does not get meaningful revenue when you buy an Android device. Rather, Google gets its cut when you use the device.
This difference reflects the economics of the new millenium: the product itself is no longer the major part of the business model. It is only a means to executing on the business model.
With the old approach, the consumer lifetime value is limited. Once the product is sold, there is no additional revenue. That is why companies like Microsoft come up with frequent and sometimes useless version upgrades: to get additional revenue from existing users. A subscription model is a variation of this.
With the new approach, the consumer lifetime value is practically limitless. As long as the consumer is using the product, she is generating revenue for the company. Since the product is basically “free”, there is almost no barrier to user upgrades and continued usage.
As a product manager, this new approach presents its challenges. You can no longer just focus on the product itself. The latter is now part of a larger ecosystem: the business/revenue model. This will mean integration with other services and products.
On one hand, you have to make sure that your product is usable, that consumers want to use it. On the other hand, you also have to make sure that the product is sufficiently well integrated with your company’s monetization products and that the users will use your product in such a way that they will generate meaningful revenue.
The upside is that the revenue potential is enormous. Just look at Google.










