Michael Grove is the CEO and Founder of Open IT Works, an early member of the Open Solutions Alliance (OSA). His industrial experience includes five successful start-ups, including 15 years as CEO. He has deep functional experience in sales, marketing, engineering, and program management in a broad range of businesses; including aerospace, renewable energy, M&A and turn-around consulting, semiconductor, systems management software, and non-profit activities. He has several patents to his credit and is the innovator behind the idea of Open IT—next generation Open Source. In his September 17, 2007 blog entry, he took issue with Bernard Golden's concept of a second chasm.

OSA Alert: You disagree with Bernard Golden about his “second chasm” idea. Why?

Michael Grove: I’ve spoken with Bernard and I think he respects my point of view. We’re talking about Geoffrey Moore’s theory about disruptive innovations and how you get interest in your new product to grow from early adopters who are willing to make an investment and get something imperfect to pragmatic customers who want something finished with solid support. There’s a lot of confusion [in the commercial open source domain] about who is the customer. Is it the developers in the community? Is it other developers? I love the analogy that Bernard quotes in his Open Source Commentary article from a study about bees, beekeepers and consumers. It’s brilliant. If you’re a commercial company leveraging open source, you are a beekeeper, and the developers are the bees. You are in business to serve customers with business models that are clear, familiar, and competitive with the customer alternatives. The buyer is the CIO and his reports. As a commercial company your leverage and hopefully unfair advantage is open source (the bees).  You have to convince CIOs that your (open source) product/service is better, and that bees as well as your way of doing business fit their normal legal and business processes.

The developers – that is, the bees -- are not your customers. They are your suppliers. Your incentive and value exchange is in the form of barter. In exchange for your “supplier” efforts, they get xyz.  Ideally you can nurture and expand the value produced by your “suppliers.” Some very successful commercial companies like MySQL, Funambol, Sugar CRM, and Openbravo understand the beekeeper model

Some business models try to sell from the developer up into upper management. They provide an open source product that’s free with a few small enhancements, and then try to upsell a professional version with a lot more value for a fee for the product and/or services. Developers contributing code can end up resentful of creating core value that a commercial company leverage for revenue while perceiving little contribution back to the community.  The developer/user community can also feel frustration as they took the time to understand and implement free software only to find that natural improvements are now only available for a fee.  Most of what CIOs deal with on a daily basis in traditional commercial processes. They don’t want to think or act in special ways because a product is open source. They measure open source products by the same set of rules they use with proprietary ones. They simply want to know what it does and why it is better – and they want to pay a reasonable price for it. Therefore, I say commercial companies leveraging open source should price to market (the buyers) and not according to the small percentage of upsales from free software.

There are two very different groups out there – real buyers who want a commercial contract, and developers who don’t want to be encumbered. You need to get developers excited so they’ll make the honey. Your customers are the CIOs, along with IT and engineering teams currently purchasing and using propriety products.

Are open source and your Open IT model part of a greater trend in business?

Yes, we are moving rapidly moving towards a more agile, open, cooperative world. This dynamic is pervasive and not limited to open source or Open IT. From Facebook to politics folks are using networks to communicate and get answers. Why? People are trying to get things done at the lowest cost with the least effort. It’s not new. Humans have been cooperating for eons. It is part of our mutual desire to survive and get more for less. Now we see knowledge doubling every 18 months and this huge momentum is driving us towards knowledge distribution – as represented by Google and many other forms. Ten years ago if you wanted to solve a difficult IT problem you had to check with people you knew inside your company or maybe a few colleagues. Now you can literally Google it and find all kinds of knowledge from patch upgrades to best practices. The world is changing dramatically.

I feel confident that collabsourcing^TM is a great idea at the right time. There is great pressure to provide more IT value for less, but you can’t standardize and differentiate at the time same time. Hence the rise of mass customization via collabsourcing.

What is collabsourcing?

Collabsourcing is the next generation of “sourcing” beyond outsourcing. I see it in the same light as the content Web (1.0) and the participative Web (2.0) – using interactivity to get costs down and aggregate demand. You see more and more companies bringing back what used to be outsourced contracts in house. Outsourcing has its limitations, and once you’re dependent on it you’ve got no strength in-house to follow differentiated strategies.

Collabsourcing brings different companies together to solve problems. For example, say four companies use SAP as their backend and want to create a great HR application. Well, a company on its own might spend a million dollars in non-recurring infrastructure costs, and then half a million over three years in maintaining and updating it. With four companies combining their requirements and resourcing, not only do you immediately cut the non-recurring infrastructure costs proportionally to the number of participants -- in this case three quarters -- each company gets the benefit of working from their respective strengths. Even with service and added overhead of coordinating four companies, the savings for each company is still 65 percent! That’s huge compared with the 15-20% you might save from outsourcing, and you still retain your strengths and your ability to optimize the value delivered to your company.

Vendors offering standard solutions from Microsoft to Salesforce.com claim huge saving -- but at what price in reality? For example, Salesforce.com is a one-size-fits-all product with features that 95 percent of specific users don’t need. Ditto for Microsoft Word. We see collabsourcing as the “participative web” generation of “sourcing” where costs drop dramatically while value does not. This will lead to a whole new wave of innovation as suppliers work closely with members of collabsource™ projects to solve problems at a lower risk to both the supplier and the end customer. In effect, collabsource project teams become the “inbound” marketing group for the supplier. The result: fewer processes and dramatically improved alignment of supplier-customer value chain.

How has it worked so far?

It’s going over quite well. There’s a lot of “talking” going on in all sorts of CIO venues about collaboration around best practices, etc. but it’s just that … talking. Collabsourcing is about the “walk”. Like open source, Open IT collaborative projects are about creating real project outcomes to solve specific problems.

How do you resolve intellectual property (IP) issues?

We have put together a legal infrastructure. Participants set rules on a project-by-project basis. They can grant IP or license IP to the project however they choose, except that we have already defined the legal language. They make choices within the standard legal framework so that all of the participants operate under a mutual understanding. Once the participants have defined a project and how they are going to deal with the results, each member knows the IP conditions they are being asked to agree with in order to join. Each member retains control over all of their IP decisions.

What about liability and disputes?

Anytime you have more than one party there’s a chance you’ll have a dispute. The motivation in this model is to cooperate because we are building a network of IT organizations whose goal is to find ways to build on the results of mutual project that over time create an accumulative value. If you don’t do what you say or if you’ve got a litigious mindset, that will affect your reputation in the group and fewer companies will want to partner with you. Look at open source. There are millions of lines of open source code out there, and just a handful of lawsuits – much less than in private industry!

Would your collabsourcing model naturally end up developing open source code?

Could some of that code be open source? Yes. If the project owners what to do that … in fact, it might even be a good thing in many cases. This could be another source for open source code. Projects might also choose to use open source code. As they satisfy the particular open source license by contributing back to the community, that too will help build the amount of usable open source code. It’s getting harder and harder to define “proprietary” anymore because very few software products are produced without at least some open source code. Look at Google. It is built on top of open source code, but it is definitely a propriety enterprise.

Is collabsourcing inspired by the success of the open source model?

We are riding on the shoulders of the success of open source. I fully acknowledge and support the founders of the open source movement and their mission. You can create some awesome results that way. I consider us a derivative of the open source movement. In a generic sense, a lot of the attributes of open source carry over to what we are doing – the ability to define requirements and get input from multiple sources about desired results, dividing up the work so that the players all work to their strengths, and so on – the big difference is that in our IT world, these guys expect deliverables completed to established requirements and on schedule.

Has membership in Open IT Works grown as you have expected?

Well, what I like to say is, “Life is not a straight line.” Nor is a company. We got off to quite a good start. That was great, but it made us think this was going to be easier than it has been. CIOs are very busy people, and also very pragmatic. Until we get past the early adopter phase, we have a lot to prove. The company is only about 10 months old and we’ve come a long way already. We have learned a lot from the nine members of our CIO community and have really honed and improved our value proposition.

Good ideas don’t succeed on their own. Some never get expressed. Some are tried in the wrong place or at the wrong time. Timing has a lot to do with it, and sustainability is often subject to both logic and random chance. The time has come for collabsourcing.