Explore Rice

7/15/2006 12:04:00 AM

Open-source projects have the potential to be the next Internet success story. Or they could turn out to be just a passing fad. The idea behind open source is simple, and to a degree, even noble. Users have free access to resources that they can read, use, redistribute, adapt and modify. But if users don’t have to pay, what makes open source economically sustainable? According to research by Paul Dholakia at Rice University, open source offers more revenue-generating opportunities than organizers can reasonably pursue.

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Over the past three years, the number of open-source projects has exploded, encompassing 75,000-plus software sites and hundreds of university offerings. Open source began with just a few software pioneers like Linux and Apache. “But now everyone is jumping on the open-source bandwagon, especially in the area of education,” according to Paul Dholakia, associate professor of management at Rice University’s Jesse H. Jones Graduate School of Management.

With new open-source projects launching daily, Dholakia views sustainability as the key to a project’s success. “Just like with the dot-com explosion, some of the projects will overlap and merge; others will be poorly managed and go bust,” he said.

From an idealistic standpoint, Dholakia believes open source has great potential and would like to see it established as a permanent resource that continues to grow. But realistically, he wonders how many open-source developers will properly apply the lessons of business to sustain their projects.

Dholakia pointed out one mistake that’s common with open source projects -- focusing on how to make money in the early stages. Too much attention is paid to the site’s features and technology, and not enough attention is paid to understanding the users and potential users, and what constitutes value to those people. If the initial focus is on revenue, Dholakia believes, you’re thinking about sustainability the wrong way.

“Unless the site is able to first gain and maintain a critical mass of active, engaged users and provide substantial and unique value to them in the start-up and growth phases,” he said, “it’s unlikely any revenue model will work in the long run.”

Using his experiences with Connexions (www.cnx.org), an open-source education project sponsored by Rice, Dholakia is discovering more answers to the sustainability question. In a sense, Connexions is an ongoing, large-scale experiment that will help demonstrate what is needed to effectively create and sustain the conditions for the use of educational and scholarly materials by educators and learners worldwide.

Connexions relies on a value-based segmentation model to help define some of its revenue-generating opportunities, a model that Dholakia said can be applied by other open-source projects. “While providing open access to all the educational content on-site to users, we can simultaneously provide value-added services to specific user segments and charge them for those services,” he said.

Segmentation naturally leads to revenue-producing opportunities such as training and user support for institutional users, housing and dissemination of copyrighted content within the same site on a subscription basis, ask-an-expert services and consulting services to provide custom education to corporate clients.

As one example, Connexions is working with several print-on-demand presses that deliver customized textbooks and printed versions of courses at dramatically lower costs. A new 300-page, hardbound engineering textbook ordered through Connexions sells for $15-$20, as opposed to $100-$150 from a traditional publisher.

“The $15-$20 price not only includes costs and profit for the on-demand press,” Dholakia said, “but also a small sustainability revenue stream that funds the Connexions project, as well as a revenue stream that will enable students in developing countries to get the print-on-demand version of the book for free.”

“Putting quality educational material in the hands of those who would otherwise be unable to afford it -- this is just one way open-source projects can do good in the world,” Dholakia said. “To sustain them, the focus belongs on making it work from a business perspective.”

Dholakia joined the Jones School at Rice in 2001. He is a member of the Connexions research team and recipient of several grants to study user communities and formulate a business model for Connexions. He holds a master’s degree in psychology and a Ph.D. in marketing from the University of Michigan, a master’s degree in operations research from Ohio State University and a bachelor’s degree in industrial engineering from the University of Bombay.

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For more information, contact Dholakia at dholakia@rice.edu or Laura Hubbard in the Jones School at lhubbard@rice.edu.