Analyzing Open Source Business with Porter's Five Forces

—Today many IT companies (in both commercial and non-profit sectors) use Open Source as their main infrastructure, and as consequence they face to some social, cultural and financial aspects of OS. Now a day, the use of open source software in IT businesses, and in the IT market is going to become popular and accepted. In this paper we try to make a strategic analysis of OS business model by using the Porter's five forces framework. We study many case studies and previous researches for this analysis and recognize that the issue of license and revenue model has to be precisely considered while a firm adopts the open source strategy. Open Source (OS) software is defined by open source initiative as a class of software which allows the user to have access to the source code of the software, having the right and capability to use the software as they see suitable, modify the software in order to create derived works, and redistribute the derivative software free of charge, or at a charge. [1] In recent years, the Open Source Software (OSS) development has caused a rapid shift from a model which is driven purely by communities of developers and applications (supported mainly by the academic milieu), toward commercial environment. And as a result many software companies have adopted OSS-based business strategies. OSS has attracted new SMEs which provide products and services by using OS infrastructures. The more important point is that OSS has also reshaped and modified the business models and strategies of some international large firms. As an instance, the main industrial players like IBM, Oracle, Philips, Nokia, and SAP, which have chosen to integrate OSS applications into their R&D activities, core products, and services [2]. Emergence of open source software has also made a significant change in the IT literature, and especially after the success of many OS projects, a lot of attention has been paid to this subject in academic and professional reviews. By the Porter's definition of strategy: " a broad based formula for how business is going to compete, what its goals should be, and what policies will be needed to carry out those goals. The essence of formulating competitive strategy is relating a company to its environment. " [3], formulating the strategy is necessary for each business. And therefore study of strategy is essential for the three different categories of OS stake holders: …