Open Source Networks

Open source software distribution has been revolutionary in the computing and mobile computing world. It allows the best possible product to reach the largest possible audience (like Mozilla Firefox). This causes across the board increases in productivity. Firms and individuals who produce open source software have incentives to do so for fame and future fortune. At the heart of free software distribution is the idea that a maximum distribution of the product is the optimum outcome for the distributor. This is not true of open source hardware. Whereas open source software destroys competition by eliminating the consumers incentive to pay for pricier alternatives, open source hardware fosters competition by revealing invaluable operations secrets, eliminating human capital advantages and by exacerbating research and development externalities.

Hardware configurations and supply chains are well guarded secrets in the tech world for good reason – they represent significant challenges to start-up firms. When Facebook made its plans open for use by competition, it reduced the amount of engineers Rackspace (a cloud service provider) needed. As a result, three engineers at Rackspace have been able to develop a comparable server layout and supply chain that took Facebook a team of 700 engineers to develop. Facebook engineers are responsible for a considerable amount of Rackspace’s accomplishment, yet aren’t going to see a dime for it. This will become unsustainable as Facebook continues to pay wages for more and more of the webs engineers, leading to eventual collapse.

Open source hardware also caused Facebook to waste a significant human capital advantage. Theoretically, competitive firms are insulated by their ability to buy the best talent, which allows them to innovate more and causes other companies – with less talented employees – to innovate less. Facebook is still buying the best talent, but it’s doling that insulation out with the righteousness of a public service. Furthermore, beneficiaries of Facebook’s err have the opportunity to secretly improve on the design. It will be extraordinarily difficult for Facebook to compete with a one-upping competitor in this type of game, as the players’ information is imperfect.

Open source hardware is an imitation of a successful use of massive networks, but falls short because Facebook is distributing the wrong information over the wrong network. Open source software initiates a cascade among a network of consumer, causing self-perpetuating market domination. Conversely, open source hardware initiates a cascade among a network of competitors, lending the enemy a helping hand.

Facebook also seems to be implying that this practice is for the collective good. Consider this statement made by V.P of Supply Chains at Rackspace: “Everybody used to have to do it by themselves… You had to come up with your own work — and that was a lot of effort. But if you’re working in a community effort, a lot of that stuff is shared.” While it may be true that communal efforts generate efficiency, their burden is never shared equally. The question for Facebook will be whether they can sustain theirs and everyone else’s industrial engineering. (1/27/13)



One thought on “Open Source Networks”

  1. I wonder if there are any stipulations in the Open Compute Project about the need to further contribute if you are taking designs or at the very least if there is some kind of restriction on profiting of of Project designs without reciprocating, though these may be hard to enforce. If so it may act as a deterrent to “cheating” behavior in the game theory sense. This kind of bonding would mean that Facebook wouldn’t have to shoulder the burden of other’s industrial engineering, they would instead be providing a core that other, more nuanced, firms could build upon and report the small and specific innovations a larger firm like Facebook may not have the resources to devote to investigation, but still stand to make gains. Imitators will always ride prior work, but if any innovations in the hardware sphere are still able to be drawn upon, than competition will remain about other aspects of the product.

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