A Dynamic Model of Adoption and Improvement for Open Source Business Applications

Abstract

This chapter develops a model of open source disruption in enterprise software markets. It addresses the question: Is free and open source software (FOSS) likely to disrupt markets for enterprise business applications? The conventional wisdom is that open source provision works best for low-level systemoriented technologies while large, complex enterprise business applications are best provided by commercial software vendors. The authors challenge the conventional wisdom by developing a two-stage model of open source disruption in business application markets that emphasizes a virtuous cycle of adoption and lead-user improvement of the software. The two stages are an initial incubation stage (the I-Stage) and a subsequent snowball stage (the S-Stage). Case studies of several FOSS projects demonstrate the model’s ex post predictive value. The authors then apply the model to SugarCRM, an emerging open source CRM application, to make ex ante predictions regarding its potential to disrupt commercial CRM incumbents.