Intellectual property in the era of open source

Ironically, these claims come from some of the most vocal detractors of the movement, as well as some of the leading proponents.

The detractor argument is that open source kills innovation; the proponents say open source is good because it promotes freedom, broader sharing of technology, and greater empowerment of users and customers. But is there really truth in the core premise--that the value and importance of intellectual property is dying as open source takes off?

My perspective is that intellectual property continues to be a critical driver of innovations and software businesses--and that open source is not fundamentally changing that. Yes, open source can mean that customers don't have to pay huge amounts of money for commodity software--that is, software that doesn't have highly differentiated intellectual property (IP). But there has been, and will always be, a huge market for innovations, and with or without open source, that IP will deliver superior value to customers as well as investors.

In fact, open source can lead inventors, engineers, architects and business strategists to focus on areas where software is not a commodity. This often means that open source optimizes the creation of IP to focus on the problems that pain customers the most--for instance, where customers are willing to spend the most money--rather than technology that fits a particular business plan or strategy.

It's as if open source applies evolutionary pressure to business plans, in the Darwinian sense. Because open source eliminates whole categories of obvious commodity software plays, we in the investment community see fewer "better mousetrap" propositions that retool commodity categories and more focused and innovative plans for unserved markets.

Let's take an example from an Ignition portfolio company in the business of making software work and fixing it when it breaks. The support and maintenance business in enterprise software is sized at tens of billions of dollars. Customer satisfaction is low, and has been for years. What's more, the lack of innovation in doing better (much less well) in this market is remarkable. In the enterprise software market, support experiences have not changed for years. Really the only "innovation" from the past decade that comes to mind is putting support information and issue trackers online, which has served to reduce vendor costs, not necessarily improve customer experiences.

Surely some great technology--yes, intellectual property, in fact--can help to "break open" this market, and dramatically improve both customer satisfaction, as well as business opportunities for providers of these services.

There is a real opportunity to create IP that brings a host of innovations to bear on solving the problem of keeping systems up and running and bringing them back up from failures as quickly as possible.

The solution is a continuous support system that constantly monitors customers' production systems and automatically matches any failures against a continuously updated database of failure signatures, much in the same way that security vendors guard against virus attacks, but applied to a broader problem space.

Another example of unique IP from an Ignition portfolio company comes from the systems management area. Not all companies are going to jump to open source overnight, and some smart innovations can help them contain administrative and infrastructure costs during the transition. The need is to manage Linux and Windows computing resources as a single contiguous network, leveraging network services across both environments. It's a hard problem to solve, and as far from commodity technology as you can get. But its success tracks with the increased adoption of commodity infrastructure.

Open source is forcing entrepreneurs and investors to think in new ways about a new set of problems. While it has taken away some of the low-hanging fruit, it's my belief that open source will help drive a focus on improved solutions for customers--particularly in underserved markets--and that unique intellectual property will play a critical role in fueling this new engine for innovation.