Support Open–Source Business Models to Drive Innovation

Submission

The current rules and regulations for government sponsored R&D funding as well as government procurement are focused almost exclusively on developing and procuring proprietary technology. The outdated philosophy is that if we invest Canadian funds to develop new technology then it must be protected under patents and copyright for Canadians to benefit from the investment. While this is applicable to some sectors, such as university–based bio–sciences R&D, it certainly does not apply to all ICT sectors and definitely not to software information systems.

80% of all software revenue worldwide goes to just five companies. Last year Oracle (one of the big five) bought Sun the "world's biggest free and open source software company" for a whopping $6 billion. "Part of the reason is that open source is dominating the innovation pipeline," Mark Shuttleworth said. "It cements the idea that open source and free software is the big game. What [SAP, Microsoft and other large proprietary software companies] can't do is ignore it." — Shuttleworth: Oracle now largest open source player (ZDNet. April 20, 2009).

Canada will never produce a mega–software company to compete with the big five (anyone remember Corel?). The growth of the Canadian software sector will be driven by SMEs that are on the forefront of innovation which very often includes using, developing and implementing open–source software and associated business models.

Our company, Artefactual Systems, is an innovation leader in the international archival and digital preservation software system market (Artefactual Systems). We release all our software and documentation under free and open–source licenses. This reduces financial and technical barriers for the widespread adoption of our solutions and builds a market for our custom development, system integration, support, SAAS hosting and expert consulting services.

Yes, we are giving away intellectual property but we are confident that we can stay ahead of the innovation curve to provide better value–added services around our technology platforms than other service providers (that might support the same platform) or vendors of proprietary solutions that operate in the same market. Therefore, as an open–source SME, we must continually be innovating or we go out of business. We must innovate to ensure that our core technology platform is competitive against the proprietary options and we must be on the leading edge of R&D to ensure that we are recognized thought leaders in our field and always in consideration for expert consulting contracts.

Artefactual Systems has successfully implemented this open–source business model for the past three years with software development funding derived solely from our client contract revenue. The total cost of our open–source technology development is less than the revenue we can make on our associated services. In other words, we can make a profit using the open–source business model.

There are now significant opportunities to grow our services internationally and move Artefactual from a small, seven staff company to a medium sized venture if we can continue to compete on technology innovation. However, this requires some dedicated R&D and/or venture capital funding that is more stable than the ad–hoc revenue stream of client contracts. Our experience thus far with approaching the traditional government channels for such funding is that financing open–source technology is not worthwhile because the intellectual property that is produced is given away and therefore the competitive advantage is lost. This is simply an outdated and narrow–minded point of view.

The Government of Canada Digital Economy plan needs to recognize the important role that open–source SMEs like Artefactual Systems play in driving our international innovation advantage, all the while employing high–paid Canadian professionals. Artefactual Systems only represents one company in our own niche, long tail market of archival services. However, the future of Canadian digital economy innovation lies in supporting the hundreds of other open–source SMEs like ours, each in their own area of expertise. This will be just as important as supporting the more traditional proprietary R&D business model. Therefore, the Government of Canada's funding programs and agencies need to revise their policies and procedures to establish the criteria under which government funding can be made available to support firms that implement open–source business models.