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Why Open Source Businesses are not like Wal-Mart

Hopefully one or more open source businesses will be among the standout successes of early 21st century capitalism. However, it’s interesting to look back at one of the standout successes of late 20th century capitalism for an instructive example of one of the unusual challenges facing open source businesses.

Wal-Mart’s history is well known. The first Wal-Mart opened in Rogers, Arkansas in 1962. Five years later there were 24 stores across Arkansas. In 1968, Wal-Mart opened its first stores outside Arkansas, in Missouri and Oklahoma. Both those states, of course, neighbour Arkansas. Wal-Mart’s expansion thereafter continued to be in concentric circles around its home base, enabling logistical and cultural challenges to be overcome gradually and execution to continue to be highly efficient. Despite enormous success in Wal-Mart’s home market, wider geographical expansion has not always proven successful–as in Germany.

The open source business could not be more different. One of its key distinguishing factors is that it provides an extremely effective low cost means of distribution–which is not tied to geography. Open source projects are usually the result of a scattered development team, and it’s just as easy to attract users in London, New York, Sydney, Bangalore, Beijing or Tehran. (All cities that appear on access stats for the Spring Framework web sites.)

This is wonderful from the point of view of building a community. However, it’s a real business challenge. It means that very young businesses have employees or shareholders in different geographies from the outset, imposing a significant admin burden. Their first customers may be scattered across the globe, meaning legal issues in different jurisdictions. It’s important that those setting up businesses around open source projects understand these issues. But, on the positive side, I’m sure the open source business is much more exciting than mass-market retailing…

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