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This is a template for bachelor’s and master's theses as well as written assignments in TSE. A list of the styles contained in the template and a few instructions for their use are available in “Instructions for report 2003” file.
Timo Leino, Riitta Koskimies ja Eija Koskivaara, February 2008.





Exploring Network Effects with Open Source
The Nokia Maemo case

Master´s Thesis

in Management of Information Technology
Author (s):

Jose Teixeira


Supervisors:

Ph.D. Timo Leino

Ph.D. A.F. Rutkowski
1.6.2009

Turku
PREFACE

[Here I will highlight my strong computer science and open-source background and express the pleasure of writing a thesis in a extremely motivating topic. I will also mention many thanks and dedicate this thesis to my family.]

TABLE OF CONTENTS


1 Introduction 9

1.1 Research background 9

1.2 Research motivation 9

1.3 Research problem 9

1.4 Research boundaries 10

1.5 Definition of concepts and terminology 10

2 THE open-source Phenomenon 11

3 THE OPEN-INNOVATION PARADIGM 12

4 Competitive strategy and platforms wars 13

5 adoption OF TECHNOLOGY UNDER NETWORK EFFECTS 14

6 The NOKIA MAEMO Initiative : A revolutionary OPEN-SOURCE SOFTWARE PLATFORM 17

7 RESEARCH methodology 18

7.1 Selection of research method 18

7.2 Case selection 18

7.3 Evidence collection 18

7.4 Evidence analysis 18

7.5 Trustworthiness of the research 19

8 RESEARCH OUTCOME 20

9 Discussion and Conclusions 21

10 REFERENCES 22

11 APPENDICES 25


LIST OF FIGURES

Figure 1: Market share of mobile OS 2008 9


LIST OF TABLES

LIST OF ABREVIATIONS

1
Figure 1: Market share of mobile OS 2008
Introduction

1.1Research background


[Here I will talk about the growing open-source phenomenon, the emergence of a open-source software division at Nokia and highlight the high competitiveness in the mobile devices and mobile operation systems markets.]


1.2Research motivation


[Clear that this thesis is an IMMIT program mandatory assignment. Mention my experiences as open-source developer, open-source advocate and as project manager in Nokia Maemo software division.]

1.3Research problem


[Here I will quickly introduce the research problem, mentioning very clear the research question, and explain the research importance from the managerial and scholar point of views.]

[The reseach question is: How to explore network effects together with open-source comunities?]



1.4Research boundaries


[I will Highligh the ”desctritive case-study” innerent boundaries. Highlight that the Nokia Maemo open-source inniciative is singular. Point my focus on platform open-source projects.]

1.5Definition of concepts and terminology


[This is the right point to define, very clear what is ”open-source”, ”open-innovation”, ”network effects”, ”network externalities” and shortly introduce Nokia and Maemo software division and his connection with the previous concepts.]

2THE open-source Phenomenon


[The story of open-source (3 stages). Review of current literature (what research was done, what are the current research directions). Highlight the growing of open-source studies, development and usage in Finland. Analysis of open-source instances].

3THE OPEN-INNOVATION PARADIGM


[Mention the limitations of firm-internal innovation. Mention benefits of open-innovation. Review of current literature (what research was done, what are the current research directions). Analysis of open-innovation instances.].

4 Competitive strategy and platforms wars

5 adoption OF TECHNOLOGY UNDER NETWORK EFFECTS


[Literature review on Deishin Lee and Haim Mendelson (2007), The paper we studies how compatibility affects both the vendors and users of technologies that are characterized by network effects]
Platform wars are characterized by network effects, (citation is needed). Because applications are not portable from platform to platfom, users came with the applications.
Nokia maemo is subject to network effects. Nokia success it's not only on having the best protocol. But also on compatibility management at platform, software applications and internet services levels.
“Conceptually, technology benefits, which are independent of the number of other users, and network effects, which increase with the number of users of a compatible technology,Lee and Mendelson (2007).
“Although total network value is maximized when everyone operates in one compatible network” ,Lee and Mendelson (2007).
“we find that the technology benefits for the users depend on vendor incentives, which are driven by the existence of “de facto” or “de jure” standards

”, Lee and Mendelson (2007).


What are Nokia maemo iniciatives ? What are the nokia maemo standard iniciatives ?

This is related with the interdependence of user net benefits and vendor

strategies.

How to win a plarform open-source war ?


Business implications of a open-sorce software platform, under network effects?
Network effects as a barrirer to open-source (citation needed).
“Proprietary technology gives the vendor an advantage, enabling it to extract premium rents if it attracts a large user base, thereby making its product more valuable because of network effects” (Katz and Shapiro 1992, Gandal 1994).
How Nokia using open-standard manage to better control the network effects (explore positive feedback) ?

How Nokia can deploy a very fast user base ? Apple is already doing it, Google to, Microsoft to.



[Nokia should always create one-way migration mechanism to competitor platforms, as soon as possible]
[ How Nokia is offering complementary assets with open-source to win a standards war
Manage very carefull Maemo compatibility at platform, applications and services level.

?]
Managing a open-source platform compatibility in a platform under network effects?

Managing a software platform compatibility. Benefits inherent to open-source ? To better cope with network effects.

Why company better manage compatibility with open-source ? (second research question)

The competitive intensity can be taken to the extreme case where a vendor competes with a free open source product (Lee and Mendelson 2008).


“All else being equal, technology users prefer dif products to be compatible to leverage network effects” (Lee and Mendelson 2008).
Firms must compete head to head to win a platform war (citation is needed).

“Whereas conventional wisdom suggests that users would prefer compatible products, we find that when firms compete head to head, customers are better off when the firms’ products are incompatible” (Lee and Mendelson 2008).


Liebowitz and Margolis (1990, 1995) argue that market forces will always create opportunities for the

superior product to eventually dominate. We model

the notion of a “superior” product as determined by

consumer preferences.

”The demand for information technologies is often
characterized by network effects. Hand in hand with
network effects come the issues of compatibility. In
this paper, we studied different market structures in
which firms compete under de jure compatibility and
incompatibility, and also when there is a first mover.

” (Lee and Mendelson 2008).


“When network technologies compete head to head
with incompatible products, customers themselves
have some leverage, because part of the value of the
product comes from their adoption of the technol-
ogy. The competition for these value-added customers
exerts a downward pressure on prices, resulting in
lower profits for vendors and higher net benefits for
users.

” (Lee and Mendelson 2008).


“The competitive structure (de jure compatibility, incompatibility, first mover) determines the forces

that drive vendor strategies, which in turn affect customer net benefits. Only by looking at the entire system and taking into account the interdependencies can we determine what is optimal for technology users, vendors, and overall social welfare.” (Lee and Mendelson 2008).


TODO: Add a chapter in platform wars?
[Literature review on Deishin Lee and Haim Mendelson (2008)]

6The NOKIA MAEMO Initiative : A revolutionary OPEN-SOURCE SOFTWARE PLATFORM


[Introduce Nokia, Introduce Mobile Devices market, Introduce Mobile Device platforms market, Introduce Maemo software platform, introduce Maemo software division within NOKIA. Justify why Maemo is a instance of both open-source and open-innovation. Analysis of competiting platforms (depends in NOKIA internal data disclosure) Why Maemo is open-source? & Future directions of Maemo (dependent on research data collection)].

7 RESEARCH methodology

7.1Selection of research method


[Explain the research as a descriptive case study. Research based in both quantitative and qualitative evidences. Explain the case study methodology as in the research methods class].

7.2Case selection


[Why the Nokia Maemo case? Why not another open-source platform? Why a single case study?].

[The studied market: The mobile devices market and attached mobile device operation systems market]


7.3Evidence collection


[Highlight the exploratory nature of the research, Semi-scructured interviews with specialists who has deep

knowledge on the field.]

[Interviews ranged along themes. Questions pre-sent via email. ]

[Some public available company documentation were used.]


7.4Evidence analysis


[Explain how interviews were processed seeking general sence]

[Explain how company documentation were used]



7.5Trustworthiness of the research


[Mention the significance of the research and sufficiency of data collected. Mention the limited repeatability of the research]

8RESEARCH OUTCOME


Emperical findings and discussion

Relationships with open-source communities as a competitive advantage ?

[How data empirical analysis drove this outcome]
Usage of open-source assets as accelerators of positive network effects ?

[How data empirical analysis drove this outcome]

Collaboration with open-source communities as accelerators of positive network effects?

[How data empirical analysis drove this outcome]




9Discussion and Conclusions


[Nokia maemo as a wining move

Impacts for mobile device manafactures.

Impacts for comunities of open-source software developers.

Impacts for traditional software houses.

Impacts for mobile device final users.]

scholar implication



managerial implications

10REFERENCES


  1. Deishin Lee and Haim Mendelson, “Adoption of Information Technology Under Network Effects,” Information Systems Research 18, no. 4 (2007): 395.  

  2. P. G. Capek et al., “A history of IBM's open-source involvement and strategy,” IBM Systems Journal 44, no. 2 (2005): 249-257, https://www.research.ibm.com/journal/sj/442/capek.pdf.  

  3. M. Peltoniemi and E. Vuori, “Business Ecosystem as the New Approach to Complex Adaptive Business Environments,” in Proceedings of eBusiness Research Forum, Tampere, vol. 20, 2004, 2004, http://www.ebrc.fi/kuvat/267-281_04.pdf.

  4. C. Daffara, “Business models in FLOSS-based companies,” http://opensource.mit.edu/papers/OSSEMP07-daffara.pdf.  

  5. J. West and S. Gallagher, “Challenges of open innovation: the paradox of firm investment in open-source software,” R&D Management 36, no. 3 (2006): 319-331, http://www.cob.sjsu.edu/OpenSource/Research/WestGallagher2006.pdf.  

  6. Deishin Lee and Haim Mendelson, “Divide and Conquer: Competing with Free Technology Under Network Effects,” Production and Operations Management 17, no. 1 (January): 12.  

  7. Juho Lindman, “EFFECTS OF OPEN SOURCE SOFTWARE ON THE BUSINESS PATTERNS OF SOFTWARE INDUSTRY” (Master ́s Thesis
    in Information Systems Science, Helsinki School of Economics, 2004), http://pascal.case.unibz.it/retrieve/2316/lindman.pdf.  

  8. M. Antikainen, T. Aaltonen, and (eds), Essays on OSS practices and sustainability. , e-Business Research Center Research Reports (Tampere University of Technology and University of Tampere, 2006), http://www.ebrc.fi/kuvat/eBRC_rr36.pdf.

  9. Y. Lin, “Hybrid Innovation: How Does the Collaboration Between the FLOSS Community and Corporations Happen?,” Knowledge, Technology and Policy 18, no. 4 (2006): 86-100, http://freesoftware.mit.edu/papers/lin4_hybrid.pdf.  

  10. C. Shapiro and H. R. Varian, Information rules (Harvard Business School Press Boston, Mass, 1999).  

  11. J. Huurinainen et al., Motives, Circumstances and Driving Forces for Open Innovation: Using Open Source to run profitable business, Research Report (Lappeenranta University of Technology, Department of Industrial Engineering and Management, 2006), http://kouvola.lut.fi/!file/!id1271/files/attachment/ResearchReport_174-20071106.pdf.

  12. Nina Helander, Hanna Martin-Vahvanen , and (eds), MULTIDISCIPLINARY VIEWS TO OPEN SOURCE SOFTWARE BUSINESS, e-Business Research Center Research Reports (Tampere University of Technology and University of Tampere, 2006), http://www.ebrc.fi/kuvat/eBRC_rr33.pdf.

  13. B. Demil and X. Lecocq, “Neither Market nor Hierarchy nor Network: The Emergence of Bazaar Governance,” Organization Studies 27, no. 10 (2006): 1447, http://pascal.case.unibz.it/retrieve/2665/demillecocq.pdf.  

  14. C. Heide, Network Effects in Telecommunications: when Entrants are Welcome (Helsinki: Government Institute for Economic Research Finland - VATT, 2000), http://www.vatt.fi/file/vatt_publication_pdf/k241.pdf.  

  15. Erika Loimukallio, “OPEN INNOVATION, Open Source Software” (Bachelor ́s Thesis
    in International Business, Turku School of Economics, 2007).  

  16. J. P. Ulhøi, “Open source development: a hybrid in innovation and management theory,” Management Decision 42, no. 9 (2004): 1095-1114.  

  17. Arto Seppä, Open Source in Finnish Software Companies (The Research Institute of the Finnish Economy, January 2006), RePEc, http://ideas.repec.org/p/rif/dpaper/1002.html.

  18. E. von Hippel and G. von Krogh, “Open Source Software and the" Private-Collective" Innovation Model: Issues for Organization Science,” ORGANIZATION SCIENCE 14, no. 2 (2003): 208-223, http://opensource.mit.edu/papers/hippelkrogh.pdf.  

  19. Anna Paajanen, “OPEN SOURCE SOFTWARE LICENSE DECISION” (Master ́s Thesis
    in Information Systems Science, Helsinki School of Economics, 2007), http://www.itea-cosi.org/modules/docmanager/get_file.php?curent_file=10&curent_dir=2.  

  20. N. Helander et al., OPEN SOURCE SOFTWARE MANAGEMENT FRAMEWORK (Tampere University of Technology and University of Tampere, 2007), http://www.ebrc.fi/kuvat/eBRC_rr38.pdf.

  21. Juha-Pekka Juutilainen, “OSS BASED BUSINESS MODELS IN COMMERCIAL COMPANIES” (Master ́s Thesis in Information Systems Science, Helsinki School of Economics, 2007), http://www.itea-cosi.org/modules/docmanager/get_file.php?curent_file=12&curent_dir=2.  

  22. E. Raymond, “The Cathedral and the Bazaar,” Knowledge, Technology, and Policy 12, no. 3 (1999): 23-49.  

  23. E. S. Raymond, The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary (O'Reilly, 2001).  

  24. J. Lerner and J. Tirole, “The Economics of Technology Sharing: Open Source and Beyond,” Journal of Economic Perspectives 19, no. 2 (2005): 99-120, http://people.ischool.berkeley.edu/~hal/Courses/StratTech07/Lectures/Platforms/lerner-tirole05.pdf.  

  25. Mikko Välimäki, “The Rise of Open Source Licensing A Challenge to the Use of Intellectual Property in the Software Industry” (Dissertation for the degree of Doctor of Philosophy, Helsinki University of Technology Department of Computer Science and Engineering, 2005), http://pub.turre.com/openbook_valimaki.pdf .  

  26. J. Lerner and J. Tirole, “The Simple Economics of Open Source,” HBS Finance Working Paper No. 00-059. (October 2000), http://econ.tau.ac.il/papers/applied/Simple-Economics.pdf.  

  27. F. Nachira, Towards a Network Of Digital Business Ecosystems Fostering the Local Development, Discussion Paper (Bruxelles: European Commission DG INFSO, September 2002), http://pascal.case.unibz.it/retrieve/1477/modules.php.pdf.


11APPENDICES



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