The art of leveraging: how powerful nonlinear feedback processes can restructure rapidly growing technology and knowledge industries

Abstract

We analyze the dynamics of the Open Source Software (OSS) movement and its impact on the proprietary software world, particularly its dominant player, Microsoft. We contend that OSS is here to stay, and that it has a capacity to outperform (at least in some markets) even the monopolistic market leader on the basis of superior and more numerous resources as well as more effective processes. Accelerated software development processes yield shortened time-to-market/time-to-user cycles. We use System Dynamics computer modeling for capturing feedback mechanisms and nonlinear dynamics inherent in this system of (market and other) forces. We conclude that Internet-based, large-scale intellectual collaborations lead over time to broader, deeper, and more rapidly attained results than closed, small-scale, and profit-oriented R&D undertakings in some areas of the software sector. We predict that the dominance of the market leader will erode in the not too distant future.