Amit Mehra is Assistant Professor, Information Systems, at the ISB. He sums his research interest as “analysing the economic strategy of firms in response to emerging technologies.” Among his areas of study are Open Source Software (OSS) and Electronic Commerce. An M Tech from IIT, Delhi and a recent PhD in Management from the University of Rochester, Mehra has been an invitee at the prestigious ICIS Doctoral Consortium, 2005. He has a number of published works and working papers to his credit, mainly in areas of Search Advertising, Open Source and Product Planning.

Here, Mehra shares with ISB Insight, the various facets of OSS and Search Advertising. He charts the OSS journey as “an initial scepticism, then a grudging acceptance, and finally an active search for ways to integrate in business models.”

OSS - An incubator for innovative business models
In a recent report, IDC predicts that in the next two to three years, OSS will become business as usual and that new services revenue models will emerge. Essentially, we are poised at the commercial takeoff point for OS. Firms like Red Hat Inc. have built their business around providing support services for Linux, an established OS software product. More ‘active’ business models are emerging. Firms employ programmers to create and contribute to new OS platforms. Then they push to standardize these platforms across the industry to sell commercial tools based on the OS platform. The Eclipse Development Platform, pioneered by IBM is such an example. The beauty of such a model is that the firm can actually pre-empt competition, while saving on salary budgets. When programmers are allowed greater flexibility in their work by letting them work in both open and commercial projects, they get more ‘indirect value’ which can be traded off against high salaries.

Internet Search Advertising
Internet Search Advertising has attracted plenty of media attention in recent times, primarily because of the huge revenue streams generated by Google and Yahoo. Web retailers often justify the use of search advertising because of its targeting efficiency that helps them reach their market at reduced advertising budgets. According to me, if the efficiency/cost ratio of search advertising is high enough, it makes sense to increase rather than decrease advertising expenses. Reports in the business press suggest that this trend is increasingly being observed. Another interesting implication of search advertising is that its efficiency makes competitors come together. Amazon, for example, lists its competitors on its web site and charges them for sales generated. The additional revenue stream from commissions compensates for more than the loss incurred due to heightened competition. Amazon’s competitors use less of the search advertising services because of the exposure available from Amazon’s site. Thus increasing efficiencies of search advertising may have its own perils for the search engines.

The Road Ahead for me
I continue to explore new business models that are made possible by the OS phenomenon. Programmer retention is a serious problem that software companies

are struggling with. Some companies have begun to include training as part of the compensation package in order to retain programmers. Encouraging programmers to work in OS projects also helps build skills and is a costless alternative to training. In an ongoing work, I am looking at the efficacy of OS work as a training tool for designing new type of employment contracts. Last, being in India, the outsourcing phenomenon is of great importance and plans to study design and execution of outsourcing contracts are on the agenda.