Is It Worth Sacrificing $300 Million to Go Open Source?

By making its Symbian OS smart phone software open-source, Symbian is essentially forgoing $300 million in annual revenue, but if it doesn't it could risk losing chunks of the smart phone pie it now dominates. What's a vendor to do?

LONDON-What does it take for an established "closed" vendor to shift midcourse and adopt an open-source model? Well in the case of Nokia and its pending acquisition of smart phone operating system maker Symbian, the cost may be $300 million a year.

That's how much Symbian earned in royalties last year from sales of its Symbian OS to handset manufacturers, said Nigel Clifford, CEO of Symbian, who spoke at the Symbian Smartphone Show here on Oct. 21.

Clifford said Symbian had been looking at ways to make the Symbian OS more attractive and decided to make it available for free. And $300 million may be conservative based on Clifford's estimates. He said in the spring, Symbian passed the 200 million mark for handsets sold using Symbian OS and by the end of the year there will be more than "one-quarter billion Symbian smart phones shipping."

However, "We're putting $300 million back into the ecosystem," Clifford said. "There are going to be many uses for the money. We're going to take more cost out of the development tasks."

Why do it, he asked. "Symbian loves a challenge," Clifford said. "We want to reduce time to innovation. We want developers, and we want developers from all computing and software domains to come and play."

There you have it. It's worth it to Nokia/Symbian to lure more developers to their ranks. "Developers, developers, developers," is what Symbian senior vice president of research, David Wood, said are the three most important words to the company.

David Rivas, vice president of technology management for S60 Software at Nokia, said the move "is really recognition of the fundamental change in the industry."

Patrik Olsson, vice president and head of software for Sony Ericsson, said despite the open-source move, "the business models will be there; the ability to sell software will still be there."

Rivas added that "the rules of the game have changed and there is an increasing number of companies selling something else."

He has that right. And Symbian, which has the market lead in smart phone share, better be looking over its shoulder at Google, and Apple and Microsoft with Windows Mobile.

Perhaps, Matti Vanska, vice president of mobile software sales and marketing at Nokia, said it best. Despite its genteel Finnish roots, "Nokia is an aggressive company," Vanska said. "It's a bold move," he said of open-sourcing the Symbian software.

But, the goal, Vanska said, is to make it available more broadly beyond the current fold of developers "to attract innovation."

Moreover, "It is a volume game, and we're ahead in terms of volume and we want to keep it that way. The monetization comes from devices."

That said, Vanska added that Nokia's foray into services is part of a similar strategy.

Kai Oistamo, executive vice president of devices at Nokia, said, "I believe that an open ecosystem always wins over an ecosystem run by a dictator."

Indeed, "Nokia welcomes all innovation and blocks no one," he said.

Mike Milinkovich, the executive director of the Eclipse Foundation, which oversees a massive open-source tools code base, spoke at the Symbian event and said of Symbian's open-source move that "one year out, there will still be a lot of confusion about how this is going to work because what Symbian's doing-with the size of the code base and the number of developers-it's not going to be perfect. But longer term I think this is the right choice because open source limits barriers to entry. That's extremely powerful. It inspires company collaboration."

I'm sure all that is true. And the rules of the game have changed. But $300 million is $300 million. What would you do?