“Business opportunities are there to be exploited if organizations opt for an effective business model. ... It is important to realize that there is not just one effective business model for the Internet era.”

Wendy Jansen, Wilchard Steenbakkers, and Hans Jagers (2007)

Abstract

In today’s challenging economy, startup companies are finding it more and more difficult to gain a foothold and traction in the market. Free/libre open source software (F/LOSS) allows a company to gain exposure to their products. However, few firms offer F/LOSS solutions alone. The vast majority combine proprietary and open source products while receiving revenues from both traditional license fees and open source offerings (Bonaccorsi and Giannangeli, 2006). This dual practice of offering F/LOSS as well as a commercial license is a hybrid business model.

In this article, we focus on the hybrid business model for Nokia’s Qt product: how it is implemented, why it was implemented, and the extent to which the model has been effective. The Qt story illustrates how F/LOSS business models were developed during a period when participants were just beginning to understand how to make money with open source.

An Introduction to Qt

Qt is a cross-platform application and graphical user interface (GUI) framework that enables web-enabled applications to be run on all of the major operating systems. The key benefit is that applications can be deployed across desktop, mobile, and embedded systems without requiring modifications to the source code to support each device or operating system. Qt was first developed in the mid-1990s by a company called Trolltech in Oslo, Norway. At that time, Java was in its infancy and its user interface capabilities lacked the performance offered by platform-specific toolkits such as MFC and XWindows. The Qt framework allowed an application to be developed only once and then easily recompiled for different environments. The application design remains the same regardless of whether the application runs on Windows, Macintosh, or UNIX. Also around that time, a new operating system called Linux began attracting serious attention from desktop and server communities alike. Linux provided a compelling desktop environment called KDE in which Qt was the underlying graphics engine. Qt provided software developers with a comprehensive library of classes ranging from GUI widgets, database access, and multithreading support (among others) that could be easily ported to all the major operating systems, thereby freeing development teams from maintaining a separate source code configuration management tree for each operating system. Over the years, the Qt framework has grown from a GUI toolkit to a fully featured application framework.

Qt and Trolltech were acquired by Nokia in 2008 and recently, the Qt framework has propagated into the world of embedded applications, specifically on Nokia’s Symbian as well as embedded Linux platforms. Before Nokia’s acquisition, Qt was offered under a hybrid business model. A stipulation to this offering was that open source users could only build Qt using open source compilers such as MinGW and GCC, whereas commercial users could build Qt against compilers offered by Windows. This stipulation was removed when Nokia acquired Trolltech, allowing open source developers to build Qt with compilers from Microsoft. This suggests that Trolltech's hybrid strategy fits with Nokia’s future plans for the Qt product.

Nokia’s Business Model Strategy for Qt

From the beginning, Qt was offered as a dual-licensed product. Users could access Qt and its source code free of charge and use it as they wish within the bounds of the General Public License (GPL). For users with needs beyond what is offered by the GPL, the option of purchasing a commercial license is available. This creates a competitive advantage for Qt over other products that provide only limited access via trial versions of their software. This dual licensing forms the basis of Qt’s hybrid business model. Watson and colleagues (2008) describe this as an example of second-generation open source (OSSg2), which is also known as professional open source. They describe OSSg2 firms as a hybrid between corporate distribution and sponsored F/LOSS. They identify the attractive feature of this business model: "customers may use a product without paying a license fee; however, if they augment the original source code and do not wish to release the modifications under an OSS license, they must buy a commercial license." This allows prospective customers ample time to use and experiment with the product before being required to purchase it, thereby increasing customer satisfaction. By offering Qt in a form that is superior to the limited trial offers (either through time or functionality) of products by proprietary vendors, Nokia has created a competitive advantage over its competitors and has delivered new value to its customers.

Nokia's dual-licensing strategy for Qt actually includes three distinct licensing options. The first option is commercial; the user pays a licensing fee and receives a high degree of freedom. The next two options align with the GNU Lesser General Public License version 2.1 (LGPL) and the GNU General Public License version 3.0 (GPLv3). Table 1 summarizes the implications of these three licensing options.

Table 1. Qt Licensing Options

Hybrid business models, such as Nokia’s business model for Qt, work on the concept of quid pro quo, which is Latin for "this for that." Commercial users pay for a license and, in exchange, can use the framework without the need to share their results. Users from the open source community benefit from the full functionality of the Qt framework and, in turn, they contribute back to the open source community. Nokia also benefits from this open source relationship in two ways. First, it can use the open source community to test and validate its products. Second, it can draw upon the open source community to fill its employment needs. Trolltech’s CEO once remarked in 2008 that its approximately 230 employees were recruited almost exclusively from the open source community (Watson et al., 2008). One could argue that these benefits do not make up for the risks involved with making a company’s source code open for competitors and possible plagiarists to see and use. However, the risks of patent infringements and copyright problems are lower for an OSS company using hybrid business model, in part because of the visibility of the code (Watson et al., 2008).

The risks of intellectual property theft are shadowed by the benefits, especially in light of recent emerging relationships from ecosystems within the open source community. Dynamic open source groups such as the ZEA Group operate towards the following goal: “we are going to group together all the people who need a whole product made but can’t invest the resources to do it, and then take that whole product and make it offerable by anyone in the network. It has so many benefits on profitability” (as quoted in Feller et al., 2006). A for-profit-company like Nokia benefits from the synergy open source generates, specifically in projects like KDE. KDE is a popular desktop environment for the Linux platform and it uses Qt as its underlying graphics library. By participating in successful open source projects like KDE, interest and confidence in Qt grow. This contributes to its adoption in other high-profile applications, such as Google Earth which, like KDE, uses Qt as its underlying graphics library.

A commitment to an open source community allows organizations to align their objectives with the needs of the customer. By providing a commercial licensing scheme on top of the open source solution, Nokia has provided a solution to “the strategic problem of a firm whose customer platform and product portfolio is based on proprietary software” (Bonaccorsi, Giannangeli, and Rossi, 2006). On one hand, by offering the product under a dual-licensing scheme, a company receives the benefits of open source software, including its track record of reliability and security, and the support of a distributed network of developers who contribute to it. On the other hand, licensed software has gained an expectation for a certain standard of documentation, maintenance, product updating, and bug fixing, as well legally binding requirement expectations (Bonaccorsi, Giannangeli, and Rossi, 2006). By offering the quality expected in proprietary software in an open source product, a company not only encourages a loyal following of developers willing to help test and improve it, but it also inspires confidence from commercial customers eager to take advantage of the high quality it offers.

The Impact of Nokia's Acquisition of Trolltech

After acquiring Qt, Nokia took steps to make the product more open. Nokia now allows open source users to build Qt applications using Microsoft’s build tools, which previously required a commercial license. By removing restrictions on using Qt within the open source community, Nokia has gained more support and traction with its customers and the community as a whole. Nokia further consolidated this support and traction to promote its own open source F/LOSS platform, Symbian.

An operating system is nothing without the key applications that compel the market to use it. In order to create these applications, developers must have the development tools necessary to design, build, and test them. Other embedded operating systems competing with Qt all offer freely available tools to the developer; in Apple’s case, the development tools are freely available after the purchase of a Mac OS X computer. Prior to acquiring Trolltech, Nokia realized it needed to follow suit in order to compete effectively.

Trolltech not only provided the Qt library, but a number of tools that allow features to be integrated into integrated development environments, such as Eclipse, Visual Studio, or Trolltech’s own Qt Creator application. Therefore, the purchase of Trolltech provided Nokia with the instant toolset it needed to make application development on the Symbian platform attractive to developers. What also made Trolltech attractive to Nokia was the fact that the Qt platform had undergone years of testing and refinement in the open source community on most platforms. By acquiring Qt, Nokia made a strategic step towards fending off the threat of Apple and Google with their own user experience solutions. Further, Nokia acquired a user interface technology on par with or exceeding the technologies offered by competitors.

Another compelling reason for Nokia’s purchase of Trolltech was the opportunity to undermine the position of an old competitor. For years, Nokia’s primary competitor was Motorola and both strove to get the upper hand on the other in the burgeoning mobile phone market. In order to drive their newest smartphone offerings, Motorola began using Qtopia, a product from Trolltech, to implement their user interface designs. By acquiring Trolltech, Nokia made Motorola dependent on them for their toolsets. This placed a lot of pressure on Motorola, especially after the Qtopia product line was discontinued in favour of their Nokia Qt SDK in 2009. Without a solid toolset to rely on, Motorola was hard pressed to develop products that could compete in the ever more hostile smart phone market. This ultimately led to Nokia’s decision to purchase Motorola in July of 2010.

The Impact of Changes to the Open Source Community

The emergence of free/libre open source operating systems into the cellphone market changed the landscape for Qt. The Symbian operating system was originally a hidden platform within Nokia and its partner companies, including Texas Instruments. However, Nokia made the decision in 2009 to make the Symbian operating system open source and controlled by a non-profit organization, the Symbian Foundation. This move was undoubtedly in response to Google’s introduction of the Android open source operating system. Qt is widely considered one the best open source GUI toolkits on the market and has “cut its teeth” by serving as the backbone for KDE, the Linux-based desktop environment.

As open source projects move further into the embedded arena, Qt serves as the open source solution for realizing the front-end layers for these new projects. Nokia has caught on to this trend; effort has been made to decrease the memory footprint of Qt or maintain its performance on embedded systems. As more developers begin building new applications for these open source platforms, using a quality tool such as Qt provides Nokia with brand exposure, while increasing the breadth of applications offered on the Symbian platform. Another interesting development in the open source community is the decision by Microsoft to offer a free IDE for building Windows applications. With an IDE being freely available, this opens the door for Qt to integrate with these free tools. It will be very interesting to see what new directions the Qt product will take as the result of the recent news that the Symbian Foundation will be closing.

The Impact of Market Changes

Many changes have occurred in the computing market leading up to Nokia purchasing Trolltech in 2008. To begin with, by 2008 manufacturers had perfected the mass production of sub-50nm devices. This resulted in much smaller, more energy-efficient devices that included large amounts of static onboard memory. As devices became smaller, more powerful, and more energy efficient, smartphones became more accessible. Also, a stable, flexible operating system with a viable suite of applications was needed to draw consumers to the smartphone market. At this time, three major competitors existed: Nokia’s Symbian platform, Google’s new Android operating system, and Apple’s iOS for the popular iPhone platform. Google offered both the Android operating system and associated tools for free while Apple also provided iPhone development tools for free; Nokia needed to provide a comparable development environment. As a result, Symbian decided to provide its Symbian operating system as open source along with a number of applications, including a mobile web server, a SIP application stack, and an S60 DSS browser.

The missing link in Nokia’s solution however was a set of development tools for building applications. This market push for development tools provided strong motivation for Nokia to acquire an open source user interface design toolkit like Qt.

Conclusion

Nokia’s actions have proven that the hybrid business model is “a very promising business model that could emerge as a dominant model for OSS development in the coming years.” (Watson et al., 2008). The hybrid business model that Nokia has adopted for its Qt product has been very successful for the firm as well as the open source community as a whole. Nokia can be commended for not only keeping its hybrid model but adding features and opening it up even more to the open source community. This lends credence to the hypothesis that “hybrid business models are not a transient stage but rather a permanent feature of the new industry” (Bonaccorsi and Giannangeli, 2006).

By acquiring Qt from Trolltech, not only did a major corporation build goodwill with community members, it also placed significant pressure on its competitor Motorola, who also recognized the value of Qt and made it a cornerstone in its smartphone solution. Once Qt was in its control, Nokia allowed it to be more integrated with other proprietary applications like Visual Studio and thereby making the framework more attractive to developers. At the same time, Nokia removed support for its Qtopia product line, sending Motorola’s development cycle into a tailspin. Nokia has proven that the hybrid business model and open source in general can be used as both a sword and a shield in an ever-changing marketplace.