Are Co-ops the Ideal FOSS Business Structure?

Free and open source software is a community affair. One would think it might be a perfect fit for a cooperative type of business entity. Businesses surviving and growing in virtue of FOSS ecosystems develop some interesting business models–the support and services model for example (though becoming increasingly common) relies on the collaborative efforts of, sometimes huge, communities of people as a basis for its existance. Another model that I once thought was pretty innovative came from Transgaming Technologies, which had this idea of letting users pay for a subscription to (among other things) vote on the company’s product roadmap (this was a while ago, I don’t know if they still operate this way). But in spite of these group collaboration and voice-of-the-people aspects, most FOSS-related companies operate in a pretty regular corporate fashion. I may be ignorant of some company out there that is already doing this, but I cannot think of any FOSS-based companies that have organized themselves as cooperatives.

Sure, there may be many differences between the operation of FOSS-based companies and their proprietary counterparts. For example, Linux distributors have all kinds of organizations, processes, and ways to facilitate community participation, which they not only rely on for their well-being but also put great effort into nurturing. Doesn’t this go hand-in-hand with the idea behind a cooperative? I thought Strategy+Business Magazine’s recent article, A Cooperative Solution, was incredibly interesting and enlightening on just how successful co-ops can be (perhaps I’m naïve–the scale, power, and apparent efficiency that some have, hadn’t dawned on me before). Not only did it explain, in-depth, how massive organizations like the Dutch Rabobank or Italian retail COOP thrive (sometimes even moreso than their traditional counterparts), it also focused on how beneficial the co-op structure is to its communities of participants.

Here is a quote from the article concerning thousands of people involved with Rabobank. I’ll make two points about it.

“The members of the bank took part recently, for example, in voting on whether to merge some of its branches. That is the kind of crucial decision usually made by top management. But at Rabobank, it was the focus of long debate among all the members. It took Rabobank’s central organization nine months, many personal discussions, and two general assemblies to build consensus throughout its vast constituency on the consolidation issue.”

First, doesn’t that sound similar to how things often take place in Free and Open Source Software communities? Second, while it may sound like it took a long time, the article later details why some of these group decision making processes, while on the surface sound like they’re hugely inefficient or time-consuming, end up actually making the company, as whole, much more lean and responsive down the road. The Strategy+Business articles explores these co-op features:

• Consensual decision making
• Better communication
• Leadership development in the company and community
• Long-range planning and experimentation
• Opennes to learning best practices
• The social dimension

The processes they evolve to facilitate these areas and the effort they put into doing things “right” in the first place, tends to flatten out all kinds of problems that other non-cooperative organizations face.

Co-ops greatest strength are their constituents. The co-op is, by nature, for the interest of its members and the communities those members constitute. So while a public company might, for example, have to constantly be on guard to increase its earnings every quarter and thus satisfy share-holders (who are likely to have motives outside the scope of what is good for the employees/communities affected by the company), a co-op doesn’t face that problem. Even though (as is the case of the co-ops profiled in the Strategy+Business article) they may be very successful, co-op money flows to its communities, to its own success.

Lastly, in Tim O’Reilly’s recent blog post, Four Big Ideas About Open Source, his second point concerns the way open source companies have an ability to change the rules of the game. I suppose I argued for this advantage too when I wrote about what I thought a Linux distributor should do to in order to gain the typical mass customer mindset for choosing an OS (change the whole rules of the game). Mr. O’Reilly said

“One of the most powerful things about open source is its potential to reset the rules of the game, to compete in a way that undercuts all of the advantages of incumbent players. Yet what we see in open source is that the leading companies have in many ways abandoned this advantage, becoming increasingly like the companies with which they compete.”

And he concludes that these companies should be Web 2.0 companies. Ok, that might be the case, I haven’t formed any intelligent or unintelligent thoughts on that yet. However, I can’t help but think that maybe this is a chance for the dispersed, open, development model to wed its counterpart in business, the co-op. It would certainly be unlike the competitors. I have a smirk on my face just imagining the article fallout that would happen with all the proprietary vendors crying “see, we told you FOSS is communism!”