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5/24/2005
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The True Value Of Intellectual Property

If GM can rip apart a Toyota engine, why shouldn't IBM take a look at the design of Windows?

There's an oddity about our industry that bothers me. It has to do with the seemingly ultra-valuable intellectual property of our vendors. Apparently, there's a tug-of-war going on between the desire to hold intellectual property close and the perceived goodness of standards in general and open source in particular.

The oddity here is that our industry is maturing, and as it does so, companies move their R&D efforts from capital "R" to capital "D." Once that happens, intellectual property's value rapidly decreases while the value of the vendor's ability to execute on a product strategy rapidly increases. The automotive industry serves as a reasonable example of one that's already gone down this path. Innovations in safety, fuel economy, and horsepower have all been paramount at one time or another, but the automakers couldn't hide their innovations behind a vale of secrecy--even hybrids are dissectible.

In our industry, source code to CPUs, ASICs, firmware, and software is a closely guarded secret. That would make perfect sense if these were the result of huge investments in research, as is the case in the pharmaceutical industry. But they aren't. These days, the greater trend in our industry is toward relatively minor research efforts, followed by immense development efforts. So what companies protect isn't really intellectual property in the sense of invention. Instead, they're protecting the execution of ideas that are already fairly widely understood.

It's said that insanity is the repetition of a behavior with the continued expectation of a different outcome. Given that, I submit that hoarding intellectual property such as source code with the expectation that it amounts to a business advantage is crazy. It's the ability to execute that constitutes an advantage. The evidence is there: Consider the strewn carcasses of the likes of Evans and Sutherland, or SCO. Consider the fate of Apple's proprietary Macintosh compared to IBM's open PC.

IBM is something of an enigma while providing a grand example in this regard. It has embraced Linux like no other systems vendor, yet continues with the development of AIX. It sells scads of Intel- and now AMD-based servers, yet continues to offer its own Power architecture. It also recently bought Gluecode while it continues to sell its proprietary WebSphere software. What IBM gets--and the rest of the industry at large doesn't--is that what matters is the ability to execute on a product's promise, not on the ability to stop everyone else from executing on their promise.

While IBM gets this, other giants of the industry don't. The recent theft of Cisco Systems' code is a good example. I wasn't so much bothered that ne'er-do-wells were examining Cisco's code as I was dismayed by Cisco's reaction. There was a reasonable rush to find the perps, then an awkward claim by Cisco that no security issues would result from the code theft. I should certainly hope not--if the security of a Cisco network depends on the secrecy of its code, then we're all using the wrong networking gear.

What Cisco, Microsoft, IBM, HP, and every other large vendor should do is put their source code out in the public domain, or at least offer an open-source version. If GM can rip apart a Toyota engine, why shouldn't IBM take a look at the design of Windows? Do you really think Toyota is worried that GM's act would mean the end of its success? If Juniper Networks saw all of Cisco's code, would any reasonable person imagine that Juniper would immediately come out with a better Cisco-compatible router? Even if it did, wouldn't that just spur Cisco to innovate even faster?

For the most part, intellectual property is immensely overvalued in our industry. It's a misguided concept that starts with venture capitalists and continues right through to you and me. So unless you're dealing with the smallest and most divergent of start-ups, forget about the intellectual property and worry about the ability of the company to execute on the vision it's selling you.

Editor-in-Chief Art Wittmann can be reached at awittmann@cmp.com.

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