A paper written by Haim Mendelson from Stanford Graduate School of Business and Deishin Lee from Harvard Business School guides students and businesses on how to fight open source business models and technology.

The two professors say being first to market, improving product features, and keeping the product closed are needed to combat the open source market - the way to make money against competitors who sell their products for free.  By keeping the product closed, open source networks can’t use the product to improve their own.

It’s sad to see such misguided lessons coming from two smart people and worse, teachers in a business school.  While it’s fine for commercial companies to compete with open source initiatives, Mendelson and Lee seem to recommend commercial as superior to open source even though several business models show free can be very profitable (e.g. Linux, Mozilla, MySQL, Wordpress).  Their example of a good commercial release, Microsoft Office, ignores how Office didn’t compete with open source upon release and further ignores how Microsoft is adapting to compete now with Open Office, Google Docs, and Zoho (all are free, only Open Office is fully open source).  Microsoft has released new specifications on its format types for anyone to include in software and is considering a subscription-based model for future releases.

Mendelson and Lee’s emphasis on being first to market is always good, no matter your business model, and improving product features is likewise necessity.  The problem commercial software has and will continue to have is open source, or at least open platforms, just offer more for less. Apple’s iPhone, another example of Mendelson and Lee’s, began by refusing developers any access to the system, telling them build for the web browser. A year later developers get to build applications with harsh restrictions, sometimes issued after applications are finished being built.  Google Android is coming out, fully open source and free for phone manufactures, has already attracted sour iPhone developers and has a huge software library waiting for its clientele - the first Android phone is still three weeks away from release.

Closed systems are a dying breed. It’s a slow death.  Trade secrets will always exist and there’s nothing wrong with that. What business students and professors should recognize is the landscape is evolving. Free and open aren’t bad words, but should be embraced by the next generation of business leaders.  Encouraging more of the same closed, walled garden thinking only slows innovation (see Microsoft) while free and open are winning the market and the profits (see Google).

The most talked about new web 2.0 sites, from Facebook to Twitter, are facing business model challenges. Scott Karp points out the challenge of print advertising online while Alexander van Elsas goes farther in his post “Advertisement holds web 2.0 in a death grip.”

Web 2.0 has focused on free services - free services that build virally fast and then, hopefully lead to a business model when the venture capitalists get impatient. But banner ads and tier subscriptions aren’t enough.

Advertising, as Karp and van Elsas point out, isn’t useful. Google pioneered ads that use your search terms so they are relevant and unobtrusive, whereas the only thing Facebook can sell me are gay dating sites (Google advertises better ones). The challenge isn’t simply advertising isn’t working, but that you can’t charge people for your services.

Most web services offer a paid option with valuable features. Remember the Milk charges $25 a year just to sync my tasks to my phone. Yahoo Mail wants another $20 to give my email portability. Each service doesn’t cost too much, but add them up, and suddenly the internet got expensive.

Bernard Lunn says social networking “is at a major fork in the road” (leading to web 3.0?) where they have to choose between walled gardened, open APIs, or mix. All the free on the web will need a business model, and every site from social to content providers will find charging customers harder and harder and advertising spread thinner and thinner.

Google’s strength came from reinventing advertising to its strength - search - creating a unique model that let companies and individuals advertise without upfront costs. Amazon and eBay have built retail businesses that couldn’t exist in brick and mortar stores. Most other sites have relied on 7-8 figure buyouts to make money.

Other websites will need to find new business models. Some ideas like market research and statistics, like I discussed for Facebook and other social networks, make excellent use of their large user bases, but will lead to a decrease in value when every social site starts offering this research. Further, with open source and APIs all the rage, regular pageviews will become less reliable as people use services how they want, not how the websites want them to. For example, advertising will work even less for content providers once RSS readers takeover the mainstream.

This is a lot of doomsaying without many solutions. I think sponsorships and product placement has potential, but again, it’s going to be impossible to control users. The best business models thus far have been enterprise level customer service, best seen in companies like Red Hat which provides customized Linux solutions and and MySQL’s Enterprise Unlimited. Companies will pay for customized services and research which individuals have no use for. Less than one percent of MySQL’s customers pay, but that was enough for Sun to pay $1 billion to buy the company.

The focus over the next few years needs to be on developing new and hopefully revolutionary business models that recognize the internet, software, and content want to be free (yes, even music and movies). The old business models required payment, but the future doesn’t have to be constrained by old-fashioned thinking. Think outside the tubes.

Forget about Republican versus Democrat, Pepsi versus Coke, and dogs versus cats. Geeks love our rivalries. We are ferociously loyal to one group over another and thing anyone who disagrees must be an idiot (which, in my opinion, they usually are). So here is, in my opinion, the best, geekiest, and most fun rivalries in all of geekdom. These rivalries must be going on currently (no Nintendo vs. Sega) and it must affect a significant group of geek, meaning Ewoks versus Care Bears will have to wait for another list.

7. Cheats vs. no cheats

Passwords. Hacks. Mods. Game genie. All tools of the trade for people who want to beat the game or just skip a really hard level. But is this ethical? Does reading a walkthrough count as cheating? Who are you cheating? Yourself or the game? Message boards across the internet when asked for passwords will sometimes have users who refuse to tell on the grounds that cheating in video games is wrong. It lessens the experience. Why waste your money on a game you aren’t going to play. Well, what should you do is (for the answer, please hold R while pressing UP DOWN RIGHT UP UP A B LEFT LEFT UP).

6. Piracy vs. no piracy

Yes, another ethical debate. For some, piracy is a way to sticking it to the Man, getting lots of stuff free and easy, or maybe just trying something out before spending the money. To others, it’s stealing, wrong, and immoral. If you want to watch a movie, listen to a song, or play a game, spend the money. It’s the only way to keep more of these movies, songs, and games coming. But neither answer is as simple as the downloading on IRC (it’s not simple, if you weren’t sure). And while lawyers try to figure out the legality of piracy and file-sharing, the practice still causes ire among geeks who are easy to ire.

5. Console vs. PC

In the on-going battle for the hearts of video gamers worldwide, the television and personal computer have been fighting the longest battle. Which works better: Controlling your character with a mouse and keyboard or a home console gamepad? Which has better graphics? Which is simply more fun? In truth, the answer to the first two questions is PC. The mouse and keyboard more often than not provide more precise and customizable control (though it’s far more complex to learn) and PC graphics will long out pace video game consoles. But consoles have many advantages from always knowing your game will play on your system (no processing power requirements), simplicity in set-up and often playability, and cost. And thus far, the market is choosing home consoles over PC by billions more dollars. 2006 showed gamers spent $6.5 billion on consoles and handhelds versus $970 million on PC games. But the battle is far from over, especially as more games are released on both consoles and PCs. Then we might see who really wins.

4. Open source vs. commercial

It’s the David and Goliath battle. Should I use Microsoft Word or Open Office…or maybe even Google Docs? What about hacking my iPhone to use user made software or should I wait for the official releases? And then there’s even those piracy questions, like should I use these open source Bittorrent programs or video game emulators or use iTunes and video game consoles. This all comes down to freedom of software choice. But don’t expect others to like it. It all seems innocent until you can’t share your files. That’s when bitterness becomes anger. Yeah, you know.

3. PC vs. Mac

Ah, this one separates the coders from the designers. Macs pride themselves on simplicity and a long understanding of being better with visual and video design software. PCs, while more complex (a lot more), offer more programs and a mountain of exclusive video games. Hardcore PC gamers will tell you there is no option other than a PC and they’re right. But Apple looks prettier. And does more faster. And you can escape from Microsoft’s Window’s loving clutches. Leaving you more time for Photoshopping. Doesn’t that make you feel better?

2. Nintendo vs. Sony vs. Microsoft

You know a geek fight’s big when it gets mainstream media attention. The video game console wars between the Nintendo Wii, Sony Playstation 3, and Microsoft Xbox 360 haven’t been this fierce since a little company called Atari ran the industry. And that might have not been this bad. The video game industry means a lot more to more people these days. The multibillion dollar industry can be quite the cash cow when mixing in game licensing fees, in-game advertising, and online downloads all of which didn’t exist in the 1980s. And that’s just what the companies fight over. The fans often barely have enough to buy one video game console. So when they buy that console, they want to validate that choice and will fight anyone who challenges them. Preferable in a battle of Street Fight II. That ends up on every system ever made, doesn’t it?

1. Marvel vs. DC

Yes, this little rival of comic book universes is one of the most rabid, cruel, and longest running rivalries in geek history. You either love Marvel or DC. You might like characters in each universe. A Marvel fan might even pick up a Superman comic on occasion. But each comic fan has his or her loyalties with only one. DC Comics is original universe…but Marvel perfected the comic universe. DC is too corporate…Marvel’s too corporate. Batman is the best character…Spider-Man is the best character. The back and forth is endless and likely will never end. The debates over the best comic book company and comic book universe only makes reading comics more fun.

Every Monday, I force my opinion on you, my fearless readers, ranking the seven of something geeky.