Hardware is now open (sourced) for business
Few hardware companies would dream of giving up their design secrets, but for a growing niche of entrepreneurs, doing just that is a pillar of their business.
The open-source hardware movement is migrating from the garage to the marketplace. Companies that follow an open-source philosophy make their physical designs and software code available to the public. By doing so, these companies engage a wave of makers, hobbyists and designers who don't just want to buy products, but have a hand in developing them.
"Patents still work as an incentive for some people, but for a growing number of companies, sharing is more lucrative and fulfilling," said Alicia Gibb, executive director of the Open Source Hardware Association.
Though there are only a few dozen companies selling open-source products, the movement is growing quickly. In a survey by the association, about 90 percent of developers said they started working on open-source hardware within the past 10 years. Already, 38 percent said they use open-source hardware to build professional and work projects.
The rise of open-source hardware companies is due to a number of cultural and technological trends, according to Catarina Mota, research chair at the Open Source Hardware Association. Hardware makers have built on the open-source software movement that gained steam in the '90s, and the ubiquity of the Internet allows hobbyists to collaborate on physical products. The barriers to making hardware have also fallen thanks to cheaper prototyping tools, such as 3-D printers.
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That rapid growth of the movement is reflected in the success of marketplaces for DIY developers and open-source enthusiasts like New York-based Adafruit Industries.
Adafruit's revenue has tripled year over year, and the company projects full-year revenue for 2013 will reach $20 million. Customers are not just limited to hobbyists and isolated makers, said Limor Fried, founder of Adafruit.
"Our customers are moving more and more towards commercial endeavors and a very large portion of our orders are from professionals at very large companies," said Fried.
The movement is also gaining steam at maker spaces, public workshops that offer access to production tools and the training to use them.
Mark Hatch, CEO of TechShop, says he sees an uptick in the number of people interested in open-source ventures. He credits the advent in recent years of low-cost computer boards like Arduino, BeagleBone and Raspberry Pi, all of which are open-source themselves. With little programming experience, entrepreneurs can use these microcontrollers and microprocessors to power any number of electronics, from video game pads to unmanned aerial vehicles.
One of the companies Hatch is excited about is OpenROV, a small-batch manufacturer of underwater robots developed at TechShop's San Francisco space. The start-up's submersibles are capable of diving 100 meters to do serious scientific research but cost less than $1,000.
The company's success is due in part to the fact that founders Eric Stackpole and David Lang saw a niche that had not been met. At $850, an OpenROV kit costs a fraction of existing robotic submarines on the market. The team set a goal of $20,000 on crowdfunding website Kickstarter to get the business off the ground. Instead, they drummed up more than $111,000 in just 32 days.
"The consumer ultimately doesn't care if something is patented or not. What they care about is what it does, if they can get it, if they can afford it," said Stackpole.
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The company didn't just crowdsource funding. It also crowdsources research and development. By making its designs available to the public and running a user forum, it's built a community committed to advancing the platform.
After selling 250 first-generation submersibles, OpenROV released version 2.5 last month. User feedback helped it improve the battery performance and incorporate more robust sensors without increasing the price.
"What we're building is really twofold," said co-founder David Lang. "The individual tool and specific device is great. The other half is this community of people who have assembled."
Building a community can give rise to brand loyalty. The RepRap has emerged as the most popular open-source 3-D printer. Founder Adrian Bowyer designed it to be self-replicating and easily modified, so users can print replacement components or experiment with new ones.
While anyone can build a RepRap from scratch, Bowyer's commercial venture, RepRapPro generated more than $800,000 in unit sales and training fees in its first year of operation last year. Bowyer started the company with just a few hundred dollars.
While some companies insist on making all aspects of their hardware open, others are starting to apply open-source selectively.
New York-based littleBits makes electronic modules that snap together with magnets to make larger circuits. The company makes the designs for the circuits open to the public, but not the schematics for the magnetic connector. The idea is to allow the user base to contribute designs for future circuits and kits, while protecting the product.
Founder Ayah Bdeir said the threat of another company copying its designs is always a concern, but it can also be an asset. "It's kind of a double-edged sword. On the one hand, it does create stress, but it also keeps you competitive," she said.
Bdeir created littleBits to help designers develop prototypes, but she has found a growing market for her kits among educators. She has also attracted venture capital firms, raising $9.65 million to date.
Big-name companies are also taking note. Texas Instruments has dipped its feet in open-source waters with the Launchpad microcontroller. Earlier this month at Maker Faire in Rome, Intel announced it has entered a development partnership to make boards compatible with the Arduino open-source platform.
The entry of industry heavyweights worries some small open-source companies, said Open Source Hardware Association's Gibb, but better-established firms understand that staying small and nimble allows them to innovate quickly.
But the biggest asset open-source hardware makers have might be the communities they've built among users who share their values and their roots as makers, said Gibb.
"One of the things that the Arduino has that cannot be duplicated no matter how cheap you make it is the community that surrounds it," said Gibb. "Even if somebody else comes along and tried to sell something cheaper I don't think it would matter."
—By CNBC's Tom DiChristopher. Follow him on Twitter