The Best Open Source Business Models
By: Matt Hartley
Monday, September 10, 2007 11:22:49 AM EST
URL: http://www.linuxplanet.com/linuxplanet/opinions/6417/1/
JBoss Leads the Way
Discovering the perfect formula for profiting from an open source project is not easy. There are countless variables that must be considered, many of which determine early on whether or not a project will be successful with the community using it.
The rub, however, is that discovering true success in monetizing these open source efforts does not happen easily. It takes a clear understanding of which business models work, and the best way to implement them from a long-term standpoint.
Without a doubt, my all-time favorite open source business model has to be selling pre-configured devices or services using the open source products. It's simple: you're effectively selling something sustainable and tangible for the end user, while allowing the community to use the open source project as they see fit.
One strong example would be JBoss, which is a division of Red Hat. JBoss has managed to sell conferences, support, certification, even a reference manual. Each of these profit centers provides a strong revenue stream. Providing a strong application server platform--along with a company of services and development concepts to support--JBoss has certainly been able to use the community to help develop their vision using the Java 2 Platform.
What has always struck me about this model used by JBoss was the diversity in their revenue model. And by utilizing enterprise users as their target market, JBoss is ensured plenty of revenue with their multiple income streams.
Corporate Open Source vs. Everyone-Else-Type Business Models
With the exception of Mozilla and Google, finding an open source based company that is doing well financially is fairly difficult. Because the common model remains selling support to those who need it for the open source product in question, trying to make this model work within the consumer market is very difficult to do.
When it comes to the consumer market, sell something valuable and obtainable financially. Take the Ubuntu project, for instance. Canonical offering support services for this project is fine for schools and within the enterprise. However this is simply not going to float in the typical home and will not likely generate a sustainable income for Canonical in the long run.
Lately, however, Canonical's partnership with Dell has helped Canonical to begin to branch out beyond the support-only platform. It's a good start, but I cannot help but wonder where else they could expand their reach. Support and certification is a nice model to be sure, based on their international success. I think that Canonical could do more in the end-user education market, especially with home users.
Imagine money invested into self-help DVD movies and easier to understand books that take a more step-by-step approach to using the OS. I own most of the released books on Ubuntu; there is no way the average user is going to make heads or tails out of the information overload provided in them. I firmly believe that Linux distros and a number of open source applications could make money should their creators put their minds to it and stop thinking like engineers with their marketing.
Free and Pro Versions of Software
There are a select few open source applications out there that provide both a free, completely open source version and a "pro" version that uses both open and closed source code. You just have to be careful to use the right license so you don't violate anything along the way.
Some open source applications have opted for a mixed-source strategy to better protect any closed source concepts that they wish to implement into an open source project. Some companies feel strongly that this better protects their positioning in the marketplace, despite the fact that closed source applications copy each other all the time. To be completely fair, there are some instances where combing the two licensing schemes can work and not cause any kind of community backlash. But as a general rule, dual licensing is best suited for either server applications or that of actual hardware appliances. Either the servers themselves, or even appliances such as household DVRs.
Open Source Appliances as Revenue Streams
Having used DVRs from both my local cable provider and that of the two satellite companies here in the U.S., to say that there is a market here would be a huge understatement. Both the MythTV and LinuxMCE projects would make fantastic business models for any company if the hardware costs could be brought down. That, and if we might begin to see set-top boxes being made available.
At this point, open source projects like MythTV and LinuxMCE lack the help from a mainstream corporation taking them forth and building up hardware that is both easy to use and affordable. It's interesting that this has yet to happen. Perhaps this is something that existing Linux OEMs ought to be looking into? Even if they don't consider going into the hardware market a worthwhile endeavor, they should consider this: The biggest factor in people buying Windows MCE (Media Center Edition) PCs is the lack of functionality in preexisting DVRs offered by our cable providers. Because the DVR functionality in the is the single biggest use for PC-based media appliances.
Selling Open Source Services
These days, corporations using or selling open source software are looking for assurances to protect their assets. This is where the desire to seek out open source insurance has come into play. One company provides code audits to make sure that all the code is in open source compliance, best practices training, and insurance to safeguard potential profit loss for using the insured open source product. (Open source insured products are protected only from loss due to mergers, settlements, and other related causes of profit loss.)
The company also ushers in services for those providing services for open source companies themselves. See, a company can actually find open source profits by simply providing services rather than supporting the development of software itself. Some examples:
- Staffing services: Provide coders as needed for companies looking to expand their current open source project(s).
- Legal help: Legal advice and attorneys on a retainer for those open source groups or companies needing assistance from experts on open source licensing law.
- Fund raising: Not all open source companies are in a position to begin fund raising endeavors for projects that they'd like to support. Fund raising services allows them to write a check for a business development expense.
Tie It All Together
Whether it be starting and managing your own open source project for business development or simply building something up to support other open source projects in the growing support industry, there are a number of options out there.
The key is to understand how you or your company can take existing assets to take on an open source mindset with eventual profits in mind. As you can see above, it's not all that difficult to do. You simply must understand that profiting from open source software is not as straightforward as you might see in the closed source world. It takes a solid strategy, understanding of building services around the given away product itself or merely bundling in a system around open source products themselves.
Some open source purists will argue that the vision behind the open source project should be the project itself and the community that will benefit from it. But these days, it's common practice to have companies working with the community to both give back to the company that initially invested in the project.
This article originally appeared on Intranet Journal, a JupiterWeb publication.