Seven Open Source Business Strategies

Openstandards.net writes "One of /. posters' favorite discussions is the value of open source as a business model. OSDN has an article on IT Manager's Journal that highlights seven business strategies for open source. " Slashdot and ITMJ are both owned by OSDN.

Comments

One interesting thing

[Wesley Felter]

One thing I noticed about that article when reading it yesterday was that only two of those business models actually include writing open source code. This fits with my thoughts that there's plenty of money to be made from open source, but not necessarily from creating open source.

Re:One interesting thing

[fbrain]

My company implements open source solutions for a small fee, and when asked to install some OSS we always donate a percentage of the fee towards the projects we use. It would be great if everyone 'played nice' but I can't see that happening.

Re:One interesting thing

[Anonymous Coward]

Indeed you are correct. Amazon and Google are but two testaments to the idea of using open source for business purposes, and neither is exactly a "software" company.

Re:One interesting thing

[tanguyr]

Forget the money, send the patches you had to write.

Open source shouldn't have to count on people "playing nice" - it's about enlightened self interest: sharing your patches decreases your costs in the long run, because you can apply other people's patches more easily.

Convincing MBA weilding bosses of this is more than half the fight.

Re:One interesting thing

[platos_beard]

Huh? All except one involve distributing open source code:

Optimization - give away good, sell better code.
Dual license - give away good code, sell same code to anyone not wanting to GPL their modifications.
Consulting - give away code so people will hire you to customize it.
Subscription - give away code, but get people to pay for more convenient distribution of it.
Patronage - find someone else to pay you to give away code.
Hosted - (this is the one) write code based on free software that only you use.
Embedded - Give away code tailored to hardware you sell.

Re:One interesting thing

[torpor]

I think the problem is that its so difficult for 'accountants' and 'evaluators' to really put a value on any open source which a company may end up contributing to with .diffs ...

With software, there are a number of different approaches for 'valuating' a company codebase and sticking that figure in a spreadsheet along with all the company's other assets, such as account balances, etc.

With OSS though, how does that valuation occur? Its a public trust sort of scenario - as if the tax which all employees paid the government each year was 'also valuable' to the company, whose cash it was originally before payroll was paid.

OSS 'contributions' are a strange beast to an accountant, and unfortunately, many companies these days rely on valuations and assessments from 'traditional bankers' for things (such as getting loans to cover payroll, or new inventory for sales seasons, etc).

I know that EFF donations and all those 'tax-free writeoffs' are also valuable too, but these don't get thought of as 'investment return', generally. So if you put your main codebase development out into OSS, and your accountant wants to write all your primary code off as 'donations and contributions, non-return expected', then it gets a bit weird...

I think groklaw really ought to spend some time on this sort of thing; the more boring side of supporting linux/OSS on the legal fronts may well lead to a solution to this accounting dilemna, and that would surely be nice for a lot of companies that want to get into OSS ... and still keep the books in order.

Data Strategy?

[Mr. Sketch]

It was a nice read, but I was curious about one additional option, the 'Data Strategy'. This is specific to games where you may develop the engine using open source tools and release the engine as open source, but charge for all your data files the engine uses for your particular game. Or has this just not been proven as being a viable model?

Re:Data Strategy?

[A. Pizmo Clam]

This is specific to games where you may develop the engine using open source tools and release the engine as open source, but charge for all your data files the engine uses for your particular game.

Let's take a look at gaming development under the GLP. It offers an excellant case-study of how GNUlatic-ism will destory America.

1. NetHack: This game promises to connect your computer to a "net"work and expose it to "hack"ers. This is not a good model for a law-abiding company

2. Frozen Bubble: I'm not up on the street-lingo these days, but I'm 101% sure this is a drug reference; perhaps to "crystal methane" or "the acid". Do you want drug users working for your firm? Is that a way to be profitable? Also, I believe it comes from France, that notorious hangout for Maoists and ne'er-do-wells.

3. Klotski: Like many pinko names, it begins with a "K-" and ends with a "-ski". It's also affiliated with a sinister group of known East German "hackers" whose avowed goal is to "conqer" the American workplace.

I could proffer further examples, but any healthy-minded citizen will clearly see that GLP games encourage roguery of the worst kind and are unsuitable for emulation by the large, dependable corporations upon which our Constitution is based.

Adapt...

[carvalhao]

I found this article quite insightfull. One of the paradigms of modern business is the outsourcing model, and that is due to a recurrent need to reduce overhead in any kind of business (overhead always looks like bad news for stock investors). And software aquisition and maintenance IS a major overhead in any IT oriented enterprise.

The obvious solution is to get the resources as they are needed. And that business frame fits perfectly on the OS business model. That, and not Open Source fundamentalism, is what may make or mars OS.

Therefore OS must continue to focus on enhanced flexibility and customization, not offered by other non-OS platforms, as a way to thrive. Then, let us consultants do the rest of the dirty work :)

Missing option: consumer desktop business models?

[G4from128k]

Unless you count WalMart/Lindows as embedded, the only business model that seems remotely geared toward consumer desktop is a subscription model. I can see how Linux provides multiple sound business models for b2b, but wonder if any company can make money off consumer desktop linux.

Any thoughts?

Sleepycat license question

[16K Ram Pack]

Does anyone have any more details on this?

Like if I submit a fix/enchancement to MySQL in the GPL version, can they as the 'owners' put that in their commercial license which their customers can release without the source code?

Re:Sleepycat license question

[Anonymous Coward]

No. They would require a copyright assignment from you, as seen in projects such as GCC and Cygwin.

Re:Sleepycat license question

[Wesley Felter]

Like if I submit a fix/enchancement to MySQL in the GPL version, can they as the 'owners' put that in their commercial license which their customers can release without the source code?

If you (foolishly) assign the copyright on your code to them, then they can do whatever they want. If you keep copyright to your patch, they can only use it under the license you have chosen.

Re:Missing option: consumer desktop business model

[DR SoB]

Yes, with a few simple steps:

1. IBM dumps tons of money into marketing Linux (any distro..)

2. IBM upgrades OO..

3. IBM allows blatant pirating of OS, and offer's free (or next to free) training. Pirates = Free training..

4. IBM reduces price of x desktop model that comes with Linux.

5. IBM sell's business licenses because now it's desktop version is well known to market/consumers/PHB's..

6. Profit!

Quick answer: No

[pegr]

Like if I submit a fix/enchancement to MySQL in the GPL version, can they as the 'owners' put that in their commercial license which their customers can release without the source code?

Assuming your fixes are GPL, they cannot put your changes in the commercial version without first negotiating a separate license from you.

Re:Missing option: consumer desktop business model

[idfrsr]

I would imagine that in order to successfully do this you need be a hardware company. If you can provide commodity hardware with commodity software that presents a viable consumer alternative (read marketable to average joes as the best thing since a toaster for this new sliced bread stuff) then you might be able to make it. This is really a marketing problem rather than anything else. Generate a kick ass device by intergrating open source solutions with commodity hardware and your product development is much cheaper.

For example the L600.

In the end, to be successful with this strategy you have to be a kick ass marketer to deal with the big guns at the top of the food chain.

Re:Obligitory Profit Scheme

[Anonymous Coward]

1. Work for Microsoft

2. Help Microsoft consolidate 100% of the software industry

3. Microsoft outsources your job to India

4. Beg for food since there's nobody other than Microsoft to work for in the software industry!

Cygnus

[Henrik S. Hansen]

Cygnus was actually the very first company to deal exclusively in Free Software (back then the term 'Open Source' was not yet coined). The company's founder, Michael Tiemann actually got the idea from the GNU Manifesto, which outlines ways to make money from Free Software.

Cygnus primarily provided support, but I think they also did some development. Maybe someone can elaborate?

In my mind, Cygnus is a good example of how a small company can survive on just dealing in Free Software. Many people need support, or perhaps need custom-made changes to Free Software.

AFAIK, Cygnus is now part of Red Hat, and Michael Tiemann is CTO of Red Hat.

Re:Cygnus

[PhilipPeake]

I was a Cygnus customer - yes, they did do development work and provided support for the GNU compiler which was much better than you would get from any commercial compiler vendor -- particularly hardware vendors (SUN, HP, IBM, etc).

One of the problems that they always had was that they were "customer driven", and tried to evolve the GNU compilers in the direction that favored their customers. This put them in direct conflict with the "official maintainer" of the GNU compiler suite, and, from time to time, with RMS himself.

I was rather sad to see Cygnus swallowed up by the RedHat monolith.

Eighth Open Source Business Strategies

[turnstyle]

Demand more allowance!

Re:Missing option: consumer desktop business model

[pavon]

I don't think there is much money in developing a Free home desktop OS. There is money in packaging and supporting it, and you can certainly subsidize some development using that money. But more importantly, there is money in the business desktop, and if you look at the current state of affairs, the business desktop and the home desktop are extremely simular. Furthermore, most people aren't confortable switching to a new system once they have learned windows, but having used open source software at work will remove those concerns (assuming it was a good experiance :). So I really don't think there will be much of any demand for the home desktop until OSS becomes more prevelent in the workplace anyway.

In other words, not having a viable business model for the home desktop is not important, because it will ride on the coat-tails of the business desktop.

Aren't They Forgetting....

[bfg9000]

.... don't actually create a competitive product, fire all your coders and replace them with lawyers, and sue everyone in existence in hopes that somebody will give you money to leave them alone?

Of course, that strategy has yet to be proven, and it seems to have a few holes in it....

Mozilla is a failure?

[bzipitidoo]

From the article:

The Mozilla project continued to deliver buggy, late releases

That can be said of most successful software projects. Why is the article picking on Mozilla especially? Because a superficial look at their Bugzilla database makes it seem like Mozilla has lots of problems? IE is worse.

Re:MySQL license question

[Anonymous Coward]

Like if I submit a fix/enchancement to MySQL in the GPL version, can they as the 'owners' put that in their commercial license which their customers can release without the source code?

If you (foolishly) assign the copyright on your code to them, then they can do whatever they want. If you keep copyright to your patch, they can only use it under the license you have chosen.

I don't see what is foolish per se about allowing them to use their license on my code, considering the huge benefit I got from getting MySQL for free (except if you think copyleft is the only way, of course)

And to all the sibling posts, as someone who actually contributed to MySQL (although nothing
worth mentioning), let me clarify a bit:

• If the contribution is a mere two liner or so, they don't ask for anything, as such a fix is not really copyrightable (because it's usually the only straightforward way to do the fix)
  
• If it's more than that, they ask back for the right to dual license your contribution, and from what I have seen, most people give the permission to do so.
  
• I haven't seen someone making a significant contribution and denying them the right to dual license, but from the looks it could be that the author of the InnoDB table type has a special agreement with them.
  
• And with smaller contributions which they don't get the persmission to dual license, as others have said, they re-implement them on their own, if they want to include the idea.
  

(And if you are wondering why I am posting anonymously: I just like my privacy.)