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How Can Companies Profit While Giving Code Away?
An anonymous reader writes "In an almost philosophical essay replete with references to everyone from Larry Lessig and Tim Bray to to Professor Yochai Benkler, Sun Micrososystems evangelist Simon Phipps explores the metaphor of subscription (well, of course it's not just a metaphor any more from Sun's point of view) as the way that companies will make money off of deploying open source solutions. His distinction between OS developer and OS deployer is useful, but the crux is his contention that, with a "system" such as Sun has put together like the JDS, 'You don't buy the software from Sun - instead you subscribe to the editorial outlook.' It's an alluring analogy - Sun as the editor-in-chief of a 'publication' (JDS) with readers who may or may not choose to subscribe. Worth reading."
But let's not forget newspapers make their money off the ads.
'You don't buy the software from Sun - instead you subscribe to the editorial outlook.'
Is this kind of like how Casino's give away complemetary rooms and gifts to their biggest gamblers?
The code is free. The support is not.
Let's face it, most of us are scoffers. But moments before zero hour, it does not pay to take chances.
Seems we already have a few models of this.
The software is free but you pay for the CD it's on and tech support.
I like muppets.
It's very simple: nobody reads the license. I made some money by selling an open source app (of which I am the maintainer). I also sell it, and include the source code. Yes I'm actually able to sell it, even though it can be downloaded for free.
The fact is, nobody reads the license. I include the source and the GPL. The GPL only gives the user more freedom. But nobody reads the GPL! Most don't even know they're allowed to distribute it, or even resell it.
Lot's of people talk about the subscription model and it's benefits. Often compared to a magazine subscription. The difference is that back issues of magazines still continue to work, unlike some subscriptions of software that have time-bomb unlock codes. I think the subscription model is a bad idea for consumers.
The win-win philosophy underlying the Sun statements is good; that is, it's true that Sun can make money by operating as 'editor in chief' of a suite of freeware applications. However, I don't buy into the statement that open source doesn't mainly benefit from having many hands involved. Making the best people the 'committers' of projects is important but nowhere in the article does anyone mention how much good software is created and maintained by people not previously recognized as 'best' for the job. The process doesn't work the way the Sun statement implies.
Then it is a support contract.
That's a different thing.
When you cancel a support contract, you lose the support, but you keep the code and get to use it.
When you cancel a software subsciption, you can't use the code anymore.
"Piter, too, is dead."
... perhaps because that is the business model he knows best?
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This model is very compelling for the commercial market -- companies know that they will both want customization and will need support for their software. They are willing to pay for expert assistance and 7x24 access to services. Enterprise software and support can sell for hundreds or thousands of dollars per seat - providing plenty of revenues to offset the labor costs of support can customization.
But the consumer market is very different. The consumer market has very low retail prices that can't support the high cost of labor - a $49.95 price point product can go from profit to loss on a single tech support call. This consumer market consists of two segments -- geeks who don't need support and the clueless who needs lots of expensive support. Currently, proprietary software makers can earn a profit, in aggregate, because they capture money from both the geek and clueless segments. They may lose money on the clueless, but that make up for it on the geeks who don't need support.
In a FOSS environment, the geeks can go for the free downloads and do-it-themselves when it comes to deployment, customization, and support of FOSS. Geeks have little reason to pay for FOSS-related services. This leaves only the labor-intensive clueless expecting to get a year of support for their $49.95. But because they are clueless, they will use more that $49.95 of support labor (even if that labor is in India).
The trick with these services models is finding people that are both willing to pay for service but that don't actually need to use the service that much. Its a very good model for corporate IT, but I don't see how the numbers can work on the consumer side. Perhaps someone in tech support has numbers for the statistical distribution of the percentages of people that use X-minutes of support.
Two wrongs don't make a right, but three lefts do.
This is not an original idea - even in the software world.
Microsoft for many years has already sold countless subscriptions to their MSDN.
Of course the OS is, itself, a subscription with 'issues' every 2-3 years..
95, 98, 2000, etc..
How to make money on 'free' software.
Charge for support.
(You want me to tell you how to use the software, then pay me).
Charge to become a member of the stearing group. (you want development to go this way then pay me).
Charge for features, and non critical bug fixes. (you want that, then pay me)
I think support should be by Open FAQ's, you have to pay to get someone to look at your problem, but as soon as the solutions posted everyone can view it.
thank God the internet isn't a human right.
Really, they're coming around to Apples's position -- given a situation where the open-source world has a lot and one's company has a little, throwing in with the crowd is a sound strategy. When the company has a lot and open-source has a little, best to keep what you have.
Meanwhile, I'd never heard of Benkler until this week, when he wrote an inane essay in Science about how research should be "open-source". If you took the most witless comments here about how if a distributed group can write software, then, logically any subject about which one knows nothing can obviously be done efficiently by a distributed group -- that's basically what it was.
What I'm listening to now on Pandora...
Let's also not forget, as someone who works for a newspaper, that it's not easy to make money in the newspaper business at all. The whole industry seems to be feeling the pinch these days.
If you take a look at what Sun is currently charging for the Java Desktop, it just doesn't make financial sense at the current price point. I for one don't expect to see companies switching to a subscription model that charges $100 per system per year (granted the current pricing until December 2, 2004 is $50). To be competitive and offer the business community a truly compelling reason to switch to the Java Desktop, the price is going to need to come down just a bit more.
What might be a motivating factor for a company to purchase a product using the subscription model, support perhaps? Well they do give you 60 days of support but the remaining 305 days of the year support will cost extra.
-- Just my $0.02 worth...
You know, all of your bitching about the stifling of innovation would be a lot more effective if you had some actual fact to stand on. New technologies are constantly being introduced to the market. How fast is your computer now? How fast was it 5 years ago? How much more economical are cars than they were 5 years ago?
And so on.
evil adrian
Right, look at Transgaming. They charge $5/month for Cedega, but you get the releases forever, even if you cancel your subscription. When you cancel, however, you miss out on support, new releases, voting rights, and the knowledge that you are helping to support its development.
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Software companies are not the only companies which write software. I defy anyone to show me a company with over 50 employees which doesn't use some kind of home-brewed software somewhere in its operations (and, yes, I mean other than HTML content). This is especially the case in scientific research, where if the budget's tight and a needed tool is either nonexistent or too expensive, the answer is "Write your own." I work for the bioinformatics department of a biotech firm, where I am paid to write free software.
Up until recently, that's been free as in beer; we have a suite of DNA development apps that we provide as web services, so our clients are doing their research with our cycles instead of shelling out $4000 a seat for a closed-source solution. Lately, however, I've been working on a tool (for site-directed mutagenesis, if anyone really cares) which will be both integrated into the web toolkit and released as a stand-alone GPLed app. The legal department's behind it. I am stoked beyond comprehension.
But does this work? Oh hell yeah, if you go by the bottom line and by the number of calls my boss gets every week from bioinfo startups trying to convince him to provide 45-day free-trial downloads of their software on our site. (Use our bandwidth to promote your closed-source code? I don't think so, bitch.) Obviously, people could visit the site (the tool suite doesn't require registration or anything like that), design a primer, then order it from one of our competitors, and I'm sure some people do; but why bother when there's a convenient, unobtrusive "Order now" button just below your results? I'm sure we could sell our software, but in the long run, the customer goodwill we build up (along with the increased orders) by providing this for free is more important to the CEO than whatever short-term quick bucks we could squeeze out by hawking SciTools. In the end, providing free software is the game-winning solution.
I'm sure this can't be the only example of a situation where this tactic works, though I haven't given a lot of thought to where else it would be appropriate. Hmm, maybe I should post this as an Ask Slashdot.
Dance like nobody's watching. Sing like you're in the shower. Fuck like you're being filmed.
Lacking in this common phrase is a sense that money is being earned. Lacking is a sense of exchange of some tangible goods or valuable service in exchange for the money. Often even an expectation of work performed for or responsibility to customers is absent. Money will simple be made "off of" something... usually intangible intellectual property.
So, dear reader (if you've endured my little rant so far), please keep an eye out for this phrase. Is it usually used in a context devoid of striving to satisfy customers? Or am I just reading to much into it? If so, I'm sure you'll reply to let me know :-)
PJRC: Electronic Projects, 8051 Microcontroller Tools
Does this essay seem like probing to anyone else?
By that I mean, it's like the essay was written to see exactly how much we're willing to spend on software. Further it seems to want us to answer in what method we prefer the pricing to be structured.
Anyway, for my two cents on profiting while giving the code away:
scott king
>its kind of hypocritical to proclaim opensource when misss treating the Licneses of the code tha tyou use..
its kind of hypocritical to proclaim people are hypocritical whenever they try to make a living.
wtf are companies supposed to do? give away everything under GPL and die? give me a break.
and it is also hypocritical to support GPLization of everything while you work for an entity that either lives off the government budget or makes money selling [whatever product or service].
on a broader note, i dislike Sun and I also (to some extent) compete with their products/services, but i respect them because i know some things they do are cool.
many people here (not necessarily author of the parent post) have the lame attitude of being against everything yet bringing nothing or little to the table themselves.
have you ever heard Red Hat CEO complaining like that about Sun? Or Bill Gates? of course not
yeah, maybe they'll say some generic stuff for the press - customers, value, choice, blah blah blah - but they're essentially interested in going back to whatever they do and doing it better - they are too busy to bitch endlessly about something like some folks on this site.
what makes the community do what they do?
Because that's how they get the tools they want.
The company I work for provides specialized web services (intranet sites, etc.) The software we use is GPL'ed. Both my employer and I have contributed code to this software.
It costs nothing to contribute (we would have written the code anyway), and we get back *way* more than we put into it. That's why we do what we do - because we get something back (better software.)
Same way Gillette and Shick do. Give away the razor and sell people the blades. In software, sell the support (or the updates, or whatever).
Say 100 companies all chip in a percentage of what they would've paid on license fees to improving OpenOffice with features they want. Yes, it costs them some money and yes, some other companies will get the benefit of those improvements for free. But they still save a ton of $$ and don't have to keep paying and paying and paying like you do with Microcrapware.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
Way I look at this is GOOD. However some of the socialists here will probably believe otherwise.
...time passes...
-Insecure gives out program to scan networks with multiple methods.
-Hacker types either trying to secure, or breaking security, use the tool
-When tool breaks, they report bugs
-Bigger companies realise that this tool would save X thousand hours of work and debugging
-Big company pays insecure to use said tool in closed project. Insecure gets paid big bucks
-Because Insecure now has income, they can MAINTAIN development on tool, nearly guaranteeing stability
Who wins? If you hate profit, the 'people' have lost. If youre glad to see such a good product stay free, everybody has won.
The thing that irritates me is that so many people think GPL implies free binaries and source for everyone direct from the original distributor, it doesn't. It means that whomever the original distributor gives binaries to, the distributor must also give them the source, which they are free to redistribute. Sun can release Solaris under the GPL, and not ever give away a single free binary, and not ever put a single line of source code on a single public web/ftp server. That is the truth of the GPL that so many people don't seem to realise. Then they start spouting off about how companies are disrespecting/violating the GPL.
Not only "not all developers work for software companies" - the MAJORITY of developers don't work for software companies.
The VAST VAST majority of software is written by in-house (or contracted) IT staff supporting some other sort of business - banking, manufacturing, transportation etc etc etc. The people writing software for direct sale are far and away the minority.
With the possible exception of games, the whole concept of "software for sale" is an abberation that FOSS is (slowly but inexorably) correcting.
DG
Want to learn about race cars? Read my Book
It is neither capitalism nor corporations that are the problem. Rather it is *monopoly* capitalism that is the problem. The freer the markets to all comers, the better overall for society. Too much concentration of wealth or power is always a Bad Thing. How much is too much? I can't define it but I know it when I see it.
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