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Making Money Using Open Source Software?
GamblerZG asks: "As many of us probably know, convincing people to run Free Software can sometimes be a tedious task. However, there are a lot of factors that help us in that regard, and, perhaps, the biggest of them is a simple truth: Free Software is free. It's hard to argue with such statement. I know it, because I faced it today, trying to convince my fellow co-worker that it is possible to profit by writing GNU-licensed code. 'How company can make money, if its products are available for free?' That was a valid question indeed, and I could not find any simple answers to respond with. That makes me wonder, whether there are articles on the Internet, which explain and analyze how Open Source business models work? Do you know any ways to prove that such models can be profitable?" It can be done, you can check out a recent interview with an Open Source Entrepreneur on NewsForge for some hints. What other ideas and business plans do you think would be a good match for a business with an Open Source core?
Charge for support, customization, and installation. Show the customer that your value doesn't end when the code goes gold.
- Despite popular opinion, I am not perfect.
Make software that is VERY extensible. So much so that the open-sourced "guts" of the software are pretty much a framework for the extenstions.
Then, sell consulting to design, write, install, support, and maintain those extensions.
Just take a quick look at IBM announce today they're making 38.8 million off Open-Source-based services on a single location in the span of four years.
If that is not money, I dare not fathom what is.
HAD
Yeah, but not everyone can do that. If you writing something very trouble-free and intuitive, you're not likely to get much support income.
This is easy: Charge for the things you do. Making software isn't easy--it takes time and effort--so you should be paid to make software. Supporting software isn't easy, either, and so you should also be paid to do it. (Making copies of software is easy, so it's not fair for you to be paid to do it.) Neither of these sources of income are incompatible with free software. It's simply a matter of compensating people more directly for the services they provide.
Open Source is only free if your time is free.
There's alot of truth in that statement. It also means you can make money by setting up opensource systems for other people (and perhaps you'll have to add a feature or provide support to make the sell)
You could also get paid for simply adding a feature. You could only sell this feature once, which is a big difference with the proprietary model. You can respond to this by simply asking more money off course.
Overall, it's true that Open Source forces you to be more service-oriented as opposed to being product-centered.
Successful companies do not produce "products" so much as we produce "customer satisfaction". Products are necessary props in producing satisfaction, but they're not the only necessary props. Software is used to produce that satisfaction. The programmer's dream is to work only with our computer, producing that "killer app", and publishing it for the hungry masses to consumer. The reality is that customers must be sold tom if they are to pay, and that software is part of the sales process. So keeping the source closed is really sleight-of-hand, a way to protect inferior code from competition. Binary-only software is no less piratable than source code, especially with so many architectural layers that can be replaced with rebranded wrappers. Profit measures the surplus value in the *relationship* between vendor and purchaser. So open source is no different from closed source software in its role in making money. If anything, open source is advantaged in improving the relationship, and in offering more opportunities for satisfaction, as well as reducing the costs of delivering that satisfaction - hence more profit.
--
make install -not war
-- Thou hast strayed far from the path of the Avatar.
So... Many... Quotes...
No one ever went broke underestimating the intelligence of the American public
Make something idiot proof and the world will make a better idiot
I checked with my company's IT guy - he's in full agreement. I must admit, it's fun listening to him teach the executives how to use e-mail.
Simple answer: it's extremely dificult to do so.
The question you should be asking is 'How can a company make money, if it gives away software for free?', and the answer should be more obvious - it can do so if its product is not the software it's giving away.
For instance, IBM's "product" is the tailor-made services and consultancy it provides. The software is merely a tool they use to provide it.
You might argue that keeping such tools to yourself is a commercial advantage over your competitors. That's true to an extent, but there are also downsides - e.g. if you provide your own proprietary operating system instead, you don't get benefits contributed by the community, and your competitors are more attractive because there is no lock-in.
Recent examples include things like displaytag library, Hibernate and HTML Area.
Of course, this means I must take a wide berth around GPL'd code, but there is enough stuff under BSD/Apache/whatever to get the job done.
Yeah, right.
Many people would rather have a high paying job in a corporation, with benefits and such (e.g an acolyte of the Cathedral) rather than scrounge around in a bazaar surrounded by hippies shysters and knockoff artists.
--- Jump!! Fire!! Bullet time!! - Lego version of the Matrix
Comment removed based on user account deletion
If your code directly calls GPL code, then your code must be GPL. If it forks through a system call, its separate.
If GPL code directly calls your code, your license must be compatible with the GPL.
However there are millions of other open source licenses out there that doesn't have this problem, and if you've got a hardon for the GPL, you can write the "main" program using a modified GPL that states that proprietary plugins may be added to the code, then write proprietary plugins.
If I have been able to see further than others, it is because I bought a pair of binoculars.
Agreed. Innovation is what keeps people afloat, not closed source code. If IBM or Redhat rebundels your stuff, find a way to one up them. This is no different than any other line of business. Lots of companies make widgets, the successful ones find better ways to do it.
Offer customization services. Then you will be able to sell maintenance agreements. If someone wants to have your software integrated with their funky app, they won't necessarily have the expertise to do so. Get the specs and make the modifications for them (then release the source code and binaries to them).
Gamingmuseum.com: Give your 3D accelerator a rest.
I see the point, but doesn't the free truck include access to a horde of people (many with good service track records) who are willing to work on the free truck for a (nominal) support contract?
To follow the analogy further, doesn't the $150k truck also require you to extend the warranty for x dollars per year?
LOL.
Here, have a clue on the house. The people who run sendmail.com? It's CTO is the original author of sendmail. How's that for making money writing open source software?
As for redhat, are you saying that having someone who knows how to make 50 software packages work together across 2000 seats in an enterprise situation isn't worth the price of admission to Red Hat Enterprise? Do they need to have written all that software themselves in order to make money off of it? Apparently not, or they'd be out of business.
Not to mention you're completely overlooking the fact that they wrote rpm and dozens of other tools that make their job as support as well as the actual administrators' jobs that much easier.
If I have been able to see further than others, it is because I bought a pair of binoculars.
I say if their mission is truly something besides get rich/make money they should embrace that other mission.
They should look at their costs, and their income. Does it take locking something up 15 years that was probably trivial to come up with? (I don't mean the programming just the basic concept that is patented). How much of their cost is on patenting everything? That cost needs to be looked at too.
I would imagine cutting pay at the top to something that is still plenty high (speculating, maybe the top isn't paid too much), opening patents after a couple years, and being more restrained on what is actually patented would equal a prophitable company (though not as much so) that better fulfills its "mission".
Of course we know that it is all bullshit and aliviating suffering is not the companies mission at all, just a byprodoct.
Wow, sent an e-mail as suggested when clicking on "use classic" banner, and got a fast response that addressed my msg
"what is going to prevent other companies competing against you on support?"
You mean like I make a decent penny now and again by supporting Windows, even though I didn't write it and MS doesn't get dime one of my fee?
Jeezum Crow, even Billy hasn't figured a way around that one yet, it keeps him up nights working on it, but he still hasn't found the answer.
Still, there are people who call MS for support instead of me, because it's an MS product, yes? And there are still people who call me because I give them something they can't get from MS, like my being right over and actually fixing the problem, yes?
And am I not, when I support Linux software, taking just as much advantage of Redhat as they might be of me? I didn't pay them for the software I developed my product on. I don't give them dime one when supporting their product for a fee and they don't get dime one when I resell their product as a base to run my own on.
There is a perfectly functional reciprocity system at work in OSS, it just doesn't revolve around the exchange of money, it revolves around the direct exchange of the code itself.
So you don't sell the code. You make yourself fit into the sytem instead of trying to bludgeon some other system into it. You exchange it (got ma OS and development tools for free from Red Hat, given 'em back my zingblat code). Then you sell what can't be exchanged, your expertise with your own code. . . and Red Hat's (gonna support zingblat on Red Hat).
From Red Hat's point of view it's giving away a free OS, getting back a free app they can bundle and support.
They could sell you the OS for $20 and you can sell them zingblat for $20 and the whole thing works out the same, except now you both have to support debt, a larger army of lawyers, accountants, filing clerks, et al into the bargain.
Aha! There's the problem with the OSS business model, it eliminates offensive, makework deadbeats in the workforce, thus eliminating jobs and destroying the economy. Billy was right!
KFG
Repeat after me: open-source software is not a business model, it is a softare development model.
The blunt fact is that in IT, there are really 2 classes of people: users, and developers. This is fully analogous to any other industry, where you have a consumer (users) and a producer (developers).
The users -- everybody from sysadmins and netadmins, on down to the secretary using her Office apps -- do not write code. They do not contribute anything beyond bug reports to OSS. Hence, their personal stake in the price of software is simply to get the cheapest software that will do the job. Given that OSS is free as in beer, users will naturally gravitate towards it and promote it. Just as in college, where there is free beer, there are students lined up around the block to get a drink.
Then there are developers -- the software engineers and programmers. They *do* write code; that is their job. They contribute more than bug reports to OSS; they contribute the very code that is required to build the apps that the users use. The trouble for developers is that OSS, by not charging a fee for the time spent developing, makes the value of developers' time equal $0. Time = money, and if money = $, then time = $0 as well.
When applied as a business model, that is how OSS works; there is no escaping this fundamental economic analysis. You cannot very long sell a product at a non-zero monetary sum that which one can get at zero monetary cost to themselves.
Thus, the only way OSS can survive in the business environment is if the developers are working for a company which has some other revenue stream then -- be it support services for the code they write if they are a software company, be it some other service if it is a non-software service business (e.g. a marketing firm, law firm, etc.), or be it some tangible, physical good (e.g. in any hardware company, car manufacturer, grocer, etc.).
It's an opportunity for creativity in business models to try and incorporate OSS into their business functionality, but from the developer's perspective, it's important to recognize this fact: because you are writing software which is being given away for free, your work is not directly making money for the company. Because your work is not directly making money for the company, you will be seen as "dead weight" in the company. Because you are seen as dead weight, you will have a hard time justifying your employment with management unless you can determine, clearly, how your work saved time somebody else in the company, or how your work drew in more customers for the company, or how your work generated more service contracts, and so forth. If you cannot do that -- and this will be difficult (though not impossible), given that you don't work in those departments -- you face job loss.
Hence, it is generally in the best interest of developers not to write OSS. OSS coders are literally coding their way out of their own jobs.
But all of the above largely assumes software is normally otherwise a product sold to people on store shelves, when in fact, most people already write code for internal use only anyway. What about those people?
OSS is still a negative to developers in most companies, because, after all, if you are writing code that would normally be for use within your company, that is potentially a competitive advantage for your company. But if you're giving away that code, you're giving away that advantage for other companies - other competitors - to use. This is good neither for the developer, nor the company paying the developer who released the code as OSS. After all, if you employ developers who just spent 6 months writing control software for, say, a large manufacturing company, why should the company release that software to the public? So that their competitors can go out and buy the same hardware, leverage this software they did not develop (and have no intention of contributing back to), and produce the same or very simi
Is Capitalism Good for the Poor?
Trolltech is an excellent example. They would not have nearly as many paying customers if it wasn't for the free version. Everyone in unixland knows KDE, and a good part of them use and like it. Enough of them are programers who have played around with the source enough to pass the qt learning curve and see how great it is. When the boss decides to start a new project they are not in position of either asking for qt, or evaluating all toolkits. The latter is hard to do, because by the time you know a toolkit isn't great you have half your application written already.
Trolltech in fact mentions kde to those who are considering their product. When you evaluate something new it is hard to know if it is any good. It is hard to get customers to act as a reference, and even when they will there is always a question if the reference is honest. KDE is there, they can point to it and say "See, they have several million lines of code built on qt". That is worth a lot.
In short, sell the GPL version as the demo, and the free software built around it as proof that your code is good. Doesn't work so well for non-libraries though.
Have you *ever* worked on a project where the requirements didn't change?
Of course, if said company already has programmers, they'll just download the source and do it themselves after studying the code for a while... unless you also recommend writing code that isn't understandable...
Your model mostly assumes mom-n-pop type shops, who also usually have small amounts of money to pay for such things and will balk at 4-figure costs (and especially 5-figure costs) to do these things.
I think the real world is going to require a balance between idealism and pragmatism. It's the tightrope that gives so many people ulcers or makes them take up drinking.
I think your corporate friend is right up to a point. If his company goes out of business it is not going to be able to help anyone. It can go out of business for any number of reasons, including the reason that all its investors dump the stock because they see better profitability elsewhere.
I think you have a point that if they really want to share knowledge and help people then they wouldn't hoard intellectual "property." And for them to not do it falls somewhere between hypocrisy and denial.
It seems to me this is another case of "the tragedy of commons." If one actor does the right thing, he'll suffer for it - sharing knowledge will cost the company some competitiveness. So no one does the right thing, and everyone suffers. The same principle explains why environmental laws are so hard to pass, or why there is no meaningful privacy protection in the United States.
I think the solution to problems like this have to come from societies, not individuals. In other words, change society so sharing knowledge will not hurt this company with respect to its competitors. In this case, it means reform of IP laws so there is less profit motive to hoard useful knowledge. Really what is stopping this company from doing the right thing is the legal environment where IP is seen to have high competitive value.
[Sir Garlon] is the marvellest knight that is now living, for he destroyeth many good knights, for he goeth invisible.
Yes and no. It depends on what other projects you have going on. Sometimes you have the in-house resources but your time is better spent on other things.
Also keep in mind that no matter how readable your code is, you are going to know it better than anyone else. It just may be faster and cheaper to pay the main developer make the modification.
Ongoing maintenance is an issue too. Let's say that you internally added feature X. The main project does a new major release, and it doesn't contain your feature, so you now have to re-integrate it. More work.
With all due respect, but you have no idea what you are talking about.
First of all Red Hat, or any other company for that matter, are not appropriated the work of others. That is a vulgar lie.
The people that have produced the software (Red Hat payed employees amongst them) have released it under licensing terms that allows companies like Red Hat to make bussiness. All the GPLed parts are freely available, and they not only make them available but are contributing to a completely free project like Fedora.
Red Hat, under the terms of the GPL, is nopt obliged to produce anything if they do not wish to do so. They could just package the software and charge for those services, but what they are selling is support training and advice.
Software is a commodity, the GPL helps to comodize it.
You are a vulgar liar and should be ashamed of yourslef or are a completely ignorant person that can't even take the time to understand the GPL but then ejaculates an opinion like if you knew what you are talking about.
What a prick.
IANAL but write like a drunk one.
The problem with a support-based model is that it creates disincentive to make the software easy to use and trouble-free.
The only open-source model I've been able to dream up which would actually be long-term sustainable and which would actually align business incentives with the humanitarian goal of producing better-quality free software is the "contract programming" model. In other words, you pay me to write some particular software you need, and when the "final" version is delivered to you per contract, it's simultaneously released to the world as F/OSS.
Under this model, big corporate customers of my software development house foot the bill to get their needs met, and then everyday people and other businesses get access to it for free. I get paid honestly for my work, the customer pays honestly to get a real need met, and everyone else who happens to find the software useful gets it for free. Everyone's happy. And it's the most healthy model from an economic perspective, since I'm getting paid for the actual work of writing the software, rather than getting paid for the legal privilege of licensing the software to someone.
Unfortunately, this is a model in which to keep making money, you have to keep writing more software. Contrast this against the business model of companies like Microsoft who "write once, sell a billion times over" and thus generate money magically out of thin air. This is why big rich companies are so big on "intellectual property" protection -- it's the artifice that gives rise to their "Magic Money Generator" business model.
Moderator hint: a comment is neither "Flamebait" nor "Troll" if it is true.
Tim O'Reilly touched on this topic in his EclipseCon 2005 keynote address. One of the things he pointed out is that a company can make money by creating a unique set of data, instead of a unique set of software. For example, the maps that power MapQuest, et. al., come from a company called Navteq. Amazon adds value by collecting user data and using to show you popular books related to the one you just bought. Companies like Digital Envoy provide mappings of IP addresses to geographic locations. There's no doubt that the open source community could create free software to drive yet another online map, bookstore, or ad engine to target specific geographic regions, but they'd be hard pressed to come up with the data required to populate them. Similarly (pointed out Tim) imagine if Google released their search engine source code tomorrow. What would you do with it? Without a way to administer the monster array of cheap servers that Google has, there's no way you could compete with them. Google's secret sauce is not their software to rank search results -- it's that they've actually gone and done it for all those zillions of web pages and made that data available for you to use.