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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?
I am a big fan of making the source free but charging for support. This gives the user/customer so much more power. They can work on your application all they want, if they get stuck or need help, they call and pay you. You can offer initial setup and configuration. Many large companies charge quite a bit for support contracts. You can as well, with the advantage of having a lower TCO for your customers.
I'm a CS major, but a professor in the Business college here wanted my help designing syllabi for an advanced website development course.
I recommended we endorse the AMP (Apache/MySQL/PHP) platform over ASP.NET (which is what he had in mind), and his main reason for not taking that route was that "Apache is open source, and you can't make money with free products. Here in the business college, we're only interested in products that can make money."
I promptly never spoke to the dumbfuck ever again.
OMG! Wau!
http://www.sakaiproject.org/support.html
In brief, the Sakai project was started by a few large institutions who were tired of buying into the licensing fees of other learning management system products like WebCT and Blackboard. They decided to create their own and make it open source - both free as in beer and speech. However, the support for Sakai comes at a price, albeit a much lower price than the aforementioned commercial products were offering.
In the end, you recieve a completely open learning managment system created and maintained by developers at these institutions and supported by commercial interests.
From The Longtail Blog
"What's changed is the presumption that the primary rights-holder is the best at extracting the commercial potential of creative material. Instead, anyone can do it: the advertising company that remixes an old movie to sell a car; the Linux t-shirt done Warhol-style, or just plain old DJ magic. "
"Let them eat cake" Well now that cake is actually free and we all want to sell it. Now if you can put a custom birthday signature on that cake you might have a business. This is one of the reasons film school is starting to see a new wave of interest. Communication and creativity, not business processes, are going to be the only things left after the so called Web2.0 is done modernizing commerce.
What if Digg added local news and a Slashdot inspired comment karma system? ---
http://houndwire.com
Yes, but how do they sell that open-source product?
By relying largely on the work of people working for free.
Redhat didn't write KDE, did they? Redhat didn't write the Linux kernel, did they? Redhat didn't write the GNU cmd-line applications, did they? No, as a matter of fact, they did not.
They have appropriated the work of those who have contributed their labor for free and are now selling it to businesses for hundreds of dollars a license.
And it is the same elsewhere: SuSE, Mandrake, TurboLinux (are they still around?), and so on.
So what has Redhat produced? Not used, but produced? The answer is: not much.
They've tweaked the kernel for their own purposes - but they didn't do the majority of the coding. They did write Bluecurve, but that just borrows heavily from GNOME and KDE. They created the RPM package format, which by all accounts now (though this would've been heresy 5 years ago) is garbage.
Have they created much else? Not really. So, notice that the vast majority of what they do is sell work that you, the open-source community, have written out of the good-naturedness of your own hearts.
I do not count GNU/Linux distributors as "open source companies" unless they make significant developmental contributions back to the OSS community, and in large part, they do not. That is the Linux distributors' dirty little out-in-the-open secret that nobody seems to remember...
Is Capitalism Good for the Poor?
So in other terms, you take a product that you haven't written and offer support services. How do the developers get compensated in this scheme? The article submitter is a developer, What is to prevent your company from picking up his product and offering support for it, thus leaving him out of the money loop?
Have you ever been to a turkish prison?
The answer to the question how OpenSource business models work is that they don't. If you today are making money by selling boxes with your software going OpenSource will sooner or later make you go bankrupt.
The reason why OpenSource works for Redhat and SuSE is because they don't write much OpenSource, the community does, they just pick the whole work of other, package it nicly, write some installer programms, fix some remaining bugs and then sell it. If there wouldn't be a large community to actually write the software they wouldn't have much of a chance, since there wouldn't be much that they could package. Supporting their products is another source for there income, for which their OpenSource activity is of course a great way to advertise it.
So if you expect to write original OpenSource software and expect to get a large return from it, you can basically forget it. If everybody can download your software for free you won't stand much of a chance to sell it. If you however sell a service and not a piece of software there is a good chance that OpenSource won't hurt you, since people will still buy your service. There are also models which work by releasing older versions as OpenSource and selling the current version as close source.
Overall making money by writing OpenSource doesn't work, what works however is using OpenSource as advertisment to services you sell. However selling services doesn't work for all kinds of software, so if your software doesn't require much service around it, you are out of luck. If you want to make money with your software there are probally better ways then OpenSource, you should see OpenSource as a way to ensure the users freedom, not to ensure yourself a larger income.
I agree. The experience of distributors doesn't give any insight into the question of whether writing Open Source code can be profitable.
Beyond that, I wonder if companies like Red Hat have actually made a profit over their lifetime despite having 95% of their product developed by people they didn't have to pay. (Yes, I could research the answer, but I'm too lazy).
I attended a chat last night with someone who works for a very large medical device company. They talked about how important intellectual property was to them and that it is their life blood. So they patent as much as possible and lock up everything as tight they can to get a competetive advantage on the competition.
/. crowd and the fsf folks have to say as this is a lot of what I hear coming out of this company and even other tech companies. So its a huge obsticle to overcome for the open source/fs movement.
However, he also stressed "living the mission" where there mission is to essentially alievate pain, help people live longer better lives." And in his next breath he said that his company would sue anyone who copies their ideas to do remote patient check ups on pacemakers etc.
So I asked, doesn't this contradict the mission, how can you on one hand be for helping people but writing proprietary software that maximizes your revenue? Why don't you open source it all, wouldn't that be a better fulfillment of the mission? He responded by saying that it is essential that the company do this to ensure that it can be financially healthy to continue to provide these services and develop new ones.
It seemed pretty logical to me, but I want to hear what the
A counter-example (and an interesting business approach) is trolltech:
They created the QT library, and they are giving it away under GPL. They make a profit from companies that need the library for non-GPL products.
Washington bullets will simply be known as the "Bulle
I, like most programmers, am paid for the time I spend developing the code, not for the code itself. The code is free, my time isn't. And if you don't pay for time, the code will not be developed.
This work fine when there is a limited number of users, which is the case for far the most software.
It actually also works for some software with more users. GCC developemnt is largely funded by people who hire one of the GCC development companies (there are several) to improve some aspact of GCC that is important to that customer.
I think /. blanked out the sarcasm tags again.
But on a slightly more serious note, there is some, maybe not a lot, of difference between illigitimately profiting from free software, in which the freeloader makes money from someone elses' work; and distributing copyrighted media for free, in which the freeloader doesn't make any money.
I'm interested in others' thoughts on this matter. Is the pyramid of 'who makes money' important in the ethics of piracy? Does the fact that someone who is already releasing a product for free is loosing credit, or is it more important that the end user doesn't pay for something that's free?
A hint, you won't make the money by giving it away. The free software will be a marketing ploy to gain publicity. You need to sell a product or service that the OSS is somehow tied to.
For example, Red Hat has Fedora as a free Linux OS. If someone wants tech support for Fedroa, they can pay Red Hat for it. If they want a more advanced server version, they can pay for it.
Some projects are based on OSS, but sold commercially, like Linspire, WineX, Crossover Office, etc. The OSS license can be released into a commercial license, in that the OSS developers make their money in selling licenses to release their OSS code into commercial products.
Remember, Slashdot does not have a -1 disagree moderation, and no, troll, flamebait, and overrated are not substitutes.
Not all software is written for sale as software; there seems to be somewhat of a perception that this is the only kind of software out there.
For example, where I work at a research hospital, the software I work on is used for analysis of MRI images. It's not GPLed, but it's open source, free, and pretty much anyone can get access. Our money comes from grants.
In my previous job, I worked at a major defense contractor. Software wasn't written for "sale" persay, there either. Instead, we were given a contract by a government agency to develop a piece of software for them. Of course, we couldn't open-source that software because it was sensitive, but I'm sure there are plenty of other cases of "software by contract" out there where the submitter or recipient of the contract has no financial interest in software sales - just in getting the contract filled.
Clean coal harnesses the awesome power of the word 'clean'.
Indeed, TrollTech is IMO the very best example of a successful OSS company I can think of. They do purely development and support, and they make money off of both.
However, I would argue that the reason they make that money is because they have smartly found a niche that encourages it - writing libraries that everybody wants to use. And, of course, they do what I would suggest to would-be OSS developement companies -- dual licensing.
IMO, dual licensing is key to OSS. For non-commercial purposes, one is basically free to do what they want (or it's licensed under GPL, whatever). But for commercial purposes, the license becomes more restrictive and demanding of money.
TrollTech really is probably the model the OSS community should look towards...
Is Capitalism Good for the Poor?
I believe much of the power of open source development is that it allows organizations to develop custom in-house applications. Instead of being stuck with a proprietary system that may, or may not, work exactly for their purposes they have the option of hiring developers to produce exactly what they need. While there obviously is little area for profit for software vendors (short of aforementioned selling of set-up, support), it allows a lot of organizations (e.g. research labs, many college institutions) function more efficently, etc. In short, the money (in most cases) can be found in gained efficency. Also, as refernce, note how much documentation on tldp.org there is that was written by people encouraged by their companies to do so, allowing for a win-win situation -- for the people who got to spend company time writting up public documentation, and that next time issues come along in the company (or others) their will be documentation to help them through.
This may be a false assumption but I expect that the big support customers are companies who are already paying exorbitant amounts of money for crappy support.
The company I worked for a couple years ago installed this retarded ERP system. It was badly documented, it didn't do what we needed it to do and the interface for customizing it left our IT people completely baffled. Talking to the company that produced it offered us one solution, spend another $100,000 for the upgrade to the version which *supposedly* did everything we needed it to do. Options were: muddle through and make the $150,000 investment worthwhile by somehow working out the kinks or pay $100,000 more sight unseen for an upgrade with the same crappy support but supposedly better features. The company was actually considering shelling out the $100,000 which would bring the software vendors take up to $250,000 for a product we *know* is crappy but are now locked into.
With some combination of training/installation and renewable service contracts the Open Source alternative could have easily netted the majority of that cash and potentially a continuing revenue stream had it been mature and "out there" at the time of this crappy wheeling and dealing.
People pay out the ass for crappy service now, what makes you think they wouldn't pay for good service?
I just found out there's no such thing as the real world. It's just a lie you've got to rise above. - John Mayer
We've had this problem, so I'm not speaking theoretically. Most of our users bought support with the purchase of our commercial product, but after one year many of them didn't want to renew because they hadn't had any problems and didn't know what they were paying for.
A business plan that is based on support is at direct cross purposes with creating high-quality, easy-to-use software.
"GMZ: Was this always meant to be free software ? Did you ever try to "get rich" with it? Do you regret that you didn't?
LL: At the time, it never really occurred to me that people would pay money for software. I certainly didn't think that people would pay money for a book about software. Fortunately, Peter Gordon at Addison-Wesley convinced me to turn the LaTeX manual into a book. In retrospect, I think I made more money by giving the software away and selling the book than I would have by trying to sell the software. I don't think TeX and LaTeX would have become popular had they not been free. Indeed, I think most users would have been happier with Scribe. Had Scribe been free and had it continued to be supported, I suspect it would have won out over TeX. On the other hand, I think it would have been supplanted more quickly by Word than TeX has been." (From TUGboat 22 (2001)
Just a very succesful case of money made out of free/open source software that is often overlooked (and maybe one of the oldest cases as well!)
38.8 million, on 96.5 billion
.000402 of sales..
(with a b) in sales in 2004
what percent is that?
%.0402
or
less than 1 half of 1 tenth of one percent
oh, I'm sorry, that's over four years?
about 1 tenth of 1 tenth of one percent of sales
Is that fathomable? I laud IBM for it's participation in FOSS, but- it's not even a drop in IBM's revenues...
every day http://en.wikipedia.org/wiki/Special:Random
Paths to make money of OSS
1) Support. Provide support for the software. Fixing or adapting it to the customers requirements for money.
2) Installation. Really a subset of support. Will install and train in the usage of OSS for money.
3) Add/Create OSS for money. They customer wants something. You will code it.
From a user's perspective, I think F/OSS is great because it's free and I can't help but feel enveloped with a warm fuzzy feeling from the idealism that it's bundled with. F/OSS is one of those things that everyone wants to work so badly, we ignore some of its shortcomings. It's like the uncle who everyone likes because he showers you with nice gifts but no one ever mentions his capricious spending or impending bankruptcy.
For those making money 'using' OSS, of course it's wonderful. They are essentially getting something for nothing ie for free.
The problem as you as mentioned, is that it devalues -- in $monetary terms -- the software developer's efforts and undercuts the efforts of other software developers.
I stress that the devaluation is monetary. But software developers or many that I've known (and I concede myself to some extent), run on a different currency -- one of ego and recognition. So in that sense the developer isn't entirely losing out. He has traded his time and energy for personal pr rather than money.
In some cases that recognition translates into getting a well paying job. However if money were the goal, F/OSS route wouldn't be the best route. I know it's a gross simplification but still noteworthy, take the two most recognized and influential personalities of operating software: Bill Gates and Linus Torvalds. It's obvious who's the world's richest man is, and who gets all the karma from the geeks like us.
The whole F/OSS movement is political. I know 'political' is a bad dirty word that engineers like to avoid. It's not necessarily bad because it's political but we should recognize it for what it is. It's a joust for power and leadership, goodwill in exchange for favorable opinions and sympathy. In the best case, OSS results in something like Linux, and in the worst it's the girl with a skirt giving looksies -- great for onlookers, a questionable gain for the exhibitionist, and great for the pimps who know how to squeeze a buck from it.
I probably keep those towels in the same place you store your facial tissues ... which you use for wiping up after when you jerk off to the latest stock quotes, urban zombie. Get some perspective, tool.
It never fails; bad-mouth the world's least moral religion (i.e. money), and all kinds of shitbitches pop out of the woodwork with their dismissive one-liners. My, what clever deconstruction you wield! You're so convincing with the scope of your arguments! {raspberry}
You're only proving what fucking idiots Americans are. Like your brethren, you're one of the best-educated retards that history has ever produced. The best you can rationally expect now is to be the last one to turn out the lights on your shithole of a country, after the last dollar has winged its way overseas with the last globalist executive.
[You have a stable society when some nut guns down a schoolyard and the law doesn't change.]
The obvious answer to the question posted is the well known essay "The Magic Cauldron"
n /
http://www.catb.org/~esr/writings/magic-cauldro
I can't believe nobody mentioned it before. (Yes! I actually checked it, so if someone did mention it, then Slashdot search sucks!)
But if you consider it morally wrong to produce proprietary software, why would you want to help people produce proprietary software. That makes no sense what-so-ever. Unless, of course, you don't consider it morally wrong to produce proprietary software, you're just a hanger on and open source your software as part of a strategy to get more customers.
How we know is more important than what we know.
I have always been fond of the dual licensing idea, however I am confused on one bit: One of the key advantages to open sourcing something, is utilizing the additional developers out there that can contribute to your project.
I would suppose that when a non-employee developer makes a change to the open source version of the software and submits it back for check-in, it is not possible to dual license this change without their explicit permission. Is this the case, or is there some other loop hole there that allows those changes to be licensed privately by the company?
If such changes are not allowed to be privately licensed, then it takes away most of the advantages of open sourcing the software in the first place, in my opinion.
-DJBS
Maybe I just haven't seen the light, but it still seems to me that Open Source remains the antithesis of the software development industry, at least the part that deals with the generation of wealth from the creation and sale of software. The economics of Open Source are that the act of authoring and creating software is not directly remunerated, but that there are secondary industries based on ancilliary services such as distribution, support, customization and consultancy. Perhaps it is true to say, therefore, that the Open Source system operates outside the rules of a free market economy, and is more akin to a Communist system of central planning, equal contribution from selfless, willing participants, and free consumption for all. What do you think?
/. crowd will proove me wrong!
There seem to be two main providers (authors) of Open Source software: volunteers, who contribute for kudos within their "on-line" community and possibly for altruistic purposes; and government-funded workers in universities, research centres, hospitals etc. I am not aware that mainstream commercial organizations, companies, or other "for profit" organizations represent a large proportion of the Open Source supply-side. This is perhaps because the contribution of time, effort or intellectual property to Open Source does not normally make economic sense as there is not a direct, associated pay-back.
The closest model to this is the type of company that consumes Open Source materials and submits contributions back to the community. I suspect that these contributions are those that were done as part of the course of business, and are not the result of any out-of-the-way development or sense of generosity. And perhaps the code 'feedback' is ultimately self-serving.
An interesting element in the economics of Open Source is that with the exception of government-paid workers the remaining authors are largely professional software developers who write software for a living as their main employment. Of course there will be many exceptions to this, but my suspicion is that Open Source can only exist on the back of Closed Source.
Clearly there must be a limit, or balance, to the scope and scale of Open Source or, like a snake eating its own tail, the movement will eliminate its own sustaining workforce and falter. Rather, there will be an equilibrium point. A related observation may be that contributors employed by for-profit companies will have limitations on the scope of their involvement, since most employment agreements lay claims on related intellectual property whether written at the office or at home. This, combined with a software developer's love of writing generic "super-tools", has meant that the most successful Open Source projects are software engineering tools, utilities and building blocks: Linux, Java, IDEs, configuration management tools, bug tracking tools, MySQL, PHP, PHPBB, Apache, gcc, etc. When I looked at this a year ago the four largest categories (55%, or 47,000 projects) at SourceForge.com are of this type. Indeed, these represent the majority of the 80,000 projects logged at that time.
I don't believe that the Open Source community would be moved to contribute on specific applications, such as the pacemaker example here. The available pool of kudos would be too small, as well as the available talent. No doubt the
Clearly the notion of free software is attractive to anyone with a software need. Personally, I am grateful to the authors of the software that I have downloaded for free, and will check-out SourceForge's 'Games/Entertainment' category forthwith; I am pleased to see Microsoft's strangle-hold on the desktop being seriously challenged by Linux. However, this is of course not good news for Microsoft. Although in danger of some sort of hypocracy, I would recommend that any software company watch the font of freeware available through GNU and SourceForge, and drink freely - so long as the 'copyleft' licensing terms can be accepted and managed.
Reg