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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?
Have we finally found the Second Step?
See www.redhat.com, see www.sendmail.com, and so on and so forth. These people sell opensource product support, and make money doing it. This doesn't require paying some "analyst" $50k+ to write you a white paper on how to make money.
If I have been able to see further than others, it is because I bought a pair of binoculars.
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.
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.
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.
Couldn't we have summarized this as:
Okay, it's been 2 weeks guys, so we have another programmer who wants to make money programming, but has no idea how to create a solid business model, so let's all put in some work and tell this guy how to make money with FOSS instead of those of us who have figured it out running our own businesses.
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
Its easy to make money off of Open Source! Slashdot just posted a story on it!
You can mod your friends, you can mod your nose, but you can't mod your friend's nose.
Check out this other article about making money and open source that was on indicthreads.
Cathedral and the Bazzar.
If you use this product commercially, and feel its been of monetary value to you. Please donate a fraction of the value of the software. The value of this software is different for each person and company, please be fair. Thank you.
God spoke to me.
One thing threatening Open Source today--piracy.
As we have already seen today, the GPL is under attack from evil forces known as "pirates." These shadowy folk silently steal source code and violate the GPL, infringing on the rights of GPL authors. They are nothing more than thieves getting a free ride off the work of others, and I for one am disgusted at the idea of it. As you can see in the previous article, clearly Slashdot is also sickened by the idea of copyright infringement and piracy.
Some have even called for a lawsuit against these pirate thieves. Suing individual infringers has always been a position that Slashdot and its readership has supported, so it's only fair that the original GPL authors protect their rights and safeguard their material from being stolen in the future. I think we should all support any lawsuits against these infringers to protect the rights of GPL authors everywhere.
I appluad Slashdot and its readers for always taking a proactive stance against piracy and copyright infringement in general, and I would like to join the cause against this "source code theft." Piracy is a major threat facing OSS today.
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.
'How company can make money, if its products are available for free?'
In Soviet Russia it's a valid question, my friend, but not in English.
Invoicing, Time Tracking, Reporting
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
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!
-- Thou hast strayed far from the path of the Avatar.
Apple has been using Open Source and making money from it for a few years now. Their model is to have open source and freely available core components (Darwin, Webkit, etc) then build value on top of it and charge for that.
I think we'll start to see this model adopted more and more.
Yeah, but can anybody spot the other problem?
"How can a company make money if its products were available for free?"
The if...were is a hypothetical subjunctive; the writer is making a statement contrary to fact. The company's products are not available for free; the case is being postulated where they are.
Lots more details in Wikipedia, of course.
(No, I'm not a card-carrying pedant. It's made out of plastic.)
Not that difficult, really. All you'd really need is The GIMP to modify serial numbers. Plus a good scanner, nice dye-sublimation printer, and the right paper.
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.
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
Comment removed based on user account deletion
Using Google search terms "make money using open source", I came up with the following:
-101 Ways to Make Money off Open Source
-How to make money with Open Source Software
-Making an open source living
-eWeek:How to Make Money Off Open Source
I am not intending to be snitty in suggesting that you search Google; there were tons of other seemingly-good resources contained within it, and it might just be a case of different search terms. You might be able to team the information gained there with the advice of people here.
Also, if you can gain access to the class papers from the Boston Embedded Systems conference, particularly those from Bill Gatliff in 2003, there were tons of developers there who lectured on this very thing, citing examples and explaining the ins and outs of open-source licensing. I thought Bill Gatliff did an excellent job, and you may be able to contact him through his website for some resources.
*-*-*-*-*-*-*-*
"We are Linux. Resistance is measured in Ohms."
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.
There are other businesses where some parts of the theory behind OSS make them money.
I pay plenty of bar tenders to make me "Open-source" drinks that I know damn well how to make on my own because I'm just no good at it or I don't want to take the time to go to the store or I'm too tired to make it etc. etc..
People pay for hamburgers at restaurants all the time, even though even little kids know what goes in them, because they don't want to go to the store and buy all the stuff and they don't have the tools to prepare it or the skill to do it well. They just want to eat. It's a matter of convenience and skill and action.
You just have to choose the right market. When a bar tender is behind the bar she doesn't pay another bar tender to make her a drink that they both know how to make, but after her shift is over and she's dead tired, relaxing on the other side of the bar she will. Likewise, you probably won't be able to sell your OSS products to people who make their own OSS products. You sell them to people who need solutions to problems that you can provide using tried and true OSS code. To sound really cliche, if you're selling OSS stuff you're a "solutions provider" and your solution just happens to involve free software, but businesses will still pay you to solve their problems because you are doing work, your tools are just free.
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?
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
The question about making money is referring to the present - the same point at which the products are hypothetically available for free. English isn't a language where every 'if' clause takes a subjunctive. This sentence isn't expressing doubt or disbelief; it's a condition posed as a question.
RPM was garbage 5 years ago too. ;)
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.
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.
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?
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.
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!)
Have we finally found the Second Step?
But I don't have a problem. I can quit any time I want to. I just don't want to right now.
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.
Volume.
They say the first thing to go is your penis. Well, it's either that or your brain. I forget which...
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 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!)
I find making money with open-source to be a pretty straight-forward process. My only trouble has been with the TWAIN drivers I needed to scan the individual bills before I printed more.
Mmmmmm... Bold, yet refreshing!
Ok..Not exactly me..but my company. We have used products from AdaCore Technologies. http://www.gnat.com/.A couple of years back, the cost for several supported seats for both a self and a cross compiler (for embedded work) with a few small add ons was something like $25k. We'd gladly pay it again. The product was great. The support was great and we had access to the source code which is a real help in an embedded environment .
--- Liberty in our Lifetime
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.
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