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BBC Examines Open Source Business Model
twitter writes "The BBC's David Reid attended Euro OSCon in Amsterdam and reports what he learned about the Open Source Model. He sums up the rise of non free software in the 1980s and how people and companies like IBM can make money with free software. From the article: 'The open source movement does not object to making money. The source code may be free, but there is gold in software support, training and publishing.'"
Do you really want to use software built on a model of the software is free but you pay for support?
There would be a huge incentive to make software hard to use, buggy, etc.
"there is gold in software support, training and publishing."
thats all well and good.. doesnt help a programmer pay the bills though.
There's also gold in the software customization market, like a VAR would in the propriatary market.
Being able to take a free foundation and tailor it perfectly for your business model is much better than trying to wrap your company around a canned, closed source solution.
Whats good for the customer is good for the consultant.
"there is gold in software support, training and publishing."
thats all well and good.. doesnt help a programmer pay the bills though.
Sure it does -- the company gets revenue through support, etc and pays programmers to make software so they have a product to support.
What comes first, finding a teacher or becoming a student?
Maybe this explains why the open source model is so good at writing software with user interfaces so inscrutably craptastic they practically require support.
Today I watched a TV show on hackers. How the hacker culture formed, from the phone interventions to the computer makers. One thing that called my attention was Bill Gates' letter to the homebrew computer club, saying:
"As the majority of hobbyists must be aware, most of you steal your software. Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid?"
It's so funny, isn't it? At the beginning, Bill Gates complained about people sharing "his" software. But now, people sharing FREE software (Linux, OpenOffice) is what's ruining his business.
Oh the irony....
If you want to say that Open Source software can lead to a viable business strategy, then I don't think anyone can really argue with that. There are companies that sell bottled water and others that sell magical stones, so there's got to be some way to make money stuff that is given away for free.
But is it a better strategy than actually selling proprietary software? Perhaps, but then again, it depends on how you define "better strategy". The whole point of keeping software closed is to keep control over the product. By doing so, it is possible to make money through lucrative licensing schemes. And the best part is that you only have to write the software once in order to license it multiple times.
With Open Source software, the product is generally available for free from any number of vendors, so such a situation limits the licensing fees that can be generated. Also, because of the nature of Open Source software, customers may choose any number of other service companies to do customization work. This is not the case with Closed Source, as the company that owns the product maintains strict control over who has the ability to do customization work on it.
On top of all this, how lucrative is "Service" anyway? In general, a product-driven strategy has a better margin than a service-driven strategy. A product only has to be written once, so the costs are all up front. In a service company, each project requires a certain number of employees, and as projects increase, so does the required headcount. There is always a growing cost of payroll associated with growth in a service company, so much so that as the number of engineers increase, the profit margin falls significantly because of increased costs such as HR and "non-essential" staffing overhead.
This is not to say that there isn't money to be made here. In fact, there is a lot of money to be made by keeping projects to a minimum and keeping headcount low. However, a company with any aspirations to become large and self-sustaining must rely on a strong product base and not solely on service.
But it doesn't mean that Closed Source is better. Just different. In many ways (such as from the point of view of the customer), Open Source represents a much better solution than Closed Source offerings. However, from a business standpoint, it's hard to imagine why anyone would see OSS as a better alternative to CSS.
Jesus saved me from my past. He can save you as well.
and there lies the big trap. As we move into the age of simplicity, we will not need any support. The IT tech guy in your office will be able to solve any 'support' problems.
The gold in software support is false gold.
doesnt help a programmer pay the bills though.
I've managed to pay my bills selling support for the last 14 years. First for packet drivers, then for qmail.
-russ
Don't piss off The Angry Economist
Note: RedHat was just an example and they have worked their business model pretty well, but I can't see it working for everyone.
Bruce
Bruce Perens.
The company paying the salaries of the programmers also has a much better insight into the product, and hence can support it to a much deeper level, as well as produce fixes or customisations in a shorter timeframe than a support company that doesn't have anyone inhouse who knows the codebase inside-out.
The small-time operator helping grandma do monkey tasks and being paid peanuts for it - well, there's room in the ecosystem for them, and they free up the programmers at Redhat et al from having to deal with the grandma level issues.
This only works if the company that's providing this support/documentation/etc. is
1. the same company producing the software
and
2. is producing support/documentation/etc. that is qualitatively / quantitatively better than freely available resources.
For practically all open source products available there exist publically available Forums where anybody can ask a question and get a reasonably quality or even high quality reply.
In addition, for the majority of open source products there are many resources available with regards to documentation, tutorials, etc.
So the only way you're going to make money off of support/etc. is if you can 'beat' those freely available resources - and I'm not entirely convinced that works for 'any' open source software. I feel like that is reserved to some of the larger and more 'difficult' open source projects such as Apache (plenty of free resources out there, but also plenty of companies providing dedicated support/etc. for it).
--
And of course with regards to #1... if you code a piece of open source software, and you try and sell it, and it's not selling.. and you don't have the time/resources to even try to make money off of support/etc. then you're still not going to make money off of your open source software - but others might.
Parent should not be modded "Troll". He brings up a valid point: if someone offered me a free car and said they would offer "service and support" for a fee, I would immediatly assume the car must be prone to having problems.
It's similar to a week or so ago when an article on slashdot brought up Microsoft entering the anti-virus/security market. It seems like a conflict of interest when part (or all) of your revenue comes from fixing your own company's mistakes.
With that said, I am still an avid supporter of open source and roughly 50% of the computers where I work run Redhat Enterprise Linux.
Damien Conway, who trains programmers through his business Thoughtstream, said: "I think the most successful of those is definitely licensing support; providing the software and then saying: 'if you want to buy a support contract, here's what it will cost you on an ongoing basis'.
There's more than just support:
There's also building and designing systems using open source. Like backup and mail systems, for example. It can sometimes be a lot cheaper (in savings on proprietory licenses) for a company to hire someone to implement an open source solution.
Then there's customization. Sendmail does X and Y but some company wants it to also do Z. They hire a programmer to write an add-on or a module. Again it can be less than buying proprietory licenses.
I've been implementing Linux systems for nearly 10 years doing just this and I've made a lot of money by helping companies save money.
perhaps i should be more explicit the next time.
I'm saying it's "ruining", i.e. present tense, something happening. Saying "ruined" refers to something that ALREADY happened.
By "ruining" i mean campaigns such as Google's, cooperating with projects that are a direct competition to Microsoft's. Perhaps I should have said "is threatening to ruin", or "beginning to ruin".
In any case, it'll be fun watching how the water is slowly filtering into Microsoft's boat. And certainly much more interesting than the Titanic, mwahahaha.
I cannot tell you the times I've ripped down an open source package that was oooo, ever so close to what I really wanted. If the source code happens to be in a language I know, I usually felt pretty free to modfy it to suit my purposes - namely the pursuit of world domination.
All kidding aside, this business model already exists. I've seen a lot of web shops that run this way now. They get ahold of some open source portal product, learn to tweak it, and then they sell it to all their customers with a specific set of tweaks for each customer. Heck, if more people knew they were running on Mambo, they'd be on the phone yelling at their web guys for charging them umpty-thousand dollars for "a custom portal application".
2 cents,
Queen B
HDGary secures my bank
These are programmers building great technology to help their peers to build software to solve customer problems.
Let's face it, the Open Source Model is more focused on meeting the needs of its user community for the sake of the community. In contrast, the closed-source for-profit model typically works on the basis of, "Is this good for company? Will this help us sell more product?". When your concerned 100% about the community your mentality behind development is far more focused on the solution and how the product can be improved, with no extra baggage like the requirement of turning a profit by giving focus on things that would simply sell a product (the changes in closed-source could be good or bad, since the focus is a sell not product improvement). I know it's been said before but it can not be overstated, for-profit companies can easily disappear and no promise that any sort of support is available in the future. The Open Source Model is so flexible that as long as people still use the software it can still be improved and developed. Essentially it's quite hard when using Open Source to lose any time investment (unless the software was that poorly used to begin with), while with closed-source model you can lose both time and money when the company that provided you the product disappears as well as the product support to never re-surface again.
In Open Source there is little room for added restrictions now and later that would require another license for using the software, while for-profit will always say the EULA is subject to change and can later lock you into paying continually more. The real gold in the Open Source Model is the flexibility it gives in use of the software. The protection from a lot of the stupid restrictions (i.e. paying based on number of concurrent users of the software) that we see in closed-source software almost practically pays you back in peace of mind and saves people from features in closed-source software that are specifically designed to lock you into their products.
You can find "gold" in anything if you look hard enough, or think about it the right way.
Just look at the King of the Golden River, Harry King. ;)
"Taking the piss since 1961."
His name is Robert Paulsen...
Holy crap! Has Microsoft started hiring Shrub's astroturfers?
It's really this simple: OSS is a loss-leader used to drive sales in other services like consulting and training. It requires a huge leap of faith (Linus) or desperation (Sun) to offer up so much hard work in hopes of future rewards, but it can be done.
While there may be 'gold' in support for some people, the suggestion that software developers should *only* make money on the support of their products is fundamentally flawed. First of all, it doesn't scale. Secondly, there is conflict of interest between providing paid support and creating software that is robust, intuitive, and easily customizable, such that it doesn't need much support in the first place.
Let's assume that you, a software developer, has created a product that is reliable, intuitive, and easily customizable. For the same reason that some uses would rather download a free version of an equivilent commercial product, why would you expect them to pay you for support, that assuming you've done your job well, they wouldn't really need? After all, for the few issues they would have, they could just look at the source.
No, that's not the model. The model is that some company gets revenue through support. Sometimes that company is the one that paid the programmers to make the software, but often it's not. There is nothing in the model that says the money necessarily needs to flow to the people who do the work.
The gold analogy is a good one only because the miners of gold are not the ones that put the value there... they're an unrelated crew that often strip-mines a resource with little care as to how it got there.
A better analogy might be seafood, though, since it suggests an ecology that needs to be measured and moderated to hold it in balance avoid overfishing ... rather than the oft-told fairy tale of an open software machine that uses perpetual motion technology and unlimited free programmer cycles into a world of surplus gold for everyone.
Kent M Pitman
Philosopher, Technologist, Writer
Ironic... we like writing code, empathise with the Bastard Operator from Hell, use clue-sticks, hate lusers.
Yet we champion open-source where our livelihoods come from supporting users, rather than closed-source where our livelihoods come from writing code.
- Customization/enhancement work.
- Migration and deployment.
- User support.
For example, many of Red Hat's larger customers have service contracts where they pay for 1 and 2. People who buy their shrink-wrapped product pay for a bit of 3.One very recent open source innovation is Flock, a browser that integrates next-generation web technologies such as RSS, blogs, bookmarks and photo sharing.
That would be the same Flock I downloaded the preview of last week - the one that is a build of Firefox with a new skin, a mildly different methodology for bookmarking (meh, tags) and er... er... it has a pop up editor for your blog that er... is not quite as good the one you can get by er... going to your blog and er... creating a new post... oh and a really shonky clipboard feature...
Oh and Next-gen web technologies? Hmm, my first blog (and I was slow to get on that bandwagon) er... 2001... so four years ago, practically neolithic in IT terms. RSS, hmm, played with that in 2002 for the first time professionally. Bookmarks, they've been around at least a decade in web browsers and the prior art must stretch back to the dawn of computing. Oh and photo sharing... has been around since a tech first realised he could digitise a pair of breasts and then display them on a teletype and then send it to his mate at the next terminal*
* and I'll bet there are some suggestive punched cards out there as well...
You've never dealt with Peoplesoft, Oracle or IBM.
Or that most of the "enterprise software" industry charges 20% of initial purchase price each year for ongoing support.
It is the way the market works now. it's not the way the market should work.
Who said that? Even the IBM rep quoted credited the developer community as a source of innovation. Did I miss something in the article or goof the summary?
People are getting it. I submitted this story because of it's friendly portrayal of free software by a mainstream news outlet. David talked to people who say most of what you say, ORiely, Thoughtstream and IBM. He had less time to understand and much less space to write about it, but I think he's got the right general ideas. I thought that was very cool for such a mainstream publication as the BBC. My title was something like, "BBC dispels Open Source Business Model FUD."
Friends don't help friends install M$ junk.
That's a personal problem, the last job I had I made plenty through doing software support, training and publishing in the software I wrote. I knew it better than anyone else so mine tended to be the more in-depth stuff. I suspect that my next job will do so also.
It's pretty common, look how many tutorials and papers at places like Ottowa Linux Symposium, Supercomputing, and other large conferences are written by the programmers. Even in some semi-canned software (Autocad for one) I've been put in touch with the programmers for support.
It's not code monkey work if that's all you want, it takes more discipline and knowledge, but it can be very rewarding. But then if all you want to be is a code monkey you shouldn't be complaining about this in the first place - you are limiting yourself in both your position and salary.
------- Sorry about the spelling, I suffer from two problems. Dyslexia makes it difficult to spell well, lazy makes it
I don't see how you can get to a point where you sit back, and essentially sell your code base over and over again, as most market-leading software companies do. That is where the huge profits are. All the typical ways of earning money using OSS requires that you constantly provide services, which despite being steady and profitable isn't a cash cow. The closest thing would perhaps be selling some piece of hardware only running software digitally signed by you, or OSS software running with proprietary software on top (OS X and Tivo, for ezample).
Live today, because you never know what tomorrow brings
I have a small company w/ a non-open software product. We offer support contracts. So far 0.2% of our revenues have come from support contracts, the rest from selling licenses. Our software is easy to use, so people don't need support. That model just isn't universal. On the other hand we do use and contribute to a lot of tool-level open source that is part of the product. But the parts are not under GPL, which leaves little room for anything but the revenue-by-support model, but rather under various less restrictive open source licenses.
What happens when the support is outsourced to India?
In summary, unattractive squares should stick to Linux and Windows. Seamless computing is for different thinkers.
* * * gallery updated 5 Nov. 2005 * * *
Perhaps someone can point out examples of companies that are successes using the business model the article describes.
O'Reilly makes money from books. Red Hat, MySQL make money from license revenues.
Namesys developed a highly-regarded file system (ReiserFS). It knows the reality of the "give the software away and make money on support" business model. Namesys survived because of a contract with the government (DARPA). From the company's web site:
For free software based on support revenues to be viable, people have to be more inclined to use our support service than they are to use the support services of persons who bundle our software with what they sell. Frankly, they are not, and this is why providing service on free software is failing as a business model for producing free software. These support pages were created to test the model. They offer the lowest support price around, your problems are handled by experienced kernel programmers, and yet they earn less than $1000 a year total. This seems to not be a unique experience in the free software industry, and this has severely impacted the viability of that industry. If you want to see a vibrant free software industry, go talk your government or large business into buying support contracts from code authors.
Perhaps it wouldn't be such a bad idea if some open source
programmers did grandma-level support twice a month?
to make sofware that is 100% what you need, without customisation. As mentioned earlier, if this were true, then CSS companies are screwing you over big time.
N3P is a two year, government financed (free as in beer) college level training in how to become a successful (free as in speech) Project Entrepreneur in Open Source.
N3P
Selling THE software.i ons+... so the buyer becomes actual OWNER of the software, not just a licensee, "person permitted to use our package".
Not "licenses to use", not "support+media+manual" packs, but THE software, that is binaries+source+specs+tools+IP+support+customizat
Sure that won't work in case of simple, tiny generic apps, but for specialised software - the government commissions a countrywide tax system, vote counting system, car registration index, health care accounting software, portals for government institutions and such. It's not likely the company would sell more than one (countrywide) license anyway, and profits from access to the sources, API, specs, ability to release the userspace tools for people for free, while making them possible to be modified to fit existing systems, it's all very important.
People paid to create software, pay for work, not pay for item. People paid to modify the software, audit the sources, add features, keep it bug-free (not pay per bug, but pay per month of bugfixing support service), people writing manuals, how-tos, guides - lots and lots of opportunities to get paid for work on common, publically accessible code base. And of course getting paid to create the code base in the first place.
Anagram("United States of America") == "Dine out, taste a Mac, fries"
Mighty interesting comment: "open source is real software" followed by "grow up and use real software". By your own admissions, we already are! Thank you so much for the validation. I can now continue to live another day.
Anthony Papillion
Advanced Data Concepts, Inc.
"Quality Custom Software and IT Services"
For the individual programmer, or small company, I think it's very simple. The open source building blocks are free, and freely available, but to use them well and combine them into systems to meet particular requirements takes uncommon knowledge and expertise. The only real way to get that expertise is to join the project, or work in tandem with it in some constructive way (eg CPAN modules, mailing lists, documentation, bug reports). So: more eyes, more open source developers.
And I don't for a moment subscribe to the view put forward above, that support-led work creates a culture of secrecy and obfuscation. Maybe in the corporate IT world, but only because the culture is already leaning that way. Out here in the shanty towns open source keeps us honest: everyone can see the documentation, the code, the other people doing the same thing. Everything is visible and everyone understands that our work is built on other people's work and theirs on ours.
We get paid for what we know and what we can do, and participation is the key to success.
I've actually been involved in that business. Unfortunately, the business was so bad in its over-promising of features that had never been tested and only appeared on Slashdot while the company president was on the phone so he tried to sell them to whatever customer he was talking to, and so poor in its hardware quality, that it actively deterred its one-time-only customers from using open source ever again.
It was very painful to be involved in, and I got out as fast as I could. Being highly skilled doesn't allow you to replace 2000 man-hours of testing with 20 lines of shell script or actually testing hardware with theh particular operating system the client wants installed.
Trust me: programmers have grandmas, too. It's a lot of fun to go to the local computer store and help guide innocent people to the right solution, just for fun. It frees up the sales staff to answer my more detailed question, and they still get to put their little sales sticker on the product sold.
Offtopic? RTFA, please. :)
Invisible to moderators.
Yes, GPL enforces requirement that you pass the source to your customer. But what in the world makes her benefit from passing it further? You could freely convince her to to keep the software for themself cause e.g. its competitors could use it to their advantage.
It basically places the decision whether to release changes to the public (and e.g. benefit from free testing, bug fixes, and ease the integration later) in your hands.
Of course it also voids all vendor lockin strategies and makes your position weaker.
Slightly offtopic, but we are still trying to reverse engineer God's code. It would save a lot of time and trouble if S/He would just release the source code. Further, the Bible has to be one fo the most obfuscated operators manuals I have ever seen.
S/He is not exactly tolerant of people changing his code either, after all S/He fired one of his programmers, Satan, just for adjusting one of his programs Eve by adding search and decision making code. Of course the code proved to be viral and infected another program called Adam. The new code was extremely buggy and has yet to be fully debugged.
During the 1850's most astute businessmen saw production as a 2n'd class industry - all the big wealth was in plantations and farming. But unfortunately for them, the industrial revolution forced the commoditisation of the labor force and the death of the plantation system.
Today many people see serivces as a loosers industry. All the big money is in factories and content "ownership". Unfortunately for them, the information age is doing for services what the industrial revolution did for production. The information age is forcing the commoditisation of information and the death of the copyright system.
Last time, there was a civil war. This time, I don't know what's going to happen, but I know for sure that all hell is starting to break loose.
Or better yet, gets random kiddies on the interweb to make it for free.
Now before I get modded down, I be to remind whoever might read this that what I am saying is FACT. - bogaboga
Economists: "Customers point of view might influence business standpoint".
Trust me, I work for the government.
The BBC article and the /. summary make similar mistakes that stem from a non-critical examination of the open source movement—using terminology and telling history in such a way as to refer to much the same software as the free software movement refers to but without the ethical component. This is all done to explain how things are strictly from the perspective of business.
As a result, "Linux" mistakenly becomes an entire operating system; not even a share of the credit for GNU, a primary contributor to a GNU/Linux system. Linus Torvalds gets primary credit for lots of work he did not do. If this article really "sums up the rise of non free software in the 1980s and how people and companies like IBM can make money with free software" as the /. summary claims, we should expect to find something to do with free software, no matter how brief or put off onto a link. Yet the BBC's article gives no credit to anyone involved in the free software movement for anything; no credit to the Free Software Foundation for writing the most popular licenses used in FLOSS (most notably the GNU GPL), no credit for any of the work the free software movement did for over a decade before the open source movement existed. We're supposed to treat the freedom-subtracted message the open source movement advocates as progress rather than point out that our freedom is under attack (for example: software patents, DMCA and other similar laws internationally, hardware vendors who won't tell you how the device works and only distribute proprietary software drivers) and it's much harder to gain back our freedom after we have lost it than it is to work to sustain the freedoms we have earned.
Without any examination of ethics, followers of the open source movement are likely to fall into well-understood traps where they accept non-free software. The open source movement never raises the issue of software freedom. Instead, this movement argues that more people should have access to a program's source code so that the program will be developed more quickly, at lower cost, and with fewer bugs. This increase in access to the source code does not necessarily include the program's users. Such a perspective is not the same as a the free software movement's perspective and simply doesn't go far enough to ensure our software freedom. This lack of political expertise and failure to inform others about the traps threatening our community will hurt us, in the long run.
I have no problem with people making money by developing, supporting, and distributing free software. But there are more important concerns in life. Consider what Richard Stallman calls "businessism": (about 1 hour and 2 minutes into the show)
Digital Citizen
You assume commercial vendors aren't already using the same model, except they expect you to pay for the box up front too.
Slashdot Patriotism: We Support our Dupes!
In my semi-open-source hat (I submit about half of what I write at work back as patches - soon a very large rewrite of perl's Net::DAV::Server based on what I have done for our inhouse system. Most of the other half is specific code that's not generic enough to be worth open sourcing)
I probably do a few hours of grandma-level support a month, but if I did any more it would seriously cut in to my actual coding time - and that's at a full time paid job. If I was doing this as a hobby then too much re-answering of FAQs would seriousy cut in to the rest of my life (young family, gym, choir - that's about all I can fit in even now).
A little frontline support is good to remind you to stay grounded - but too much and you never fly anywhere.