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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.'"
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....
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
Friend of mine works for a megacorp in a non-IT field. They get all their software developed in Malaysia and no-one else in the corporation has access to the source code. So whenever they need some small customization they do shit like screen scraping and dodgee Visual Basic hacks. If they ask for a customization or a bugfix from the development team they won't get it for 6 to 12 months, if they get it all, and it won't do everything they need.
So yeah, next time you try to tell someone about the benefits of Open Source, consider the fact that most consultants in their own god damn company don't have access to custom developed software.
How we know is more important than what we know.
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.
I don't know about that - think about it this way - if you write excellent code, and can sell support contracts for a product that has few if any flaws, (such as to corporate types who need that warm fuzzy of a finger to point if something goes wrong, even if it's unlikely to do so) you get your money for very little work, after you cover your initial development costs.
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.
The part of what I have read so far that jumps out at me was this:
Is the greatest economic effect of Microsoft the fact that they have enabled a great many businesses - their customers - to do business more efficiently, and to have businesses that they could not operate at all without the software that enables them? Yes, that is the biggest economic impact of Microsoft.
Microsoft is a tool-maker, and the effect of the tool-maker on the economy is tiny next to the economic effect of all of the people who are enabled by the maker's tools.
It's like my marketing (shriek! yes, marketing) professor says: when people buy a 1/4 drill, they're not really buying a 1/4 inch drill, they're buying 1/4 inch holes. The product itself is not as important as what it does and how it benefits the consumers.
I think this is an area that open source could use some work on. It's not necessarily that the drill has to be shinier, fancier, or even more featureful than Microsoft's/Adobe's/any other propreitary software maker's drill, rather it must drill better holes more reliably at a lesser cost. Then, we can can worry about what kind of finish is used to make it gleam under lights.
Case in point: KDE and Gnome both put a lot of work into eye candy, and justifiably so, but neither can give me a list of all the wireless networks around my computer in just 2 clicks in a default setup - but Windows can. I'd imagine OS X probably could too. It's these kinds of things that I'm talking about. Supporting wifi isn't enough - that's a drill that leaves jagged stuff around the 1/4 inch hole instead of making it clean all the way through.
Yes, if you want to sustain all of the cost and risk of development all by yourself. One of the main points of Open Source is that you can distribute that cost and risk among many parties.
Is "control" a euphemism for "incomplete"?
We have lots of finished software. And the world has square holes and round pegs. The people who finished that software never dreamed of a square hole.
As an example, I once met a Divinity Ph.D. who was using the Debian Linux distribution as a research tool. You can be darned sure that we had not planned on a divinity-friendly system when we made that release.
Sure, software can have scripting features that make it customizable. We used to believe that we could make "software ICs" using object-oriented programming and connect software stacks together as black boxes. But object-oriented programming did not achieve the level of reuse that people thought it would, because we never design the object for all possible needs. So, we need Open Source so that people can get at the pieces that need changing.
Bruce
Bruce Perens.
Having worked in this business for three years, and being the CTO of a small company in the Third World actually doing it, I can see a bit of a problem with it.
While I cannot deny that it's a profitable business, it's not profitable enough to make most people engaged in it very wealthy. The main problem boils down to the fact that it doesn't scale very well. The only way to grow this kind of business would be to get more clients to do custom work for, and pretty soon, you wind up getting lots and lots of work but not enough people to do it all (we hit this stage early on, and nobody was happy, not us nor what clients we had). Company hires more people, and profit margins shrink accordingly. That's the main problem. The same is true of doing support work. Support work needs people to do it just the same as custom development, and the more support contracts you get the bigger your support staff needs to grow to accommodate all those contracts. The bigger your staff, the lower your profit margins become. The business can be stable, but stability also means few opportunities for growth.
Of course, combine this with globalization and you get outsourcing, and that's why I'm reasonably well off here in the Third World. Labor's cheap here, and while our profit margins shrink too as we hire more people, they don't shrink as much as they would elsewhere. We pay wages the equivalent of approximately US$200 a month for entry-level programmers, and they consider themselves reasonably compensated. I doubt that such wages would even be considered survivable in places like the United States, Japan, or much of Europe.
Qu'on me donne six lignes écrites de la main du plus honnête homme, j'y trouverai de quoi le faire pendre.
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.