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.'"

Comments

Thar be gold!

[Anonymous Coward]

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.

Does that make it better than the alternative?

[ReformedExCon]

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.

Re:I beg to differ.

[Bruce Perens]

One of our main differentiators is control. Rather than sell 1/4 inch holes, we're selling the ability to drill the size of hole you want, and not be limited to the drill sizes they have at the store.

Bruce