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How Do You Make a Profit While Using Open Source?
rjst01 asks: "I work for a small company that sells an advanced engineering product targeted at a small niche. We have about 600 customers worldwide and our software is available in 3 languages, soon to be 4. My boss loves the idea of Open Source, and would very much like to release our software under an open source license. But, we're unable to find a working business model appropriate to such a small customer base, that won't result in us achieving anything other than destroying our revenue stream. The fact that our software is in an obscure language (think embedded programming) doesn't help. Can anyone suggest a business model that allows us to open source our software while continuing to make a profit?"
1. Don't spend money on software.
2. Collect revenue for your services.
3. ????
4. Profit!
http://alternatives.rzero.com/
2. Sell support contract for the price you were charging for the software, plus some.
3. Profit?
I'm serious, support is something you definetely can sell. Its a renewable resource!
-kcbanner
Obligatory blog plug: http://www.caseybanner.ca/
The problem of finding a business model which utilizes open source is presently confounding many companies, many of them very large ones. Open source is very, very useful at reducing the costs of doing business - it's not so clear-cut as to how it makes one money directly.
This question is somewhat incomplete. Why do you 'like' Open Source, and what motivates you to release your software? Unless we know that, there's no way to determine what sort of business model might be appropriate. What are you trying to get out of releasing it? Warm fuzzies? If so, then sorry, you're just going to be committing business suicide. If there are specific gains you're looking to make, then perhaps.
A hero is someone who knows when to run away. I am a hero. -Trent the Uncatchable
1)You say embedded programming. Are you selling the hardware as well? If so, the software is a vehicle to sell your hardware. You can easily make it open source and make money via hardware improvements. You may even make more this way, as you'll need less software development time (if people contribute back)
2)Sell feature prioritization. If you're really a small niche selling engineering equipment, chances are your users have very advanced needs. Offer to add features for a price. These features could either be exclusive (the user pays for you to develop it only for them) or inclusive (the user pays for it to be released globally) with sliding scales for each. This is on top of support and the usual open source models.
I still have more fans than freaks. WTF is wrong with you people?
Most open source business models that I have seen to date focus on support contracts and maintenance contracts for profit. That is if a user of you open source product needs support or wants a specific enhancement that is not part of the current project then a support and maintenance contract is negotiated in order to place effort on those enhancement requests. There are benefits to going open source such as lowering the cost of development since an open community of developers can place effort into the project. However, there are side effects that you need to look out for. Such as there is no guarantee that the open community of developers will work on enhancements requested by paying customers. These enhancements require that a paid development staff focus on those profit based enhancements to ensure delivery. In addition, project management of an open source project can be difficult since most poject managers are not typically trained to handle the management of open source projects. I suppose the point I am trying to make is that like any business model, your revenue streams needs to be identified and allocated appropriately to ensure the success of your business. Open source is always an option but the ramifications of making your source code public should be considered carefully to ensure that it supports your current business model and/or can help refine or mature your business model into a more profitable one.
kha0z
Master of ImportChaos.com
I'm not sure it's such a good idea to endanger your business's only revenue stream. How about you keep the source closed, but make sure the support you offer is excellent (i.e. implementation of new features on request, being responsive to bug reports and actually fix bugs for customers who have already paid, porting to new architectures when there's demand)? Also, have your customers actually asked for the source code?
You have to consider whether switching to a free-code/pay-for-support business model would actually be a good idea. Is the business as it is now growing or declining? Is your product a cash cow or is it becoming obsolete, unable to bring in the big bucks in the near future?
If you catch and sell fish, it's good for business to give away some fish now and then, but a bad idea to give away your fishery (except in 2048, when it'll just be a liability).
(Boy, I wonder how this will get modded. Disclaimer: I am actually pro-open source, and use Linux almost exclusively, and I've hardly ever touched atrocities like MSIE and XP.)
I suffer from attention surplus disorder.
The open source model was developed primarily as a way to write good software. I think in most cases it does that well, but you have to remember that there isn't always a business case for it.
I am not a CEO/MBA/any other business-oriented TLA, but I see three areas where the Open Source model can be a viable business case:
You have a lot of customers who pay for support - this seems to be the most touted business model. Give the software away for free, then sell support for it. This generally requires a pretty large user base to profit from though, because you have to make enough from support to cover the cost of developing the software.
You have customers with very specialized needs - this is basically the consulting model. You can use an open platform as a springboard for building custom solutions for your clients. This generally works well when you have large clients who can afford consulting fees, and it works best for things with a very large scope.
You Open Source the Product to buy Goodwill - basically if you have some software that isn't a huge source of income, you can make a business case for open sourcing it as a way to get good will from the community. Good will counts for a lot, but it can't replace your primary revenue stream.
From what you describe, your product doesn't really fit into any of these main categories. This doesn't mean that you can't make money by open sourcing your project, but the odds are probably stacked against you. If your company is interested in open source, you may consider looking at building porting your application to sit on top of a completely open stack of software.
I know a lot of people on slashdot tout open source as a magic bullet to solve business problems, but in the long run it's only going to give open source a bad name if people aren't honest about when it is a good solution, and when it isn't.
Famous Last Words: "hmm...wikipedia says it's edible"
The benefit of open source is having a community of developers who will improve on the product. If you have a small user base then you may not have that community of developers. The result is that you have given your product away for free, you can't afford to improve it and nobody else steps up to the plate. It's a lose-lose situation.
Even ESR admits that there are situations where open source makes no sense. Yours sounds like one of them.
Focus on your bussiness and not the software you use to achieve your results. If your bussiness is developing software then focus on what your customers want and where the market is with demand.
Software should not be on your mind as much as other expenses and equipment needed to do your job. No magical software will create your bussiness model.
http://saveie6.com/
Thats literally just it. How do you make money from a web site? I mean, the client has all the source, and can do whatever with them, no? (well, copyrights and all, but its still open source, and you sold it to them, so...). Its a bit like that.
Best case is probably an ERP system. Often with those, especialy for smaller companies, there isn't a very easy way to install them or configure them (which is where small ERP ISVs get their money). So even if its open source, who cares, they don't do anything with it. But the benifit is still there (if you go under, your customer isn't screwed).
Its pretty much the best of both worlds. Any business based mostly on services can do fine with open source. When the software -itself- is the product, you start having issues.
No, it's not still open-source. Open source doesn't just mean access to the source code..
Bogtha Bogtha Bogtha
Free Software is orthogonal. It is the idea that every customer should receive a set of basic freedoms (such as the ability to modify the code, and to distribute derived works). This is good for customers, since if you go bust, they can hire someone to keep developing your code.
The real difference between the two is that the source code and rights for an Open Source application are generally distributed (to encourage more people to contribute) while a Free Software application only has these rights distributed to your customers (who may then distribute them to the world at large, but then they do it, not you).
From your perspective, making your product Open Source has the benefit of (potentially) giving you a bigger development community. The cost is that it makes it easier for your competitors to fork your code and make a competing product. The way to avoid this is to ensure that your developers know the code inside out and so your product will be better than a fork (and, thus, your support contracts will be more valuable). It would probably be a good idea to make your developers sign a non-compete clause so they can't go and keep developing the software for someone else.
Free Software is different. You give your customers more freedoms, but don't (as) actively encourage them to contribute changes back. This is almost certainly good for customers of an embedded software supplier, since it makes it easier for your customers to customise your software. The benefits would be that you could advertise easier-to-comply-with software licensing and ease of customisation. You would make money as you always did, as well as by selling your services for customisation ('support'). Customers would continue to use your services for customisation since you could have more experience with the code-base than anyone else, but you could sell a freedom from vendor lock-in as an advantage.
I am TheRaven on Soylent News
Open Source does not mean Free or free. You can release the source to your customers without giving your customers the right to redistribute it or their changes.
Your customers could benefit from this because they could make any customizations they want to the program -- which may not be possible with your competitor's product -- and because if there is a bug in your program which they must have fixed right away and they have the ability they might be able to fix it themselves faster than you would fix it.
You benefit because your customers might give you that bug fix so you'll incorporate it in new releases, and you'll have a competitive advantage over other vendors who don't release the source code.
If your customers redistribute the code, it is piracy, just like if they redistributed the compiled program.
Lots of companies are garnering interest in their software by having an open source tier and then a tier with more features in it that costs money. This increases interest and customer base size at the low end, possible eating into some low-end sales, but appears to be creating more high end customers to offset that loss for the vendors who are doing it.
My God, it's Full of Source!
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