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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?"
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?
Get bought out by google
Similes are like metaphors
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"
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.