"FOSS Business Model Broken" — Former OSDL CEO

liraz writes "Stuart Cohen, former CEO of Open Source Development Labs, has written an op-ed on BusinessWeek claiming that the traditional open source business model, which relies solely on support and service revenue streams, is failing to meet the expectations of investors. He discusses the 'great paradox' of the FOSS business model, saying: 'For anyone who hasn't been paying attention to the software industry lately, I have some bad news. The open source business model is broken. Open source code is generally great code, not requiring much support. So open source companies that rely on support and service alone are not long for this world.' Cohen goes on to outline the beginnings of a business model that can work for FOSS going forward."

Comments

Well, duh

[David Gerard]

Do IBM sell software? No, they sell you a solution. They'll sell you Linux, AIX, Solaris (IBM is Sun's second-biggest seller after Sun themselves) or Windows.

Don't sell "software", sell "a solution to the customer's problem." This sounds cliched, but it's amazing how many people and companies work around actually doing so.

Re:Well, duh

[Phemur]

Do IBM sell software? No, they sell you a solution.

Actually, they do. $19B dollars' worth. That's a lot of software, or about 20% of their total revenue (for 2007, at least). Services (or solutions) revenue is tracked separately.

Granted, the software IBM sells is a solution to a problem. But to say that IBM doesn't sell software is like saying Gap doesn't sell clothes; they sell a solution to the nakedness problem.

Why does nobody understand why this doesn't work?

[Gavin Scott]

Open Source development is an absolutely amazing and powerful tool... ...for everyone in the world whose livelihood comes from something *other* than selling software.

Bankers need to run their banks more efficiently so they get together to cooperatively develop some banking application software that makes them all work more effectively and efficiently. This is the magic of co-op software development. There are other people who have the same problems you do, and if you get together you can produce really useful software for vanishingly small cost, and the result can be replicated without limit or expense.

Bankers don't, on the other hand, create free, zero-income banks.

Commerceial software companies making free software is, and always has been, a really dumb idea.

If you find yourself in this position, my suggestion is to move up the food chain towards applications of the software you've developed. Eventually you'll find a level where people have problems they're willing to pay to have solved because they're not common enough to make an open source / co-op solution viable.

If your business plan reads:

1) Invent really cool new product.
2) Give it away for free.
3) Enable the community to do all their own support and enhancements.
4) ????
5) Profit!

let me save you some time and point out that there is nothing you can put in step 4 that leads to step 5.

Open source development is not a segment of the software indusrty, it's a segment of the every-other-industry.

G.

The FOSS Business model

[WillRobinson]

The model of investor expecting to make a quick buck off FOSS is broken. Not FOSS.

"Open Source" is not a business model

[MarkusQ]

The open source business model is broken.

It isn't a broken business model. It isn't a business model.

Saying the open source business model is broken is like saying open source doesn't work as a cheese sauce. It also isn't a very effective screw driver. On the other hand, I have yet to hear a business model you can dance to.

--MarkusQ

Not a Factory

[bill_mcgonigle]

Don't sell "software", sell "a solution to the customer's problem." This sounds cliched, but it's amazing how many people and companies work around actually doing so.

Yeah, this guy seems to think the the 'support' model equates with the kind of technical support he might get on the phone at an 800-number.

In my business, anyway, the open source support I sell is really business support. Companies want to know how improve their business with software, and I can help them figure that out, and open source is most often the best answer. I usually save them a bunch of money, deliver a robust solution, and pay some bills by doing so.

Granted, that's not what most 'investors' are looking to do - they want to mass-produce support scripts for that 800 number and charge $40/call. But in my case, what people are really buying is my ~20 years of IT experience and knowledge and its application to cutting-edge technology, which can't get mass produced by the end of next quarter.

The broken business model is applying factory thinking to knowledge work.