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"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."
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.
http://rocknerd.co.uk
how supposed "experts" can be so dumb.
support != hand holding.
All software has bugs. If your customer finds a bug in the software they can report it upstream and wait around for the bug to get fixed or they can report it to you and pay you to fix it now. That's support. Same goes for features. Maybe they want to use the software for something that upstream thinks is worthless. They could beg upstream to add the feature. Or they could hire developers to add the feature. Or they could outsource that to you. That's support.
How we know is more important than what we know.
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 model of investor expecting to make a quick buck off FOSS is broken. Not FOSS.
The code itself might be great, but generally, the front-end (which I'm distinguishing as separate from the back-end nuts and bolts "code") is a mess. Installation and use difficulties are generally greater in randompackageX off of SourceForge than, say, MS Word or FoxIt. There are some OSS programs that are near hitchless, like Pidgin or Firefox (had noticeable problems with crashing on exit in Vista, though), but if you go beyond the star players, you'll quickly find this argument doesn't hold up to empirical scrutiny.
Slashdot: Playing Favorites Since 1997
...the traditional open source business model...
It's been around long enough to be "traditional"?
I see even classic Slashdot is now pretty much unusable on dial up anymore.
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
As far as FOSS being something that has serious business problems in regarding to sustaining the developers who work on it, this is indeed a serious problem. It generally can be very hard to raise revenue with FOSS, projects can ask for donations and sell packaged versions, but you often end up with just a trickle with these sorts of things. Programmers should obviously be able to work full time developing software. With FOSS directly competing with commercial software an eroding those markets, could it be that programmers will end up waiting tables during the day just to support the time they spend writing code? fOSS does indeed wipe out commercial software markets and it can actuall
I am supportive of the freedom aspect of FOSS. For far too long commercial software has shut down innovation and stifled the development of improvements through cooperative development with its closed model. FOSS is on the other extreme, its an open model but it leaves programmers in a situation where they cant afford to live. Perhaps a solution for some projects lies in the middle, with a commercial source tiered licence system, where the source code is provided with all licences, the developers are receptive to improvements from customers, and the cost of software is set according to the ability of the customer to pay, a hobbyist who is using the software for fun would pay far less than someone using it in a high revenue business. This assures that the software does have a high degree of openness and accessibility to all, but also assures revenue can be raised to develop the software.
One thing i think we will see FOSS project's movng away from is giving away the software. if you GPL something, it doesn't mean you have to give it away, it just means who ever you sell it to gets the source code along with the program.I could for example write some software, sell it to others and then give them access to the source where only paid customers could make commits and see the source. source is only required if you distribute something....
If you mod me down, I will become more powerful than you can imagine....
So long as you are content to have a number of kinds of programs never be open source. If your solution is "Bundle with hardware if you want OSS and need money," ok then don't be surprised when people who's market doesn't deal with hardware chose money over OSS. I'm talking about things like games, or, say, video editing software. Things where you neither want or need additional hardware. Things where the idea is to use the hardware of a general purpose computer to do what you want.
This accounts for most software out there. While there's certainly things like, say, a firewall app/OS or something that it is perfectly valid to bundle with hardware, there's plenty of things that are just programs to run on a normal computer, no other hardware needed or wanted.
For programs like these, the response from many OSS advocates has been "Sell support!" However that doesn't work in a lot of cases. If you program is well written and easy to use, people won't need support by and large. Some of my favourite software packages, OSS and commercial, are ones where I don't need support of any kind. They do their jobs and are easy enough to use I need to additional help beyond what's included.
So what then? What do you do if your software is both a good product, and not one that uses hardware? Currently, the options seem to be "Open source it and give it away for free," or "Close source it and make money." In some cases, people can afford to do the former but not all. The "Just give it away for free," sounds like a nice idea when you are a broke student who would be receiving said free software. It sounds like less of a good idea when you are a programmer with a family to feed who would be getting no paycheck if you do.
So you run in to a large category of programs where you don't have a viable model. Support isn't a viable model since people don't need it. Bundling isn't a viable model since that isn't what your software is for.
Odd, I can think how people are making your equation work with varying choices for step 4.
4) Make it do a complex task that requires skilled labor you provide cheaper than training staff to handle it internally
This works for several companies, a couple of which we pay where I work. The task of consolidating threat profiles, keeping them current, providing solid feedback and rapid response as well as managing secure channels with a variety of companies is something our company could hire a couple full time employees to manage. Rather than be out the cost of staff, we hire an outside vendor who does it very well at a fraction of the expense.
4) Build a small closed source application that utilizes the open source software. We use software built to work with a MySQL database system. The tasks done by the configuration, maintenance and integration are within the reach of a moderately talented programmer, but they are able to do it for hundreds of clients who all benefit from solid testing, research and experience of a few experienced and skilled developers who also contribute back to the open source system. This improves MySQL for anyone who cares to use it, but at the same time benefits the company who own the closed source application utilizing it. (For this example the model has to change step 1 to "Promote and contribute to a really cool product.") This is similar to the business model for Crossover Office where you pay for the expertise that has gone into the development of a product that does nothing you couldn't manage by hiring talented developers but for a price that makes sense for small business.
4) Make your staff the source for training required to manage a complex system. Zabbix is an example of this type of product. You can download and work on Zabbix for free, but it is complex enough that for significant implementation, you really need to get solid training, and that will cost you.
Our core transactional system in fact, would be a great example except that it is a closed source system. The software is good, but there is plenty of similar software that we could use. What we really pay for is the ongoing development, support and integration they offer. They protect themselves from competition by keeping it closed, allowing them to charge a higher fee, but if they were to manage a transition to open source they could potentially drop their development costs significantly, increase market penetration and undercut their competitors while still maintaining the same profits. They would have to face the risk that another company could do a better job pricing or servicing their current customers with the same software, however, and I honestly don't believe they have enough talent in programming, support and management to make it worth the gamble.
B) Eliminate all the stupid users. This is frowned upon by society.
You do it like Apple does, free version is Darwin, commercial version is Mac OSX.
The free version is the core, skeleton, just the basics needed. The Commercial version is the skeleton with meat added on it for bells and whistles and features.
The BSD model works great for Apple.
Red Hat uses the GPL model, the free version is Fedora and the commercial version is Red Hat Enterprise. Novell free version is OpenSuSE, Commercial version is Suse.
There there are custom versions that fit a certain client's need like a glove. One size does not always fit all, and sometimes you have to custom tailor a version for each client.
Also you sell bundles as solutions and the client pays you to set it up for them.
Remember, Slashdot does not have a -1 disagree moderation, and no, troll, flamebait, and overrated are not substitutes.
Stuart Cohen today is chief executive officer of the Open Source Development Labs. With more than 22 years of international sales and marketing experience, he is a seasoned technology industry executive and has served in a variety of executive roles. Most recently, Cohen was vice president and corporate officer at RadiSys Corporation where his responsibilities included strategic partnership development with other industry leaders including IBM, HP and Dell. Prior to RadiSys, Stuart was vice president of worldwide marketing and a corporate officer at InFocus Corporation. Stuart spent 17 years with IBM, where he held senior positions in the US sales & marketing division, and the IBM Personal Computer Company and Networking Division, with international business development responsibilities in Europe, Southeast Asia and China. Stuart holds a B.S. in Quantitative Business Analysis from Arizona State University.
LinuxWorld
So... a corporate marketdroid that never invented anything, never built a business, who coattailed himself into executive positions with minor players based on prior employment relationships with major players who has a B.S. in Quantitative Business Analysis. Who, coincidentally is trying to bridge free software and services in a for-pay model that's starving for attention?
I'm gonna go with... um... so they couldn't get an Enderle quote? Was Maureen O'Gara busy that day? How did this guy talk his way into OSDL? It's interesting that their Wikipedia page mentions him not at all.
Help stamp out iliturcy.
It wasn't a hard thing for me to adopt OSS. It was a marketing idea that brought Cohen and Frye to this. They are both relentless fools.
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 $40/call. But in my case, what people are really buying is my ~20 years of IT experience and knowledge and its application to cutting-edge technology, which can't get mass produced by the end of next quarter.
The broken business model is applying factory thinking to knowledge work.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
A CEO in BusinessWeek is talking about a concept "failing to meet the expectations of investors."
I've heard that a *lot*. Usually means "I don't understand this, but I like to babble".
So you think you cannot make as much profit on FOSS? Isn't that sad? Perhaps you could make more money selling home loans - something your reality-dysfunct cow-orkers all seemed to agree on, some time ago.
Usually it's not worth listening to managers talk.
Free PC version of ChipWits at http://www.breueronline.de/klaus/chipwits/
Free Software is not a great money printer for business in the traditional sense. Instead of earning money they save loads of money and thats something many PHBs have problems wrapping their head around. The software cashcow where you could write an application and then sit back and reap the rewards are dead.
I think the focus in mainstream media is very wrong since they only look at the earning bit and not at how much money can be saved. In their mind Linux isnt successfull if it dont bring in lots of money even if it saves boatloads of money for the people using it.
HTTP/1.1 400
Evidently not. There are many objectives and purposes of FOSS, while boxware has only the purpose of selling units. That is tough to compete with because boxware, from an investor perspective (person investing in the company selling it, not the ones buying it) it is successful when they sell so many units, and fail if they sell too few. Very straight forward.
FOSS in every way is more complicated. Investors of Red Hat want to see subscriptions sold, but that also depends on who you would call an investor. Many people profit from Red Hat's work, and any FOSS progress is perpetual. Red Hat will always live on in a way because of its nature. People can always expand and support Linux no matter what happens, By contrast, whatever way it could happen, if Microsoft one day went belly up, EVERY investor, stock holders and users are totally burned.
So another contrast. The purpose of Windows is for the software to be sold. The purpose of Linux / FOSS is to be productive. FOSS doesn't need to be profitable by the box as much as it needs to be useful, and proprietary software doesn't need to be as useful or productive AS MUCH as it needs to sell box units.
When we are talking about a movie company, there are two routes to go. Movies are not FOSS, remembering that the last 'S' means software. Movies make more sense under a CC license if you want it to be that type of free, but that is something else entirely. FOSS v. proprietary for a movie studio is the argument of whether or not the company is going to use make all their own software (very impractical, they are not a software company), or pay someone to give them the software they need. On a larger scale, individual companies can make their own software (again, makes no sense cause not a software company) or movie studios as a whole can pay one big company to provide for all their needs. In a way this can make a lot of sense, but has certain limitations when it is proprietary. The FOSS solution says use this open model, build upon it as you need, BUT if you share that code or want to sell it, you need to "share-alike". This means that movie studios can meet their own individual specialized needs, and have the benefits of a community that is 'invested' in having quality software. There is also the motivation and hope that if you choose to share parts / tools that are good for you, others will build upon it and improve upon it making it the best software possible. So if 100 movie studios work together sharing their best in-house tools for making quality movies, then many things happens. You have great software everyone can use. The software is superior than what any one company could develop. The tools are more flexible than could have been possible by one company, and profitability will come down to the ability for companies to utilize that software to make a good movie. Software engineers got paid for their work, the software is very valuable, but 'worthless' as a stand alone package. So now the questionable investment is whether or not it is going to be worth your money to invest in someone looking to make money contributing to such a project that is not directly involved in the movie production itself. Red Hat is such a company (for another industry, of course), but when such business models 'fail', the ability to quantify the failure financially for that company is 'simple' (sort of) but not for the software as a whole, something MUCH more complicated.
But again, the only thing special here is that when proprietary boxware fails, it fails for EVERYBODY and entirely. FOSS just can't be judged the same way, even if it is something very difficult for people design a business model around.
And I'll just say it now before anyone needs to point it out, I do casually program and use Linux but I am not a software engineer, and certainly not involved in the industry beyond consumer and fan. This is just my observation and opinion as an outsider with a strong belief (even if a naive one) in FOSS.
Want Big Business out of government? Take away the incentive and start by getting government out of big business!
I don't think this guy understands why the GPL is so important. It's sticky. You can't lock away your improvements/fixes. All the increments get added to the whole. Without GPL critical mass is much harder for a project to reach. Don't wish to start a fight, but I think this is why the number of GNU/Linux users/drivers/work is significately greater then that of BSD. Irritating though Stallman is, he has come up with a set of rules that logically lead to open source critical mass. As programmers we should be able to take a set of rules and see the out come.