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13 Open Source Hardware Companies Make $1+ Million
kkleiner writes "Selling products whose design anyone can access, edit, or use on their own is pretty crazy. It's also good business. At the annual hacker conference Foo Camp East this year, Phillip Torrone and Limor Fried from Adafruit Industries gave a rapid fire five-minute presentation on thirteen companies with million+ dollar revenues from open source hardware. The thirteen add up to $50 million this year. While this business model is counter-intuitive for those accustomed to our current patent- and copyright-encrusted system, Torrone and Fried estimate that the industry will reach a billion dollars by 2015."
In the world of hardware there is an enormous difference between the two. You can easily have $1M in revenue and lose your shirt (make a huge loss).
http://lkml.org/lkml/2005/8/20/95
How much does proprietary software/hardware make? It's hard to examine, but it's probably more than $50 millions.
You know, Dr. Evil, a million dollars isn't exactly a lot of money these days. Virtucon alone makes over nine billion dollars a year!
$50 million today => $1 billion in 5 years! You'd have to be crazy not to invest EVERY PENNY YOU OWN in these companies!
Negative moral value of force outweighs the positive value of good intentions.
if this is meant to be some measure of success...... FAIL.
If you mod me down, I will become more powerful than you can imagine....
By making your hardware more accessible, you are increasing your product's value for your users.
Of course, this works better if you only expect revenue from the sale of hardware units and don't rely heavily on revenue from providing some form of subscription service or software sales.
I believe this is a good thing. Hardware *should* be open. I long for the old days when we could come up with new ways to use our bare hardware.
Open source improves this not by "forcing" manufacturers to be open, but by lowering the production costs and lessens the need to offset very large initial investments during the production run with secondary revenue streams.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
I don't really see the growth factor for open source hardware. Yeah, its great if you are a geek, but if you aren't... why bother? Most open source hardware projects are designed for people to program. I see things like Android becoming popular, open enough to do most things you want, but still polished. Yeah, I like being able to program obscure assembly commands to a CPU to make it do odd things, but I like things to work without having to spend hours setting them up. So while I don't think things are going to shrink, I think that the number of geeks really aren't increasing enough to expand the market.
Taxation is legalized theft, no more, no less.
That's great and all but how much profit are they making on that $50 million in revenue?
Doing a million dollars in REVENUE is simple. Just about any company can bring in a million dollars in revenue.
The question is, can they pay their people, their suppliers, their advertisers, etc and then MAKE A PROFIT from that revenue? That's the hard part for ANY business.
Mike @ The Geek Pub. Let's Make Stuff!
RAM, blu-ray, LTO backup tapes, WiFi and others
in all cases many companies come together, pool their patents to create a standard and share the profits since every product sold puts money into the industry pool to be doled out to its members. The model even predates Linux, since that's how VCR's were sold. the profits go back into research that is pooled into another patent pool for the next generation product.
Open source has been called a 'virus' by the traditional copyright establishment.
It might be more accurately be called an alternate operating system, running concurrently, that the existing OS is recognizing as a virus.
And yes, that is a Voyager reference.
Technoli
Their products are amazing. In case you are not familiar, Mark Spencer and crew are the guys behind Asterisk, the best PBX ever. Their hardware business is actually pretty big, and they also provide asterisk-related services, including training and support.
Considering that 20% of all PBXs in use are Asterisk-based, I thought it was worth mentioning it.
WTF am I doing replying to an AC at 5 A.M on a Friday night?
A billion dollars is not a big number, and not really worthy of tooting ones horn over. Are you kidding me? And 50 million dollars for an industry isn't even enough to launch a magazine over. Wow.
You just know someone's out there thinking it. It's easier to sue open-source, since all the stuff is out there, exposed. Too bad closed source won't play by the same rules.
Just for a little perspective - a $1M revenue company is a teeny-tiny company. We're talking mom and pop stores in a strip mall here. $1M in revenue is not hard to achieve - in fact if you don't care about profits it is very easy to achieve. (A business selling $2 bills for $1 will have all the revenue they can handle but will also be incredibly unprofitable) When these companies make $1M in profits, I'll be significantly more impressed. If you ever look at magazines like Inc they will always quote revenue figures in their articles and ads because it sounds impressive but really is pretty meaningless.
That said, its nice to see some traction in open source businesses even if it is small.
...make it up on volume, easily!
I've worked at companies with 3 employees and multi million dollar years that still went out of business. $1M/Year revenue isn't impressive unless you still live in the 50s
Heres a better example, I can give you a company with a nearly infinate revenue stream.
Put out a 'bill changer' machine. It takes $20s and gives back $50s.
I promise you as long as I can fill it with $50s, no one one the planet will have higher revenues than me. Of course that doesn't mean the business is viable, but it WILL have kick ass revenue and cash flow.
Persistent Volume manager for Kubernetes - https://github.com/dwimsey/openshift-pvmanager
Growing from $50m to $1B in five years would mean that the market for open sources increases twentyfold in just five years. OSS has been around since the 80ies, OSS companies have been around since the nineties. So it took 15 years for the market to grow to $50m, why on earth should it increase twentyfold in just five measly years? Like many analysts, he is just making up numbers.
To be perfectly clear, that model predates electricity, since that's how sewing machines were first sold (1856). Honestly, these aren't new issues. Patent thickets have been around almost as long as patents, as have the solutions.
I can believe that just being able to prove that a company in fact created an open source hardware design-or made a major contribution to its design, is enough to garner it significant business.
One problem with closed source designs, is that you may be buying from a company where the original creators are all gone. Open source hardware can help contain that possibility.
Not counterintutive for anybody who is, well... a little bit older. There. Said it. Now that that's out of the way, let us hearken to the days when TV sets had SCHEMATIC DIAGRAMS printed on the inside of the box. This was so that guys called "repair men" could actually fix these "valuable devices". Furthermore, while most consumers couldn't tell heads or tails from the schematics, they could at least unplug the tubes and take them to the drugstore and test them, to see if it was as simple as a worn-out tube.
No, I'm not that old. I was a little kid when all this was still going on, and even then it was fading fast. Still though, I have vivid memories of it all. It made quite an early impression on my budding geek mind.
If computer hardware gets back to that, it would be a welcome regression to the mean. Throughout most of history, you could generally understand most of the components in a device, or at least understand the relationships between the black boxes well enough to make repairs.
Anyway, the companies that made these "open source" devices throughout history did just fine. They prospered because most people don't have time to understand a schematic or source and integrate all the parts themselves. They'd rather pay somebody else to do that.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Sorry, that's a little pathetic.
I am really surprised at the comments I see on this. I would have thought of all places this sort of thing would find a few more defenders at Slashdot. I think open hardware is a great idea with just as much if not more potential as it has in software. It sure isn't going to be as quick to happen but I would love to see large scale design efforts for things like cars done in the way the FSF does software.
And hundreds of companies make much more off the fruits of OSS 'labor'.
'We are trying to prove ourselves wrong as quickly as possible, because only in that way can we find progress.' RPF
Start by being a billionaire.
Science advances one funeral at a time- Max Planck
Their hardware isn't open source.
...what in the HELL is with these comments? A lot of these people either seem to have their heads up their asses, or are just jerks.
Sure, a million bucks isn't a lot of money in the grand scheme of things, and may not be huge by small business standards... But for fuck's sake people, we're talking about companies consisting of-- on average --just a couple of people. People JUST LIKE US. In fact, they ARE some of us! If YOU made a million dollars in a year, wouldn't it be a pretty big deal?
With the world economy in the toilet and still goin' round an' round, tiny companies like these making decent money selling open source gadgets and whatnot IS a big deal.
Yes, revenue isn't profit, as many have pointed out. But I'll bet you anything, these people are doing fine, which isn't exactly something we can all say, now is it? Sparkfun? Sure, they're not really tiny like the rest, they have facilities and staff and all that, but still... Wanna know how they're doing? They gave away $100,000 worth of free stuff a while back, and I'll bet everyone's still got their jobs and can afford to eat.
These are people just like us, and they're pioneering the new way to design, manufacture, and sell electronics. Opensource hardware is even going to change the consumer side of the equation. Making people smarter about the things they buy, and making the consumer take up a more participatory role. It's another step in the democratization of technology.
Here's hoping we bring up the next generation wanting to build and create more things than they buy off the shelf. And here's hoping my name will show up in a similar presentation in the not-too-distant future!
Friend: "The NIC is misconfigured..." Me: "No prob, I'll just telnet in and fix it." *Silence*
My parents do about $750,000, maybe more, in sales per year in their small business. However they still aren't making a profit. Their expenses are eating it all up. They aren't millionaires and will never become ones this way, despite having sales near a million a year. Business isn't cheap to do. Whatever you think a business should be getting in profits, you have to figure their revenues have to be at least double that, usually much more. For example GE has $154 BILLION in revenues, yet makes only $10 Billion in terms of income available to common.
Doing a million in sales isn't hard. As I said, my parents near that and they have a small business that more or less sells just to a small tourist city in Canada. Making a million in profit, that's much harder.
It's true, the hardware itself isn't exactly open right now, but it's an evolution over previously free hardware. That is, the Zapata project was extensively funded by Digium, and Zapata hardware was openly published. Today, Digium hardware isn't open, but all the specs are and so are the drivers. So, it's trivial to develop compatible hardware. There are actually several companies that produce and sell compatible hardware, like Sangoma. Mark wrote several important Free Software, including Asterisk and Gaim (now pidgin), and his company (Digium) continues to support and develop Asterisk, its drivers and other pieces of related software and content (like Audio) completely Free. So, while they are not 100% free, I certainly think that their model is Free Software, and it's been working nicely for them and for the community.
WTF am I doing replying to an AC at 5 A.M on a Friday night?
The first one that really pops into my mind is Sun(or I suppose now Oracle). These guys definitely make more than 1 million in revenue, or profit. The Verilog for the UltraSPARC T1 and T2(The CoolThread family) was released under the GPL. They don't talk much about it, and apparently nobody else really does either, but they pull in big money, and the general consensus is that the GPL is Open Source.
or more.
This simply shows that they could be making much more... but if they are happy with what they do, who are we to say?
I wish we had more companies that make what they love to do; and are not trying to achieve more revenue and profits.
Back in the day companies gave away reference designs for their new components, and companies often simply added software to these reference designs to specialize their products. The Tandy Color Computer was a chip-for-chip reference design created by Motorola. The Colecovision was a chip-for-chip reference design from Texas Instruments. These reference designs were zero-cost, modifiable and distributable.
How much different is a freely-distributable reference design schematic with open source DL? It isn't if you think of the chip as a circuit board in miniature and the OSS HDL as a code for a schematic. Of course, that users of the unprogrammed chips have to do the reference design themselves, rather than receiving it gratis from the manufacturers is beyond me...
Oh yeah, I forgot: monetize what was once free or stockholders get angry.
the profits go back into research that is pooled into another patent pool for the next generation product.
...that is closely kept behind barriers to prevent any newcomer to trouble this cycle of profits with these pesky "innovations"
The Wise adapts himself to the world. The Fool adapts the world to himself. Therefore, all progress depends on the Fool.
Most hardver is specified using Verilog or VHDL, so there isn't such big difference between hardware and software.
If you've got 4 employees that's $250k each! Oh wait, then there's health care and benefits and now you're down (generally) to a basic $125k each. Unless, of course, you want to invest in R&D. Now four people are making less than they would on the outside for a much more stable position. And how many of these companies actually only have 4 people in them? And these are really the best of the best in the group? Lesson learned: Open Source Hardware=Fail
Torrone and Fried estimate that the industry will reach a billion dollars by 2015
Everything will happen in 5 years! Cars will fly, world hunger ends and open source rule the software world.
The world is full of companies making open source stuff. The design of a burger is hardly a deep secret. Lots of fixtures around the house - and business - are manufactured to standard designs, and are the more valuable because they are standardized. Sure, I can cook my own burger. I might well be able to manufacture my own bolts and so on. But why bother?
The point here is that these guys are succeeding not because of some magic intellectual property, with legal IP protection or secrecy.They are succeeding because of the economies of scale. While I could perfectly well duplicate their design, it will cost me, in components and time, much, much more than it costs them. Why should I bother building my own when I can buy theirs, probably better built, tested, and with some sort of a manual, for the same price or little more? Batch or mass production produce economies which allow shipping and warranty costs to be absorbed and still leave a workable profit. The clue here is cutting marketing, selling, and shipping costs. And the answer here is the Internet. The Internet allows world-wide advertising at low-to-no cost; setting up a shopping cart is trivial for any geek; we now have payment systems which work for the whole developed world, and parcel shippers will delver across the developed world in 2-3 working days.
Actually, the model for this is PC assemblers, up to and including Dell. The design of a Windows/Linux compatible PC is open source. The components are widely available. Thousands of companies, from one man shops up to Dell, are making a business of selling PCs that any geek could assemble for himself - and often does, in the evenings. But at salaried rates, it is better value to buy in your assembled PC from your mate down the road who does ten a day, or from Dell who does 10,000 a day, than to go to the bother of ordering the bits, assembling and testing something that will be no better when you have finished it.
Consciousness is an illusion caused by an excess of self consciousness.
The thirteen add up to $50 million this year.
Wow, all that tells me is open source hardware is a TERRIBLE business model if that's all they're collectively making in revenue. Is that the point of the presentation?
And say it with me...1 million dollars da daaaaaa! ...yawn
Why is everyone comparing these OSH companies to huge international tech companies? These small upstarts aren't providing schematics for the next desktop CPU. They are simply selling kits and schematics for electronics/hacker/maker gadgets. This is the next evolution of Heathkits and Radio Shack's better days. These companies aren't really trying to compete with the giants of the tech industry. The purpose is to act as an enabler for tinkerers, hobbyists, and crafters.
After years of ignoring hobbyist electronics, I purchased an Arduino, an AVR programmer, and a breadboard with a 5v power supply (all from Adafruit). When I discovered the arduino community, i was hooked. The money I paid to Adafruit was, to me, a small amount to pay for a ticket to ride. While I was relearning the electronics basics, I tweaked the design of the 5v power supply with some different parts from Digikey. This led me into etching my own circuit boards, and building my own kit. When that first gadget fired up, it was like the feeling I got when I completed Linux From Scratch for the first time. I felt like a kid again. Please refrain from pointing and yelling, "NOOB!" I'm just an architect (not the software kind) who has reconnected with my nerdy past. I'm already working on designs for DIY versions of a CNC mill and CNC laser cutter. I'm going to do this because I've been inspired by the DIY community and the companies that cater to that community.
Seriously, do a bit of research of what these companies are offering. If you're not inspired by what people like Limor Fried from Adafruit are doing, then you need to turn in your geek card. I'm just a beginner in the DIY world, but this stuff is seriously fun. That these companies are making money (even if only enough to stay alive) is a win for the geek community.
Put out a 'bill changer' machine. It takes $20s and gives back $50s.
Whether or not that's profitable depends on which countries' dollars your machine handles. I wonder if any company has tried vending machine-style foreign currency exchange.
I don't dispute that they use "free" software, just not hardware. Their primary business model is to sell interface cards or turnkey systems. That's why they purchased Switchvox a few years ago.
> Why is everyone comparing these OSH companies to huge international tech companies? Where are all the references to these huge international tech companies? Besides it's not as ever any two people starting in a garage ever went on to own a global corporation, selling an iconic desktop computer.
By making your hardware more accessible, you are increasing your product's value for your users.
Of course, this works better if you only expect revenue from the sale of hardware units and don't rely heavily on revenue from providing some form of subscription service or software sales.
I believe this is a good thing. Hardware *should* be open. I long for the old days when we could come up with new ways to use our bare hardware.
The vast majority of users of consumer electronics DO NOT CARE about hacking the products they buy. Not at all. They just want the devices to work as indicated on the tin. Remember for every geek who wants to hack an iPod, there's a million people who just want to play songs. The open-hardware "market" is insignificant.
Open source improves this not by "forcing" manufacturers to be open, but by lowering the production costs and lessens the need to offset very large initial investments during the production run with secondary revenue streams.
Adding the capability for user programming increases costs. Using user-modifiable parts, which one might take to mean that instead of the smallest possible SMT, the design is implemented using larger SMT or worse, through-hole devices, increases costs. Most modern parts aren't even available in THT, so that's a non-starter. Larger PCBs are more expensive than smaller. Larger PCBs mean a larger, more expensive enclosure. I don't see at all how production costs could at all be reduced by opening the hardware design.
Finally, allowing for an "open hardware" model means that the manufacturer warranties are basically pointless. The vendor response really can't be anything more than, "you bricked it, tough shit." How is a manufacturer supposed to figure out what hacks you did broke your product? At best, they'll offer to replace your gizmo with a factory second or a refurb, for 10% off list.
... start a religion.
It gets very hard to read Slashdot when you come across such a politically slanted post.
My Reality:
Managing a large network that I built, that I maintain, and that I provide for customers requires that I not be neutral when it comes to traffic. I have to create rules to give preference to VoIP traffic (My iptables foo is strong young one), and I need to create rules to keep P2P traffic to a minimum. The reason I do this is to provide the best internet experience to a majority of my customer base. This allows me to compete with the big telcos which provide a miserable experience in rural areas. I also have the ability to provide an extra service for people that want more P2P bandwidth, which they pay for. Net neutrality is a big hammer that large telcos can and will use to hammer the small guy. They may be "against net neutrality", but it is much easier for them to meet the requirements than it is for the little guy. Please remember that the Ilecs don't care if they provide bad service because they have a monopoly, I, on the other hand, have to compete. As the little guy providing service to a rural market that is poorly served by the ILEC, it's already hard to get competitive rates on Direct Internet Access (DIA) and decent service (ILEC repair man "what is this here funny stuff called fiber"). I'm already hostage to the ILEC, why would I be for a plan that gives the big telcos a HUGE hammer to put me out of business, why would I be for a law that removes one of the differentiators between me and the corporate monolith I compete against? My ability to NOT be neutral means my network doesn't suck
Net neutrality is a bad law that hurts me, the little guy and gives the big guys a huge advantage, and I oppose it for that reason.
-cluge