While
I wanted to come up with as short a list as possible, I ended up with a list of
approximately 15-20 of the most successful business models or strategies for organizations
providing 'open source' solutions. The optimum model for particular organizations
to pursue depends on their mission, goals, licensing, context, and numerous
other factors or variables, e.g. geography, competition, market.
Matthew
Aslett, from the consulting firm “The 451 Group” authored a
report entitled “Open
Source is not a Business Model.” One of the key conclusions of the report was that 'open source' is a business strategy or tactic, not a business model.
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Quite
often the number of business models, strategies, or tactics related to the
development and deployment of open source solutions depends on the profit
motive driving particular individuals and organizations. For example, consider
the following. There are:
- non-profit
organizations or communities that are not interested in making huge
profits from their free and open source software (FOSS) solutions,
but are more interested in simply creating and distributing high quality,
free software and solutions that will be of benefit to as many people as
possible.
- then there are
those individual or organizations that want to profit from the development,
distribution, and retail sales associated with various open source
products and commercial add-on modules they have created and released
using somewhat restrictive licenses; and
- there are also
numerous individuals or organizations that want to make a living and
generate profits by offering a wide range of services in support of the
open source solutions, e.g. installation, training, maintenance.
Over
the past decade, numerous entrepreneurial individuals and organizations have
tackled the idea of how to make money out of open source software. The idea
that the only way of generating revenue from open source software is by
providing support services - has become outdated.
There
are now a wide variety of business strategies, tactics, or business models
being employed by to generate revenue from open source software. For example:
- Many non-profit
organizations obtain funding to support the development and distribution
of their free and open source software (FOSS) solution from membership
dues, subscription fees, donations, and/or grants.
- Many for profit
organizations are paid for producing enhanced professional or enterprise
versions of an open source product governed by very restrictive licenses.
They may also offer add-on modules or bundle the open source software
within other hardware and software products they offer.
- Other for profit
organizations charge for a wide range of services, e.g. consulting,
installation, documentation, training, system enhancements, software
maintenance & patches.
Many
other innovative companies are emerging and learning how to profit from the
open source marketplace, e.g. news organizations, marketing firms, hosting,
software-as-a-service (SAAS), open hardware, etc. In addition, there are now organizations providing
products and services related to open source hardware, open access
publications, open data solutions, and more.
_____________________________________________
Other Examples of Alternative 'Open
Source' Business Models
The following is a
list of some of the more common alternative forms of open source business
models repeatedly described in numerous published articles:
Software
Support Business Model
In this model, companies sell certified distributions of open source software
along with a range of after-sale professional technical support services. Some
companies provide immediate access to the latest patched and certified version
of the software to their paying customers only.
Software
Services Business Model
In this model, a company may sell installation, maintenance, documentation, and
training services for the open source software.
Software
as a Service (SaaS) Model
In a SaaS model, customers pay for the hosting, streaming, and delivery of the
open source software solution on a managed set of servers offering cloud-based
services.
Ad
Ware Business Model
This is a variation on the SaaS model. The user doesn't pay anything for
use of the open source solution; the advertiser pays instead, e.g. Google,
ZDNet.
Consulting
Services
Under this model, a variety of consulting services are offered by a company.
For example, a company may provide a range of management consulting,
implementation, and training services related to the use of open source
solutions by specific domains, e.g. healthcare, finance, manufacturing.
Proprietary
Software Model
In this model, a company offers a more closed, proprietary licensed version of
a similar open source software solution. This protects them against some of the
risks associated with developing products that use open source GPL licensed
software.
CAUTION:
Under an open source GPL licensing, if the open source software is linked to
your company's proprietary software, the proprietary software also becomes open
source. Consumers buy commercial friendly open source licensed software to
avoid this potential problem.
Premium
Software Model
In this model, a company sells premium commercial software add-on modules or
applications in conjunction with the open source software product, often
packaging both together, e.g. Jaspersoft.
Dual
Licensing Model
This is a variation of the proprietary software business models just described.
A company may release the code they own under both a standard commercial
license, as well as an Open Source License. Using this approach, customers can
be attracted to a no-cost and open-source edition, then later agree to acquire
a more robust, multi-user commercial enterprise edition.
Hybrid
Model
There is a related, hybrid model in which a vendor forks a non-copyleft
software project then adds closed-source additions to it and sells the
resulting software. After a fixed time period, the company may release the
patches or enhancements back upstream under the same open source license as the
rest of the codebase.
Platform
Integration Services
With the introduction of service-oriented architecture, many companies no
longer buy software from one particular vendor. They build software using
components from different vendors and integrate them to best meet their unique
business needs. There are numerous risks and issues that need to be considered
when mixing and matching open source with proprietary products.
Hardware
Integration Model
In this model, hardware companies may bundle open source software into their
product. The software is free, you just buy the box it runs in., e.g.
Android smartphones. This may allow the hardware company to significantly lower
the cost of their products.
Indirect
Services & Accessories
Companies may choose to provide indirect services and accessories for open
source systems. This may include providing news and information, selling books,
marketing, training materials, hardware accessories, t-shirts, e.g. O'Reilly
Associates, Open Health News.
Non-Profit
Business Models
Many non-profit organizations are not interested in making huge profits from
their free and open source software (FOSS) solutions, but are interested
in simply creating and distributing high quality, free software and solutions
that will be of benefit to as many people as possible. However, they often need
some level of funding to support their efforts.
Many open source software
projects are supported by a "sugar daddy", e.g. Firefox has Google;
Eclipse has IBM; and VistA has the VA. Some establish foundations that require
membership fees. Some pursue charitable grants or simply ask for donations to
support their work. Sometimes the user community may come together and pool
their resources to help develop a desired feature or functionality.
Independent
Contractors/Developers
A growing number of programmers in the open source software community offer
their services as independent contractors to develop, install, maintain, or
enhance open source software for others. You'll run across many of them
on SourceForge, GitHub, or particular community web sites, e.g. Drupal,
Wordpress.
Public
Domain Model
Governments or other non-governmental organizations may develop software
internally or hire a contractor for custom in-house modifications to software,
then release that code under an open-source license.
Defensive
Business Model/Strategy
Some companies may choose to pursue an open source business strategy or model
to gain access to innovative new ideas, software code, or to reduce software
development costs and timeframes. It also allows them to take a portion of
market share for services and support for popular open source solutions. It may
also allow them to join a community and beak a monopolistic hold a company may
have on a particular area, e.g. web browsers, server software, etc.
Finally,
in putting together this feature article, I ran across over 80 other open
source business models or strategies related to forming partnerships with other
companies; creating franchised services and solutions, and much more. Many are
simply a variation on the models described above. If you have found a truly new
and unique business model that you're willing to share with us, please send us
a short write up or description of the model.
Remember,
a company doesn't have to use just one business model. They can mix-and-match
models as they see fit, moving to a more profitable model as circumstances
change.
The
list of successful 'open source' organizations offering high quality software
products, publications, projects, and services
continues to grow. Let us know about
other major open source 'business models' that we may have missed.
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