A
Business Model For Open Source
Tomorrow I’m heading out to San Diego
to speak at the Linux Desktop Summit.
I’ll be talking about Breaking the Barriers to the
Acceptance of the Linux Desktop and I wanted to share some thoughts
about the Open Source market that I won’t be talking about on
Thursday (30 minutes isn’t much time) with both my audience in San
Diego and you.
For some time, a favorite argument of
some commercial software developers has been that Open Source
isn’t a valid long-term approach to providing business software
because it doesn’t sit firmly on a viable business model.
That doesn’t appear to be true, so let’s examine some
facts.
Where Is The Open Source?
An important part of the Open Source
market is the underlying operating system, generally Linux, which is
developed by a volunteer community, with the assistance and
cooperation of a number of for-profit companies (hardware, software,
and services) that have a vested interest in the success and
continuing refinement of Linux.
It is a popular myth to think of these volunteers as entirely
unpaid and Linux as free, but, in fact this explanation seems less
true over time.
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Some volunteers are now paid for their
efforts. Linux Torvalds, for example, is now a paid employee of OSDL.
Other volunteers may work for for-profit Open Source
companies who give them time to work on the Linux kernel (or
other Open Source contributions) as their assistance to the Open
Source community.
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Many commercial companies who sell
Linux-enabled hardware or software contribute code to the Open
Source community.
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Even the Linux operating system, while
still available free from some sources, is often purchased as
part of an integrated set of software, including tools,
applications, and support.
The pricing may be lower than competitive proprietary
products, but it isn’t “free.”
Let us agree that once we have customers
paying for something they value we have defined the basis for a
business model – in some sense we are only arguing about who gets
paid and how we set the price.
Not All Linux Software Is
Open Source
Many commercial ISVs sell Linux software
for infrastructure (middleware) or an application that is not, in
itself, Open Source. That is, the ISV builds his software to run on top of Open
Source Linux, but offers his software at market prices and may or
may not choose to publish the underlying source code (generally
not).
In this case, the software may be
running on the Linux operating system, but the code itself is not
Open Source and does not use an Open Source business model.
It follows the same business model as products on other
operating systems, but may be priced to appeal to a Linux audience
(who may demand a lower price).
Hybrid Pricing
Some Linux ISVs (MySQL is perhaps the
best example) use a hybrid licensing model.
They offer their application as both Open Source software
(with the source code, free, subject to GPL rules – users must
offer any additions or modifications to the code back to the MySQL
user community), and as licensed software, for a fee (admittedly a
small one), with not GPL limitations.
This hybrid model seems a likely one,
regardless of the price differential selected, for products, which
the ISV wants to both share with the Open Source community and also
use as the basis of a for-profit business.
Support Or Services As The
Basis Of The Business Model
In the Open Source world, selling
software has not generally been the basis of most business models.
Many have preferred to give the software away and make their
living by providing services such as software integration,
convenience (delivering the software, with other related software,
in a pre-tested and pre-integrated fashion, via CD or download), or
support.
This works – that is, lots of small
firms make a living this way – but it’s harder to scale up in
size while basing your business on this type of model.
That’s why larger, commercial software companies tend to
favor offering middleware or applications that RUN on Linux as if
they were ordinary (not Open Source) software, although that may
make them less interesting to the purer portions of the Open Source
community. The Hybrid
model represents a kind of halfway house.
The Future Of Open
Source Business Models
It’s inevitable as Linux becomes more
important to a larger number of users, particularly to a larger
number of large, commercial users, that they may prefer more
conventional and predictable methods of development and support.
This has consequences.
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If large (and profitable) firms are out
hiring the best Open Source programmers to work for them, the
pool of talented volunteers may grow smaller.
On the other hand, being an Open Source volunteer for
some part of your programming career (as an intern? As a
retiree?) may become part of the norm.
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If customers decide that having access
to source code is a requirement, vendors may make it available,
but without necessarily allowing the customer to make changes to
the code without consequences.
In the old mainframe days, IBM routinely gave big
customers source code; it was just not worth making changes
unless you were planning to support your now custom code
yourself.
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We may decide to value other parts of
the business proposition more highly than the software itself
– such as expertise in the customer’s particular vertical
segment and the application of best practices in that segment.
We have scarcely heard the last words on
Open Source business models. If
you have a point of view, please share it with our readers.
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