Nice article, thanks

Making revenues from free & open source software is one of the most frequently asked questions these days. While there have been a few successful examples of companies (like MySQL, Red Hat etc) which are making money, I’d surmise that these are still very early days for open source revenue & profit models.

While open source as an operational paradigm certainly has been having exceptional success against proprietary and closed-software models in the recent past, in my opinion, a lot more thought need to be given and experimentations done before the emergence of viable revenue models for the free & open source models that can successfully compete with the current proprietary software revenue model. Some specifics of the business models are emerging fast, but it will take a few years for the market to test each of these out and hopefully, the fittest will survive.

A site that focuses exclusively on revenue models from free, open source software is Follars.com – Free, Open-source Dollars - http://www.follars.com !

Ec @ IT, Software Database @ http://www.eit.in

This kind of thing is somewhat similar to the model of academia where people publish research papers and then get research grants. I think governments should pay us grants for writing open-source software!

Visit me @ http://www.netspade.com/

The trick is not to think about software as a product, but as a tool. People make tools to enable themselves to solve problems, not *only* to build more tools. The difference here (and the reason you cannot make legitimate analogies to the "real world") is that when you build a software tool (for example an operating system), it costs almost nothing to make an infinite number of copies of that tool to give to other people. If we could make an infinite number of MRI machines and give them to anyone who needed one, the world would be a much healthier place. Of course with MRI machines we can't do that, but with operating systems (and all other software) we *can*. You write open source software because it solves a problem you have, and you think it might help others if it were freely available. You don't write open source software with the expectation of getting rich.

Black Hat

Alan, how come I can read what you write without paying? I thought you were a professional tech journalist :-)

Anyway, there's so many very different reasons for people giving away software. For example SAP is giving away a fully fledged DBMS. They built it in the first place so that their customers have enough money left to pay for their ERP system instead of Oracles DBMS. Now they want help in further developing their DBMS, so they open sourced it and agreed with MySQL AB on a merger.

Many open source developers use their participation to get a good job. They still continue their projects in their spare time to get another good job later.

I have created software for a european governement. They explicitly asked for open source in their contract. So I got payed to create free open source software. The governement payed for it through taxes. So my software is a public infrastructure now, just like a road or a bridge.

But it's not only about money, it's also about power and personal acknowledgement. How much that is worth, you only understand when you try to buy it :-)

Cheers

Alexander Jerusalem

The more fundamental issue that would not allow the OSS consulting model to work is that if developer convinced management to use open source product he is surely to figure out his way without support. I have heard an opinion that having a variety of choices we have now makes it hard to pick the right option many times,and this alone leaves the choice to people who are very proficient at choosing technologies which also reflects into them not needing as much support. I could mention many examples where we needed support to resolve issues with commercial products but no company has support that can stand agains Google or the Groups or other options :-) without spending a dime.

Alex

It seems to me that there already is open source outside the tech industry. The airlines give away seats today - it's called frequent flier programs. In fact, the programs are so essential to the airlines' survival, that all airlines have one! (From American and United to Malaysian and Thai Airways, all significant airlines count on this to keep them in business).

Also, open source lets competitors level the playing field. IBM supports Linux because in the long run, it is cheaper (or more profitable) for them to do that than to pay license fees to Microsoft. Have you ever considered the cost of 100,000 servers * Windows Server License cost? It's in the _hundreds of millions of dollars_.

So, it may not seem quite right to you, but Open Source is a business thing, not a technology one.

Mark

The analogy you are attempting is not quite correct. I will use an example. There is an R&D cost to developing a production ready vehicle and there is a cost to produce each single car. In the cost of the car the R&D is recouped. In software ther is a cost in R&D development but negligible cost in in each licensed distributable. Thus the R&D costs only are being recouped through support. By the way mobile operator in South Africa give phones away for free and have by far exceeded their own business plans. The mobile phone industry is a huge success in south africa.

Ahmed Chicktay [ahmed@eo.co.za]

You're missing the point of open source. Here's an analogy:

I'm a contractor, I get paid for building houses. In the process of building houses, and making money, I think up an idea that would cut a month off of the time to build my house. Instead of taking this idea and patenting it and keeping it close to the vest... I trade it with other home buildings who have equally valuable ideas and cut even more time off the house (making my money that way). I also get the side benefit of gaining a good reputation in the process since I have been able to contribute.

In the end, open source is not free, as in not without benefits. The benefits are the availability of other ideas to use 'freely' that end up paying for the good idea you gave.

It's a form of communism that actually works. Where few 'can' support the many.

(Also see file sharing networks, same model)

JP Fielding [jp.fielding@threewide.com]

Even in the material world there is an analogy to this model - Inkjet printers. They are sold (I believe) at or under the actual material cost to make them (actual material cost of software is $0 when downloaded). The manufacturers make a great deal money selling "support" - inkjet cartridges.

I can't stand selling just support - I mean, doesn't this provide profit incentive to make you software harder to use? MySQL is great - it's open source...but if you want to use it commercially, you have to pay for it. You want support - you can buy that to.

Paul Rivers [paulrivers@boundarywaterscanoeing.com]

You're thinking about this all wrong. Most opensource software is created by people who work at paying jobs at non-opensource-based companies. It's a shared-cost infrastructure development effort. It doesn't make sense for any one company to develop and maintain a framework, it's much better for many companies to have developers using the framework and contributing back to it. It benefits all users of the framework without burdening any one organization with all of the development / maintenance costs.

Jason Carreira [jason@zenfrog.com]

This is where I think you're missing the boat:

"if we give away all our hard earned work"
Well, we don't. We give away _some_ of our hard earned work. And we do it for a reason. The same reason people write blogs without charging the readers.

"But is there is an open-source model in other industries?"
"Open-source" as in "free"? Sure, you own blog is an example. Anyone doing unpaid internships in any business is another example. The charity business has plenty of volunteers.

Basically, there's two reasons people do open-source:

1. They actually do make money on support.

2. It gets their name out there. Like your blog. It looks good on their resume, it gives them experience that looks good on their resume, etc.

Somehow there's a real or perceived reward.

Nils

Trackback: "The Silent Majority Pays for Open Source" http://radio.weblogs.com/0122027/2003/07/30.html#a69

Rod Waldhoff

Charging for support to sponsorize software development can not be a viable business model. No company could compete when any other system integrators can just focus on selling services and not investing time on your product development.

Then you may have open source projects funded because it is fun on some free time. Others funded by universities (and indirectly paid by your taxes). Others sponsorised by large IT vendors to try to crate a de-facto standard (mostly the Apache projects and indirectly paid by these software vendor license fees) but for small Software SME there are no real profitable business model based on classical OSI based licenses today (dual licensing is often not the best choice).
On our side we tried to create a collaborative source license based on a "contribute or pay" paradigm. This avoids having free riders on your technology and every member of the community (every customer) HAS to finance something wheteher in cash or whether by spending some time on the code base. We call that the "Unvalue Added Taxes" principle. More your contribute to the project, less you pay in cash. And it works just really fine. But please read more about the license here: http://www.jahia.org/jahia/page336.html

Cheers

Stéphane

Stéphane

Public radio is another example of the "a few pay, a lot benefit" model.

The US tax system is an example of the "if you earn more, pay more" model.

Neither "seem quite right". But they "work" in the sense that the model perpetuated themselves for a long time.

Your comment reminds me of Bill Gates' comment about "I'll do Internet as soon as I figure out whose paying for it" before he got the Internet religion.

Weiqi Gao

Hihi, you are seeking for a reason to open source your application; and that really is the opposite of what you should do.

If you want to create this wonderful new application, using Swing for instance, you will build on top of Swing.
Now imagine there being a wonderful library that makes your application considerably easier to do. It provides many good widgets and designs. If you use this library your application will be ready sooner, with less bugs. In numbers; using this application you only need to implement some 40% of the work instead of the 100% if you build directly on top of Swing. Notice that debug time is significant in any application.

Now comes the crux; your application needs things that would fit much better in the library then it would in your application directly. If only because a future application you plan to write would most likely need that too. Your extras can be send to the open source library, which grows the library. Same with bugfixes; the library grows.

In short; you and many others gain from the fact that it takes less time to create that new value-adding application. You gain from much expertise and someone proof-reading your code. In short your gain is that you pay that developer less.

As you see; an end-user application does not belong in this equation, it really does not make sense to open source your application if you don't create it just for the fun of it all.

Thomas

This is a misleading argument...

1) Open Source/Free Software does not imply that programmers have to give away their work. Programmers can still be paid for programming, as a one-off payment. This gives a return on investment to fund further development, plus a profit.

Subsequent income is achieved via support - but it is a strawman argument to say that support sales are the only way to make money from Open Source/Free Software.

2) The analogy between Open Source in a software development context and the same model applies to air travel is ridiculous.

Remember: Air travel involves consuption of resources - fuel, food, staff time. With Free Software, once it's written, there are no more recurring costs. Distribution is performed by others. Time spent developing is recouped by selling the source in the first place.

To send a jet full of passengers somewhere, you must purchase more fuel, pay the staff again, pay various taxes. It is nothing like software development.

To build a car, you must purchase raw materials, pay factory operating costs. Again - not like software development. A copy of a program costs nothing to produce. There is no cost-per-unit, unlike air travel or auto manufacture.

Free refers to freedom, not cost. It is a non sequitur to suggest that OS/FS must lead to the problems you describe, and it's a strawman to say that the way in which you described OS/FS dev is really how things are (and to conclude that as a result, OS/FS is bad, suboptimal, unprofitable or whatever).

Phil

Who pays for Open Source software?

Who benefits from it?

There is no open source community waiting to build your software for free, it's a self help group.

Follow the money.

Wiseone

Support is not the ticket - it is the ticket that ISV's use, but the idea of an ISV is not really there in the Open Source business model.

The idea is that the USE of the software generates revenue - the service is sold, the software is not. The tools to build the service are freely available, the knowledge of how to use it is easily obtainable, and the platform on which to run it is inexpensive. This means the actual idea and function of the service is the novel part of it, making the capital cost of introducing a service smaller.

The incentive financial incentive to produce new software comes from being able to provide otherwise unavailable services. For instance, Apache Axis allows for inexpensive web service development and deployment. Once upon a time the tool didn't exist. Someone wanted it the benefits of it, sarted working. By making it open source additional development effort was obtainable at lower cost, maintenance goes down, etc. It worked in this case because it was a tool many people wanted. If no one else wants it, or can see value in it, and you cannot convince anyone of these things... how would you sell it as a COTS application?

Open source pushes profitable innovation up the software stack. It is not about providing free software, but allowing actual profitable innovation in what is produced using available software. That whole dreaded paradigm shift thing.

Brian McCallister

And if Microsoft or Sun were in to automobile industry, you'd get a car with no steering wheel, brake or accelerator pedals and the hood welded shut. If they were in the airline business, you'd pay $500+ before even getting on the plane, then the plane would probably explode in mid-air.

Seriously, no one is putting a gun to your head to make you consider making your next project open source. If you're not comfortable with it, JUST DON'T DO IT. You should do it not because some magazine told you it was cool, rather because you want to contribute back to the community.

BTW, if this at all sounds like communism, you're still looking at it wrong. Communism, as practiced by China, the former USSR, et al, is/was an rigid authoritarian system where the State controlled everything. Rather analogous to Microsoft or Sun than Open Source and Free Software.

Buck Pyland

No, if the car industry was open source the plans to your Ford would be freely available for anyone to look at. An engineer from Renault would look at them in his spare time, see asafty fault and submit a change. Someone would write about his fix on a Ford website and the people who asked for their Fords in the dealer would ask for this fix to be included when the company custom built each car. Seeing that people wanted it and that it hadn't hurt those who custom built already Henry Ford XV would integrate this fix into the main line of Ford cars. That's how open source in the autmoboile industry *should* work.

Nick

You're looking at it upside-down.

Open source projects that somehow make money for someone, be it through support, consulting, etc., are the exceptions.

The more I think about it, the more research I do, the more I become convinced that, despite all the press, all the hoopla, the vast majority of open source projects will never ever make a dime for anyone. At least not directly.

No one (well, almost) goes into an open source project with the goal of making money on it. They join exisiting ones to scratch an itch, or to increase their own reputation in the whole gift culture thing. Yeah, if that gets the notoriety, or a professional network or something they can bank on, great, but the cash is a side-effect.

Looking at the JBosses and Linuxes of our world is looking at the exceptions.

Steven Berkowitz

Does this mean, Alan, that you are thinking of writing an open-source project ?

Now that would make a good 'reality-tv' type column for JDJ.

Could you generate enough interest in the product to ramp up a revenue stream ? How to balance the inevitable time constraints of the revenue generation against the feature development ? Could you find a feature sponsor quickly enough, like so many open source projects seem to do these days, to put the food on the table ?

There are hundreds of questions that could and should be asked and answered before you kick anything off, but i think it would be illuminating if you did decide to write it up for JDJ...

Graeme Wallace

Part of the problem is that none of the non-software examples really match, to my mind. And I think this mode of operations (software is free, 'support' costs) has only worked for a fairly limited set of people; Andy Oliver appears to be doing quite well under this paradigm. I think the verdict is still out on how successful this model really is.

Lance

A little more searching would have brought up this link:

http://tim.oreilly.com/opensource/birmingham.ppt

Chad Thompson

I was just thinking about these things this morning. Tim O'Reilly gave a talk about the "Internet Paradigm" this weekend that seems to talk around a few points you mentioned. (Notes here: http://cortana.typepad.com/rta/2003/07/tim_oreilly.html)

It seems that open-sourcing really makes sense to companies or individuals that don't want software to become an "opportunity" for revenue. A few examples; The formation of the Apache HTTPD project by players that didn't want Netscape to own the entire "web serving" software space. The different attitudes between different companies about open-source; Microsoft (the software company) views Linux as a competitive threat, IBM (the hardware company) views Linux as an opportunity to sell more IBM hardware. Another example; the "JBoss" is open source because the people behind it likely could not get a start in the market, but as the JBoss server has gained popularity, they've discovered plenty of opportunity to make money selling books or charging people for consulting support. That's something that likely would not have happened had JBoss started off as four people selling "yet another" application server.

Your views on open-source software will come entirely from how you (or your company) make money and the opportunities in that market....

Chad Thompson