How Do You Make a Profit While Using Open Source? 110
rjst01 asks: "I work for a small company that sells an advanced engineering product targeted at a small niche. We have about 600 customers worldwide and our software is available in 3 languages, soon to be 4. My boss loves the idea of Open Source, and would very much like to release our software under an open source license. But, we're unable to find a working business model appropriate to such a small customer base, that won't result in us achieving anything other than destroying our revenue stream. The fact that our software is in an obscure language (think embedded programming) doesn't help. Can anyone suggest a business model that allows us to open source our software while continuing to make a profit?"
This simple plan: (Score:3, Insightful)
1. Don't spend money on software.
2. Collect revenue for your services.
3. ????
4. Profit!
Ask the companies already using it (Score:1, Redundant)
Open Source is not a panacea (Score:2, Interesting)
Support it! (Score:4, Insightful)
2. Sell support contract for the price you were charging for the software, plus some.
3. Profit?
I'm serious, support is something you definetely can sell. Its a renewable resource!
-kcbanner
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This is one reason why the model works well not only for RedHat, but for MySQL and former JBoss, among others.
What are the benefits? (Score:5, Insightful)
The problem of finding a business model which utilizes open source is presently confounding many companies, many of them very large ones. Open source is very, very useful at reducing the costs of doing business - it's not so clear-cut as to how it makes one money directly.
This question is somewhat incomplete. Why do you 'like' Open Source, and what motivates you to release your software? Unless we know that, there's no way to determine what sort of business model might be appropriate. What are you trying to get out of releasing it? Warm fuzzies? If so, then sorry, you're just going to be committing business suicide. If there are specific gains you're looking to make, then perhaps.
Two ideas (Score:4, Insightful)
2)Sell feature prioritization. If you're really a small niche selling engineering equipment, chances are your users have very advanced needs. Offer to add features for a price. These features could either be exclusive (the user pays for you to develop it only for them) or inclusive (the user pays for it to be released globally) with sliding scales for each. This is on top of support and the usual open source models.
Easy (Score:5, Funny)
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If a small fish does something that a massively larger fish is a. interested in or b. threatened by, a good way to make a good buck is to simply sell out to the bigger fish. A lot of startups do some initial research, maybe prototype a few things
Sell Support (Score:2)
GPL doesn't say you can't sell software. (Score:2, Informative)
In this case maybe not open source (Score:1)
So when the marke
Support and Maintenance Model (Score:3, Insightful)
Suitability? (Score:4, Insightful)
You have to consider whether switching to a free-code/pay-for-support business model would actually be a good idea. Is the business as it is now growing or declining? Is your product a cash cow or is it becoming obsolete, unable to bring in the big bucks in the near future?
If you catch and sell fish, it's good for business to give away some fish now and then, but a bad idea to give away your fishery (except in 2048, when it'll just be a liability).
(Boy, I wonder how this will get modded. Disclaimer: I am actually pro-open source, and use Linux almost exclusively, and I've hardly ever touched atrocities like MSIE and XP.)
Sometimes there's not a business case (Score:5, Insightful)
I am not a CEO/MBA/any other business-oriented TLA, but I see three areas where the Open Source model can be a viable business case:
You have a lot of customers who pay for support - this seems to be the most touted business model. Give the software away for free, then sell support for it. This generally requires a pretty large user base to profit from though, because you have to make enough from support to cover the cost of developing the software.
You have customers with very specialized needs - this is basically the consulting model. You can use an open platform as a springboard for building custom solutions for your clients. This generally works well when you have large clients who can afford consulting fees, and it works best for things with a very large scope.
You Open Source the Product to buy Goodwill - basically if you have some software that isn't a huge source of income, you can make a business case for open sourcing it as a way to get good will from the community. Good will counts for a lot, but it can't replace your primary revenue stream.
From what you describe, your product doesn't really fit into any of these main categories. This doesn't mean that you can't make money by open sourcing your project, but the odds are probably stacked against you. If your company is interested in open source, you may consider looking at building porting your application to sit on top of a completely open stack of software.
I know a lot of people on slashdot tout open source as a magic bullet to solve business problems, but in the long run it's only going to give open source a bad name if people aren't honest about when it is a good solution, and when it isn't.
Treat it like it's not open source. (Score:3, Interesting)
Don't obfuscate the product with geeky crap like, "this program is a java program that is thread safe." No one cares unless they're a developer and even still you'd be lucky if they cared. Keep it simple. Say what the product does and why it's good at it (as in design, not ideology!) and let it speak for itself.
Just because it's open source doesn't mean you should be given a medal and a paycheck...
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Except now a competitor can also sell support of your software and undercut your prices. Since they are now selling the exact same software, your only selling point is your understanding of it. And when you split to form your own company (or any other senior engineer), that competitor now has potentially more of that than you do!
Really, he hasn't
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However, as rights holder you can relicense different versions and plugins how you like; including, and up to closing the source to new versions in the future, or producing proprietary closed-source plugins for your otherwise open-source application.
Provided company ensures you retain the copyrights, I.E. requires contributors to assign their rights back, which is fairly common practice among major companies producing open source products, anyways, the maker can then do anything with the software they
Don't open source your product (Score:2, Insightful)
Even ESR admits that there are situations where open source makes no sense. Yours sounds like one of them.
Re:Sell Support (Score:3, Informative)
Same as with proprietary software (Score:3, Insightful)
Software should not be on your mind as much as other expenses and equipment needed to do your job. No magical software will create your bussiness model.
Just have a business that doesn't rely on binaries (Score:3, Insightful)
Best case is probably an ERP system. Often with those, especialy for smaller companies, there isn't a very easy way to install them or configure them (which is where small ERP ISVs get their money). So even if its open source, who cares, they don't do anything with it. But the benifit is still there (if you go under, your customer isn't screwed).
Its pretty much the best of both worlds. Any business based mostly on services can do fine with open source. When the software -itself- is the product, you start having issues.
An example (Score:2)
There is a company in Sweden that does Open Source haptics [wikipedia.org], sensegraphics [sensegraphics.com] they occupy a niche but open source their API. This has allowed them to become a base for others to develop software on around the world. They make their money from creating products on top of the API for others.
It can be done, but if you guys make more from selling your product it may not be worthwhile.
Open Source is great, but it isn't th
Anyone else notice there's no threads here? (Score:1, Offtopic)
Simple and easy answer (Score:2)
I saw this model somewhere before (Score:2)
2) Patent awesome code
3) Cross-license awesome code with IBM and allow IBM to include the code in Linux
4) Sue IBM and the Linux Pirates for infringing your copyright and patents.
Now what may happen here is that IBM might tell you that it's not really your code in Linux, this is obviously akin to the Chewbacca Defense. You must immediately then subpoena IBM for every line of code they ever wrote. IBM will li
Simple... (Score:3, Interesting)
Simple. I run my company on open source software. The software costs me no money. The services I sell bring in money. Profit!
As for making a profit from _writing_ open source software; that's a little harder. I could see the software being a loss leader for selling other things, like manuals or support contracts.
If you want to make a profit purely on writing the software itself, you will have to find one or more parties who are willing to pay for development and accept that the code they paid for may be used by others. Given that the others might contribute improvements, this may actually be an advantage, so you may be able to find such parties.
Nagios (Score:2)
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So you really need to have a business model that doesn't revolve around the software sales, but around the services, otherwise you're pretty screwed.
sustainability (Score:2)
If you catch and sell fish, it's good for business to give away some fish now and then, but a bad idea to give away your fishery (except in 2048, when it'll just be a liability).
It's better to reduce your catch now so you will have fish to catch in 2048. A few months ago I read an article on how some chefs are experiementing with jellyfish and others to create new dishes.
FalconRe: (Score:2)
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I'd say to original question, feel free to open source I if your in an obscure area its not really going to hurt you, you can still sell your programming and support services. But if there is no good reason besides w
Well, considering what happened to my replies... (Score:2)
Re:Just have a business that doesn't rely on binar (Score:3, Insightful)
No, it's not still open-source. Open source doesn't just mean access to the source code. [opensource.org].
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Just don't overprice your new product/releases/features to the point which would encourage forkers to compete.
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If you just want some warm fuzzies, instead I'd suggest you help out by working on Open/Free/NetBSD or Linux, or Apache, or one of any number of OS tools you might use around the company when you aren't coding on your proprietary product. Work on the already open OS tool to improve it for your own use, as well as contributing back to the community. You can do that on the side when you aren't program
Take a look at how PyMOL is doing it... (Score:3, Informative)
Re:What are the benefits? (Score:3, Interesting)
But humans also behave irrationally. Sometimes closed source is a good idea, because humans are irrational. I think that's where I agree with you. For instance, if you own a business doing embedded programming for some boring widget, it would be difficult to gain a financial advantage by open sourcing your code and hoping the community would contribute.
However, humans also behave irrationally the other way. Take patent-holding companies like NTP [slashdot.org], for example, whose sole existence is to file suits based on their patent portfolio. The cost to our whole society of a patent reform is enormous, and possibly the only way we can move past such things as submarine patents and the fear, uncertainty, and doubt surrounding the Microsoft/Novell partnership.
Leaving the economics alone, there's an enormous sea-change happening here. Evidence includes the Microsoft/Novell partnership. If even the largest, most profitable company to ever exist is threatened by the Free Software Foundation (okay, I know that some would debate this, but for the sake of argument, think about this) -- then this could be very significant. I've heard it said by other
But the change is more than just "a chicken in every pot / a source tarball for every binary."
Think about the implication of the internet, its ability to spread the information which is publicly available. More than that, the internet, and even slashdot, are places where useful information seems to rise to the top. Because most people are rational most of the time, the trolls and flamebait sink and information is distilled. Open source software existed before the internet, but without the community effect, its pace was measured in decades instead of weekends.
Open source, file sharing, slashdot and the other blogs, VOIP, IPTV, piracy, viruses, and so many other things are examples of this community. I'm really trying to avoid the buzzwords of the
I think the real question facing individuals, business, and governments is simply this: If we all actually sat down and traded what we have for no cost, so that we all had access to the same resources, what could we accomplish? Would we benefit? Or would the Kim Jong Ils of the world build a nuke and turn us all into flamebait?
Forklift or Plug and play? (Score:1)
If you offer a solution that somebody can take a pair of pliers/screw driver and pull your competiters module and just drop yours in
it doesn't matter that you have the source out there.
Downtime costs money what your customer doesn't spend/lose can be spent on your products
Do you mean Open Source, or Free Software? (Score:3, Insightful)
Free Software is orthogonal. It is the idea that every customer should receive a set of basic freedoms (such as the ability to modify the code, and to distribute derived works). This is good for customers, since if you go bust, they can hire someone to keep developing your code.
The real difference between the two is that the source code and rights for an Open Source application are generally distributed (to encourage more people to contribute) while a Free Software application only has these rights distributed to your customers (who may then distribute them to the world at large, but then they do it, not you).
From your perspective, making your product Open Source has the benefit of (potentially) giving you a bigger development community. The cost is that it makes it easier for your competitors to fork your code and make a competing product. The way to avoid this is to ensure that your developers know the code inside out and so your product will be better than a fork (and, thus, your support contracts will be more valuable). It would probably be a good idea to make your developers sign a non-compete clause so they can't go and keep developing the software for someone else.
Free Software is different. You give your customers more freedoms, but don't (as) actively encourage them to contribute changes back. This is almost certainly good for customers of an embedded software supplier, since it makes it easier for your customers to customise your software. The benefits would be that you could advertise easier-to-comply-with software licensing and ease of customisation. You would make money as you always did, as well as by selling your services for customisation ('support'). Customers would continue to use your services for customisation since you could have more experience with the code-base than anyone else, but you could sell a freedom from vendor lock-in as an advantage.
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So from a business point of view, it has very similar drawbacks: unless you restricted things in the contract, your client can turn around, tell you to f*** off, and hire someone else to work with the code, resell it, whatever. So the business model will have to account for similar potential issues.
Open Source, but don't GPL (Score:5, Insightful)
Your customers could benefit from this because they could make any customizations they want to the program -- which may not be possible with your competitor's product -- and because if there is a bug in your program which they must have fixed right away and they have the ability they might be able to fix it themselves faster than you would fix it.
You benefit because your customers might give you that bug fix so you'll incorporate it in new releases, and you'll have a competitive advantage over other vendors who don't release the source code.
If your customers redistribute the code, it is piracy, just like if they redistributed the compiled program.
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I came to realize that much of the IO portion of the software would eventually be developed by MS (probably with Vista) and our work would be unnecessary.
The trick with the remaining components was that some were really hard to configure properly (due to the problem's complexity and not just our software). And we could sell our expertise a
This makes very little sense (Score:2)
Actually, what you are describing, as others have pointed out, doesn't sound like a very good fit. Probably the best way to make a profit from Open Source is to have the software be so incredibly arcane and poorly written that it is utterly unreadable to anyone that hasn't spent months tracing through it. Then it will be obvious to even an exp
Get paid up front (Score:2)
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1. Don't spend money on software
2. Spend money on marketing
3. Collect Revenue for your services
4. Profit?
The Boss Answer (Score:3)
I wish to address some implicit issues based on my inference that your boss went to school for his MBMA (management by magazine article).
The recognized expert for businesses run with philosophies similar to your boss's is a brilliant business writer named Scott Adams. He has compiled thousands of case studies from the highly successful engagements of Dogbert Consulting. I think that these case studies would be highly instructive for your boss. If you're worried that perhaps your boss would be uncomfortable using case studies from a book of cartoons, you could simply cut and paste the cartoons from one of Mr. Adams's books and place a cover from Harvard Business Review on them. Trust me; it will sell.
Although some conservative businesses would actually prefer the painstaking approach of building true relationships with their customers (as well as prospects) and
No, no; nothing to do with politics or current events. No; this important third issue is for you personally. You should have ample time to see the train wreck coming, and this is simply my personal advice to you, before the trains actually collide.
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Only if you redefine the meaning of Open Source [opensource.org]
Answer: (Score:1)
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How do we make money on that? We sell an appliance, and it comes with a subscription for services and data. We sell the hardware a price point that doesn't pay for the s
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Quality Product for the customer?
Increased Talent Pool?
Is Owning the source an attractive benefit of "obscure embedded software" to the customer?
Your comments seem to be discouraging someone who is thinking of becoming the somebody else who has found it worth their time to come up with a solution and pro
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Writing books, other forms of support than just tech support (training)...
One idea is to just sell copies of the software. Offer indemnification of some sort (ala Novell or Montavista)... this goes a long way with lawsuit fearing corporate customers. I guess in this business model you're actually an insurance company.
-- John.
Sell hardware. (Score:2)
It worked for AMD. When the Opterons came out, which were the true "bread and butter" that finally put them into the black, Microsoft (in deference to Intel) delayed their 64-bit version of Windows for a loooooong time. When the chips were introduced, the only OS that provided 64-bit support and the high-quality NUMA support that really let them shine was Linux, and Linux carried the Opteron for a year or two.
steve
Simple (Score:2)
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You're flat-out wrong to say that you're giving anything away for free. It is entirely possible to sell open source software without making the sourcecode available for download to absolutely everyone. Now, the last time someone tried this, retards like the (anonymous) parent decided that they were breaking the GPL and cracked into their servers to get the source code, generally harassed the fuck out of them because people have this idea that GPL==fr
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Not so simple. (Score:2)
Depends who you are (Score:1)
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try the numpy way (Score:1)
You're asking on Slashdot? (Score:2)
Look at their stock chart. [yahoo.com] Ticker symbol LNUX, no less.
Open Source history (Score:2)
But then it would not be open source.
Sigh. The term "free software" was a bit problematic, because people confused it with "gratis" software. So a bunch of well-intending players who *sold* free software, centered around Cygnus, sat together and invented a new term, with a precise definition: "open source".
It worked well the first couple of years
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Open source technical primadonna customers (majority of users) will use your software, not contribute anything and also not pay you for support. No profit.
Many IT Directors still equate open source as free (as in beer). No profit.
In short, you could have left point 3 as just a "?" and saved typing profit.
The majority of the value in open source are by the users, not by the creators.
So while the title of the posting was right on with "How Do You Make a Profit While Using Open Source?", h
Open Source requires Free Redistribution! (Score:2)
Open Source has a clear technical definition that includes the right to re-distribute.
Check out www.opensource.org.
Don't write code you are not paid to write (Score:2)
It is a mindset question, you aren't getting paid for your code anymore, you are getting paid for your work. So don't work unless you get paid.
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Yes, but then it's not open source [opensource.org].
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The very real problem is exactly the one being investigated here. "How do I pay This Month's Mortgage long enough for the nebulous benefits of Open Source to appear?" I don't have a surefire answer either.
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(I am a free software zealot: this is me playing devil's advocate)
The problem is, if you've got some closed source software written in-house, then you're pretty much the only company that can support it. You can monopolize that market.
If you free the source, you lose that.
- companies with in-house geeks might decide they can self-support if they have the code
- other companies might offer competing support con
Sell the 'Pro' version (Score:3, Insightful)
Or maybe Ten? (Score:1)
http://www.linuxjournal.com/node/1000119 [linuxjournal.com]
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Not entirely true. The product may have to be customised for specific customers. The company I work for built an Open Source CMS, and while everybody can download it for free, most customers prefer to hire us to install it, build a website for it, and customise the CMS for their specific purposes. It's a bit on the borderline between selling a product and selling support.
Business is going quite well. And I can imagi
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I really hope they're not considering releasing it under the GPL. That'll make it pretty much unusable for most embedded applications. If I link against some GPL'd code, I'm obligated to release mine under the GPL as well. Speaking as an embedded guy myself, I've worked at very few companies which would even consider releasing their own source code.
There's more to open source than the GPL, though. "Open source" could just mean that you give the source code to your paying customers, not to anyone else,
One word (Score:2)
offer it to people (Score:1)
O.k. if a person can attempt that first, the person should also 'be able' to and 'optionally offer' (person's choice) his or he
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Actually, going Open Source might open new revenue streams. Our Open Source CMS [hippocms.org] can b
"Open" != "Public FTP" (Score:2)
Beware the competition (Score:1)
To make a profit... (Score:2)
Vertical vs. Horizontal Markets (Score:1)
Our situation is similar. We're going for open/closed-source mix now. Let me explain:
We've started as a 100% open-source company in a very small specialized market (translation agencies, ~5,000 companies worldwide), and found that it didn't work out. We didn't just earn enough money with services because few customers were willing to pay for services, and those who paid were small & cheap. So we had to develop some closed-source "extension modules"
Something to consider... (Score:2)
Something to consider: Open-source your product and transition your company to be a consulting firm that specializes in working with your software.
When will such an approach be valuable? If the value of your software is incredibly low, but the value of the effort that goes into modifying it is high. You then make money by being the expert in a nitche field of modifying your software.
The risk is that your customers could hire your employees away, thus destroying your company, but providing employment fo
Not always a match (Score:2)
Oh please... (Score:2)
Are you a hardware company? (Score:2)