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IBM

How to make money with open source software 44

Posted by Hemos from the i-like-to-eat-too dept.
steve_brody writes "IBM has published this new article in its Linux developerWorks Zone on how to turn your open source expertise into cash. Also includes a summary of different licenses, if you are considering copyrighting (or copylefting) your software. "
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How to make money with open source software More

How to make money with open source software

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  • I never said "must" and if you wish I can mail you the calculations I've done on the cost. Granted, with some more thought I can get it down to $1500 (thats roughly 12000 SEK, which is not that much higher than what normal computers sell for in Sweden (the extra cost accounted for by the monitor)), but that's about as low as I can go without making any changes in the quality.

    If you want can show me how to get it cheaper here in Sweden, by all means do. I'd love to get it for less money.

  • The problem for small software companies is more Microsoft than it is free software. Companies like WinGate have no problem selling their product, even though ipmasq and ipchains offer the same functionality (and more) for free. However, when Microsoft integrates NAT with win2000, that'll pretty much kill off their business.

    Until either more people switch to Linux (it's currently at less than 1% marketshare for home users), or more free software is written for Windows, it's not going to have that much of an effect.

    As for your Netscape example, it actually counters your point. Netscape makes almost no money from it's open-sourced browser. The bulk of Netscape's revenues come from its server software, which is completely proprietary, closed-source, software.
  • I thought I'd throw my 2 cents in...

    Yesterday one of my own Open Source projects went on sale -- News Clipper [newsclipper.com].

    The way I did it was basically to charge people who don't have the time or knowledge necessary to deal with the Open Source version. I sell a package that includes documentation, priority tech support, and platform-specific installation (a la InstallShield for Windows).

    All the while I'm still releasing the Open Source distribution under the GPL. OS folks are happy because things look basically the same as they did before the commercialization, and they'll get new features in advance of the commercial crowd. (I'm going to do beta testing that way.)

    One of the fundamental problems that no one talks about with commercial open source endeavors is that you have to sell something proprietary. If it's not proprietary, competitors will undercut you and your business will simply fail. I'm following the RedHat/O'Reilly model: sell proprietary support and documentation.

    Luckily, I was able to hook up with Binary Research International [binaryresearch.net]. They handle all the business stuff: marketing, sales, distribution. That way I can focus on development and tech support, and not have to also play the businessman. It's a model I recommend (and will probably recommend in a year -- ask me then :).

    Yes, there are non-trivial risks: Microsoft could steal the ideas embodied in the code and create a proprietary, competing product. (Luckily the GPL prevents them from making the source proprietary.) RedHat folks could start distributing it with every copy of Linux (thereby hurting Linux sales). ISPs could install the Open Source version for the 300 business website they host (thereby killing any potential sale). Third parties could start selling documentation and support in competition with me.

    This is an interesting experiment in "Commercial Open Source In-The-Small". Can a small product like mine follow the same business model as RedHat and O'Reilly? We'll see!

    David

    ------------------------------------------------ -------
    "For I am a Bear of Very Little Brain, and long words
  • Their ways of making money using your open-source software knowledge is almost exactly the same way you make money in the computer industry, period. There's nothing new in here. Work for a help desk, make your own help desk, write your own software, sell software - all these things people have been doing for years, long before all the hype around linux and open source came about.
  • ...how IBM just never got it with OS/2. They now (according to some second-hand resources) make more off of OS/2 than AIX, and yet they still (10 years later) can't sell it externally.

    Funny.

  • I'm a contractor with IBM and everyone here loves Linux. I've discussed it briefly with some management people and there was NEVER a snicker or even a hint that they thought Linux was a toy.

    My last stint was at (unnamed travel and charge card company), and if I mentioned Linux the first thing out of the managers' pieholes was "how can we make money using Linux?" All of them thought that if Microsoft couldn't make money off Linux, then neither could they. Silly little me thought that (company) was in the traveller check business, not the operating system sales business. Heh heh!

    The difference between those two jobs is night and day. IBM really gets it, and it's truly a pleasure working for a company that is on the right track.

  • I hope this article wasn't aimed at OSS coders, we're already doing this IBM. I think IBM should take a lesson from us. They should actually release some open source software. But they shouldn't try to tell us what we already know. That's just lame.
  • it's crystal clear that making a living requires me to be doing fully commercial software, either for someone else's company or starting my own.

    Good luck trying to sell it, as the breadth and scope of free software continues to expand. Perhaps if you do niche software; otherwise, you end up competing with either free software or Microsoft.

    You see, it's not really up to you, the programmer. It's ultimately up to the user/customer. They're the ones that will decide what licensing terms they prefer. And if they choose free software, well, I suggest you find a way to make money from it.

    You are operating under a false assumption; that the only way to make money from software is to collect a fee for shipping a binary. As we are finding out, that is not the only way to bring in income; in fact, it may not even be a viable way today; just ask Netscape.

    There are people who are making money from free software, but they are not trying to do it under the traditional model. If they did, they would be doomed to failure.

    You may find it difficult to make money in this market, but that's not really something that is under your control. Adapt or perish.

    As someone else pointed out, shrinkwrap software accounts for something like 5% of all programming jobs anyhow.

    --
    Interested in XFMail? New XFMail home page [slappy.org]

  • If lumber is cheap.... (Score:2)

    by Anonymous Coward
    If lumber is cheap, then the people who profit are skilled carpenters and people who can transport the lumber cheaply. That's the metaphor I'd use to describe Open Source. The code is cheap. The people who would be expected to make money are consultants who can customize software, and outfits like Cheapbytes. Of course, I'm not a developer. I'm posting this for a reality check.
  • I too work at IBM in the DB2 techie dept. I am sitting in front of two Linux machines and an AIX box. I have seen first hand how IBM has embraced Linux as the true pwerful OS it is, compared to, say that OS-want-to-be from Redmond.
  • Except that code is devalued by people willing to replicate what you try to charge for for free. The example given wasn't about production costs but about supply and demand.
  • The content of this article can be summarized as getting a day job and make coding a hobby. The best way to make money on it is to apply it in conjunction with a degree in CS with good grades and do something else for income like consulting. Either way you must have a technical, quantitative oriented degree and good grades. No-one is paid to code. Bare software is just that: bare.
  • Remarkably better (than what you're running) systems have been available for $500 and under for quite some time actually. $2000 pays for quite a bit of machine these days.
  • We should all realize that OpenSource is creating problems. In fact many people cannot adapt to this new world. But one thing that OpenSource detractors should realize is that OpenSource is working. Or else we wouldn't be here discussing IBM's thinkings and Linux success.

    Several years ago I created a product under the typical frame of proprietary code. The only thing I wanna remember from it is that all that was a bad dream. Yes I managed to make some good money at start. However the what came after was a Hell for many reasons. I realized my error and quit that world. One of the main reasons was that I couldn't afford to spend more money and other resources on developing the product.

    Today I barely code the way I did. I don't make programs anymore. The most I do is patching exisiting ones. And it is quite frequent to just hang around a few hacks to make things work. Call me parasite, sucker whatever you want. I could recognize these labels on me if I worked on the principle "mine, mine and only mine!". But I also share what I do. And I don't have seen a cent vanishing from my pocket for this. Quite the contrary.

    Yesterday I could barely pay my bills. Today, I can afford a life for me and my family. And most of the stuff I work with runs stable and performing.

    Yesterday I could afford to help 3-4 people at one time. Today I have more than 3000 users dependent on what I do. I work 99% on OpenSource software. Last time I touched 100% commercial software was more than a month ago.

    The problem many developers suffer today is by seeing their ideas as gold mines. Most like those patent-fan inventors that try to grable every idea under a piece of paper and calmly waiting that someone brings them a suitcase full of dollars for it. Unfortunately software is a hybrid mutant constantly changing its faces. So while you're waiting your gold you may suddenly realize that your idea got some rust...

  • Fine and dandy; I'm still broke (Score:3)

    by Anonymous Coward on Monday August 16, 1999 @09:35AM (#1744277)
    With all these web sites popping up left and right intending to find ways to fund authors of free software and articles on how to make money while writing free software, you'd think that writing free software and making a living doing it would be easy.

    Well, it's not.

    When you're in school, or when you're writing software in your copious spare time, then there's really no cost to develop the software, and so just about any money you can make off of it is a profit, and life's good. But if you're out in the real world, needing to make a real living, things are much, much harder. When I look at the options available to me -- and I produce several free software packages with a respectable user base -- it's crystal clear that making a living requires me to be doing fully commercial software, either for someone else's company or starting my own.

    So why do the current efforts not work? Primarily because they fail basic market economics. Man time is very expensive, especially for a good programmer. A fully commercial software effort can pay the programmer at a certain rate for his time. The methods of making money with free software are usually -- not always, but usually -- paying a lot less for your time than the rest of the market would. When we're talking about paying the rent and buying food, the difference between one rate of pay and the other is not to be taken lightly.

    Look at the current money-for-free-software web sites that have been set up. "I want a driver for XYZ high-end undocumented component. Must be fully functional and reliable. $100." Come now. Do the math; that's below minimum wage. Even projects that are willing to pay $10,000 -- which are very rare so far -- are usually pathetic when you consider the dollars per unit time. Oh, then there's the minor detail that you might not actually collect the money.

    This really is a sad state of affairs, and is a problem that must be fixed. Too many free software projects are so big now, both in terms of the code's complexity and in terms of how many people rely on that code, that they need multiple humans working full-time on them in order to remain viable. But there just isn't money right now to pay those people for their time at anything approaching a competitive rate.

    Meanwhile, you better believe that companies like IBM are embracing free software. They get all the profits at a dramatic reduction in costs. This is not a hard bit of math. Who wins? The customer wins -- they get better software. Companies like IBM win -- they get more profits. The free software authors... uh...

  • The code is cheap ?
    Are you kidding ?

    It is most often the most expensive part of the whole computing world ( and rightly so )
  • There's actually some very good reasons why this won't work exactly as you describe it. First of all, it will not be very convenient to mirror the software because you've got to pay for every new release. And there are always going to be people who do not want to pay for the software, or they have already payed and want a new download, so they'd go looking for it on other ftp sites and chances are pretty good that they'll end up with an old version of the software and you're going to get all sorts of trouble when they report bugs.

    In order to make the most of peoples bug reports, you want them to always get the latest version and the only reliable way to do that is to make them download it from the main ftp site or some verifiable mirror.

    Now, the other problem is that we don't want people to expect there to be a small cost for the software. We want them to expect that there will be a substantial cost, but that there will also be a substantial donation to the development when they buy it. So that when they buy a software for $1, they should think that there is something wrong.

    So what you do is that you make your software available for download as usual and then you start selling CD-ROM's with the software and nicely printed documentation for a fee equivalent to what the software would cost if it were proprietary, or even higher. Most people will download your software for free from the FTP site, but some people will actually pay for the software because they either like it so much or they have a manual-fetish.

    And this is something that really works. We don't have to have any "micropayment infrastructure" because you can do this today with existing means. There's an incentive in this to create good documentation for free software too, because that's something we really need.

  • You're not (IMHO) looking at the whole of the software world. If your goal is to go out and write the next killer commercial, end-user, shrink-wrapped software application, you're going to find relatively slim pickings for jobs that want you to write that and make it open-source.

    However, the vast majority of software is, as ESR frequently points out, written in-house to serve a particular company's particular need (in fact, this was more or less the genesis of Apache, Perl, and Zope, among many others). Many of these companies don't realize that they could be acheiving their goals better by making these in-house projects open source, and are ripe for the picking, from the perspective of a coder who knows how to advocate effectively. So, you make your money in a job writing proprietary software? Convince your boss(es) to make it open source, and viola! You got yourself a job in OSS.

    Another way of thinking about it is from the "there are no linux jobs" perspective. I often see people here (and elsewhere) saying "I'd like to use linux, but my company runs NT, and I can't find anyone who'll employ me to use linux." If you're a VB programmer, well, good luck. But many others might be surprised at a company's willingness to let you use whatever makes you most productive, as long as you support yourself. I personally have never had any trouble telling my employers "I prefer to use Linux." (I'm a web developer-- YMMV) They generally say something like "Well, we don't officially support that..." and I tell them that I will install and admin my machine(s) and they need worry about nothing. That's the last I hear of it until some months later someone catches sight of my desktop and says "What is that?" Heh.

    Also, jobs in linux are going to boom this year. I got my first inquiry where linux skills were directly desired the very day RHAT went out. Expect more of this.

    Good luck!

  • Yeah. They do. Just like those millions of cheap GTK "apps" you can find on freshmeat ..

  • Re:Shareware typically sucks (Score:1)

    by Anonymous Coward
    Shareware does not suck. The shareware market is a bigger impact than open source. Remember before shareware. People had to buy software to test it. With shareware all of the big guys learned, give a test period or risk loosing sales....
  • Remarkably better (than what you're running) systems have been available for $500 and under for quite some time actually. $2000 pays for quite a bit of machine these days.

    Also, compiling programs or running X on a 486 is not a problem. Compiles may be slow, however, any Unix is built to handle that sort of juggle.

    My favorite 486 parlour trick was rebuilding the kernel and wine while doing various odds and ends in X apps including Netscape.
  • I would have sent this through email if you had provided one, but perhaps you didn't read all the text? If you did you'd have seen that I need a good monitor. $500 won't buy me a good monitor. In the price I quoted is a monitor for roughly $1000. I suspect there's a $200-$500 fee for living in Sweden too and not in the US..

  • An idea I've been batting around for awhile: micro-payments in conjunction with open-source software. The software developer maintains a website with documentation, links to archived mailing lists, and packages with binaries and source code. In order to download the binaries or source from that site, you make a micropayment of, say, ten cents to the lead developer/organization behind the project. With all the people using the software, there would be enough money coming in to prevent the developer from going broke, and maybe enough to be a good chunk of supplemental income.

    Nothing else would change: the software would still be free (so it might be available for free from lots of other ftp and web sites), but by going to the "official" distributor, you'd get the latest version and be able to make a small, but appreciated, contribution. Right now it's just too inconvenient to support free software financially, and in order to make a difference, you've got to hand over a much bigger chunk of cash. This would allow a developer to make a difference for himself, and probably a lot more money too.

    Of course, in theory this could all be done with banner ads on the official site. But that probably doesn't bring in nearly as much cash. I can't think of a real good reason why more people aren't already doing this, actually...

    At any rate, this doesn't become practical until there is a solid micropayment infrastructure set up. Wake me up in ten years and we'll see how good my predictions were...

  • When I spoke to my dad about the RHAT IPO (he works on W Street) his exact response was, Linux is great, BUT, there aren't any applications.

    A common misconception in businesses. Linux has plenty of apps, as well as a Major office suite that is on its way... (Wordperfect Office. Which, btw, I am currently evaluating... Extremely better than MS 2000) The only thing Linux doesn
    t have is Quicken, and that will come as soon as the marketshare gets high enough. (We'll prob have a pretty good replacement for it by then)
  • I won't buy shareware. I try many packages, but always end up buying commercial. Why? The commercial packages are better (usually) and the lower cost for the shareware does not make up for the superiority of the commercial package I usually choose. UltraEdit is an exception.

    Sean
  • He talks about programming in Perl, Scriptics and Python. However, Scriptics [scriptics.com], of course, is the company set up by John Ousterhout to try and make some money out of his Tcl scripting language. Pretty much throughout the article, the word "Scriptics" should be replaced with "Tcl".
  • There's an inherent problem with going into business yourself, and that's the monetary requirements. If you're like me, then you can probably work as a software consultant and make at least a decent living doing improvements on free software requested by other companies. But that's assuming you have something to begin with because it's going to take a lot of time and effort into building a customer base that can guarantee you some constant income.

    I'm not saying that it's impossible though, just that it's a little harder than most people think. Just because you're good at programming free software, that doesn't mean that a company will hire you to improve the software they use. Most companies probably never used GNU/Linux anyway, at least that's the case in Sweden, although that is constantly improving.

    So you need to sell yourself in some way. Hopefully you can do this through contacts that you have made with other companies earlier. That's the easiest way to do it. If you don't, well, you'd better start knocking on doors real soon.

    As for me, well, I could probably do a lot more free software work than I do today if I had the money for it. I'm using a 486 as my console, you can imagine how fun it is to run X and compile programs on it. Sure, it works, but it takes a lot of time and effort so I don't do X. For some of you, $2000 to buy a new system (yes, that's how much I need. My eyes are bad so I need a very good monitor) might not be that much. But if you've been living on the edge for most of your life, barely having enough money to make ends meet, $2000 is way over the roof. I could live on that kind of money for more than 3 months!

    So I'm trying to make the best of it. I'm trying to save money so I can one day buy a new monitor and a new system and get some real work done, but at the same time, I have to make a living somehow. Jobs are hard enough to get in Sweden as it is, and if you only want to work 50%, and work with free software, I've found out the hard way that you're pretty much out of luck.

    Today, I'm hardly able to make ends meet. I've been lucky enough not having to pay rent this summer so I've been able to get along fairly cheap, but now that summer is over, things are changing and I have no idea what will come. I've got a few leads and I can probably get around 40-50% of the money I need working from home on free software, but the rest? Well, I hope to find either people who can pay me to work on free software from my home in the form of donations, or companies who can hire me to do some part-time programming or system administration for them. Now only time will tell.

    So this became a little more about myself than was intended, but I want to make everyone who thinks that they can make money by doing only free software realise exactly what they're getting in to. There will be times when you simply won't be able to pay your rent and your income will be very irregular at best. Think once, twice, three times and more about that. If you're not absolutely certain that free software is something you must work with full time, then you're probably better off taking a regular job and putting down some hours on your spare time to do free software development.

    You can be a free software advocate and work from "within the system" to try to change the company you work for and introduce them to free software.

    Then again, if you can pull it off, then there's rewards greater than anyone can even begin to imagine waiting for you. It's the reward of being able to look back at what you've done and feel genuinely happy about it. The feeling of having done something with your life that has helped hundreds, perhaps thousands of people around the world. That's what I feel every day when I go to sleep, a genuine satisfaction about the work I've done that night. Sure, I haven't been able to make ends meet this month and I don't know where that will take me, but I'm happy. I haven't been this happy for many, many years and I wouldn't want to have it any other way.

    Feel free to mail me at [mailto].

  • "This really is a sad state of affairs, and is a problem that must be fixed."

    Why? Free software isn't commercial software that's given away. If you want to write free software, write it. If you want to be paid, and you can't find someone to pay you to write what you want to write, do something else for money, and write the free software in your spare time. If you don't have any spare time because you work 80 hours doing something else, just be patient. Save your money. Write free software when you retire.

    Freedom is not a "god given right". We have to want it and be willing to work for it. There is no obligation involved.

    "Who wins?"

    If the authors aren't winning, they will quit playing. Authors will find a way to win, just as companies will find a way to make a profit. They aren't going to go away if noone pays them. Noone ever paid them. That's not what it's about.

    The thing about free software projects that seems to escape some people is that there's no rush. Linux doesn't have to beat Windows. It has nothing to lose. Apache doesn't have to beat IIS. We're all eager to see Gnome, KDE, and other projects succeed, but there's no deadline because there's no such thing as competition. If something better comes along, then the project was still a success.

    It is possible to make money developing free software. Technically, VA research and RHAT are demonstrating that. However, it's not necessary. There is no reason why free software has to make someone money. As long as there are people who enjoy developing things for themselves and sharing them with other people, there will be continued free software development.

    Yes, companies like IBM have a lot to gain by contributing to and supporting free software. That's because an investment in free software gives returns to the entire world every time it is copied and improved. Everyone has something to gain. It's not always money, and it doesn't have to be.

    I'm sorry you're still broke. I'm not much better off. Personally, I'm a lot more concerned with the wastes of resources in big corporations and government institutions than I am with the apparent lack of parity for free software developers. For now, I'm just going to work on the things that interest me and hope someone else likes what I've done.
  • You are concentrating too much your efforts on a development basis. And this is not related to free software. Proprietary software also suffers this stigma.

    Franfly I consider that is wrong to concentrate income objectives in doing exclusively development. It's much like Galileo inventing (well, reinventing) telescopes for $50 a piece. Any development is by nature a deficit venture. It is the end-use that can bring some income to it. Most individual developers don't realize it because they make their reference points to the corporative environment. However corporations manage to hold R&D and end-use in one line of production. Individuals cannot afford doing this.

    Just think:
    1.You are now the "Universal Soldier" of your little program. But do you believe that you can hold up everything during further development? Know every single bit of its application? Even if anyone pays for it?

    2.Do you know all possibilities of your program? Can you realize all its potential? Can you see its future? Did Linus Torvalds realize what he have done 5 minutes after making that post in 1991?


    3.Today you have 1 user. Tomorrow maybe 10.A month later maybe 100. A year later God knows. You may hold up with them but not forever.

    4. Programming is much like DNA. Alone it is a beautiful but useless program. Together with a whole series of organics, water and minerals it even makes human bodies.

    I think these four points are fundamental to understand why programs cannot be proprietary. By consequence they cannot be charged in most of its path. The only good place to charge anything from it is the end-use. And frankly you may not get millionare but you don't get hunger either. End-use based in a powerful development infrastructure can give huge opportunities.

    he demonstration of this is on Linux user environment. After KDE-GNOME-WM-AfterStep Horde many users shifted they requirements basis for more radical end-uses. In fact Windows is making a huge damage in the industry by fixing users in a desktop problem. On Linux such problems are of different level. Users require adapting the environment for very specific tasks like conferencing, a workplace for a scientific work or a very complex office environment where everything is at shotgun range.

    I make money on this. And frankly I don't even make these things proprietary. Usually I jump from one task to another. I'm not a millionare and don't think about it. However I have managed to make my ends meet. If under a proprietary environment I barely could pay my rent, today I managed to buy a new computer on my birhtday (I didn't have such thing for the last 5 years), throwing $700 on it. And still have money for making a small beer-party with my friends. Meanwhile my friend managed to buy a second-hand car under the same situation. An year ago he was overworking to pay a rent due for three months.
  • No second hand source required.
    About 6 months ago (yeah, eternity in computer years), the guy in charge of OS/2 at the time (I think Jeff Smith or something??) was interviewed in one of the trade rags.

    He said that OS/2 and the related services brought in revenue in the $billion dollar range. _That's_ why IBM will not let OS/2 die yet.

    (If you know that HSBC PLC -- I think it's like top-20 biggest bank in the world -- Bank of Brasil, etc, are all OS/2 shops, you start to realize who those revenues are achieved).

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