Business Models & Business Strategies (Score 1)

There are 4 recognized business models for open source, and 7 business strategies.

The first thing one must recognize is that open source commodotizes a product. So it's intellectual property has no value, and a company must provide some other value-add in order to make money. That turns most software companies' licensing models upside-down, where the license to the IP is the primary sale and the support, documentation, etc are secondary.

Business Models

• Give Away the Recipe, Open a Restaurant - This is where you give away the program and charge for install/support/services/training/certification/do cumentation. Due to companies considering the GPL viral, this is the primary way to make money off of GPL code. Example: most Linux retailers.
• Loss Leader - You sell the software package (support too) at a much discounted price in the hopes of getting customers to buy your other products. Example: Netscape
• Widget Frosting - An adjunct product (that is currently an expense for a primary product, rather than a profit-making product) is open-sourced to improve its quality. Example: SGI + Samba
• Accessorizing - Sell accessories: books, hardware, pre-packaged systems. Example: O'Reilly

Business Strategies

• Clayton Christensen's Conservation of Modularity - You make money at the borders to modular (open source) layers. Example: Sell proprietary software that runs on Linux.
• Dual License - Fee for commercial distribution rights and more features
• Consulting - Use OSS to provide higher margins at lower prices
• Subscription - Provide support for long-term "maintenance" revenue. Example: RedHat (for the most part).
• Patronage - Drive standards, enter entrenched markets, commoditize competitors. Example: IBM + Apache vs. MS IIS, IBM + Eclipse vs. Sun & MS.
• Hosted - Use OSS to provide a service.
• Embedded - Use OSS in an embedded system to save on license costs.

Good source