OSNews

Impact of the Licensing Model

This study found that the licensing model had a major impact on a company's core revenue source. The dual licensing of MySQL, Sleepycat, and DB3Objects enables them to triple their revenue by selling a commercial version of their product. This is the basis for a large part of the respective companies' product revenue.

There are financial consequences to not adopting a dual license. When Great Bridge adopted the existing PostgreSQL product it also adopted the existing unrestricted BSD license. This made it difficult for Great Bridge to sell a product that was otherwise available free and with no license restrictions. Its revenues came mostly from support. The same was true for IBPhoenix which adopted the existing InterBase product but was prohibited by Borland's IPL license from licensing its own product.

Not having a dual license puts an open source company at a great financial disadvantage. Adopting the unrestricted BSD license means foregoing fully two-thirds of possible product revenue. Not having this revenue means a company must be very careful managing its cash flow and that it cannot sustain rapid growth.

The open source adoption curve

The successful companies each followed a similar growth curve dictated by its open source adoption. This adoption curve has unique characteristics that distinguish open source products from the classic product introduction curve.

The open source adoption curve is driven by factors such as community involvement, word of mouth, forum discussions, ideological concerns, cost, as well as suitability to task and product alternatives. A successful open source adoption curve is characterized by a long, slow beginning as awareness of the product spreads by word of mouth to interested parties, using what economists call the "network effect." After a critical users mass is achieved the product and company sees a much more rapid growth in a shorter timeframe.

A classic product adoption curve is driven by factors such as advertising, street promotion, distribution through traditional supply chains, manufacturing capacity, and existing products of similar function. A classic product adoption curve can be accelerated simply by spending money on advertising and marketing activities. Open source companies typically do not have large advertising budgets to accomplish the same means of promotion.

SleepyCat and MySQL each experienced many years of slow but steady growth before seeing rapid growth. The InterBase/Firebird database product had a curious hybrid adoption curve since the product started as close-source, was open sourced by Borland, which then stopped releasing updates under the IPL, and development under the IPL was taken up by IBPhoenix. Its growth is characterized as steady and moderate.

Although all open source companies like to brag about their download numbers as evidence of adoption, the correlation between downloads and actual sales is hard to establish. When a company boasts of a large download number for their product they can really only brag about the general interest in their product. After an open source product is downloaded, the end user must still make the decision to license the product.

1. "Executive Summary"
2. "MySQL"
3. "IBPhoenix"
4. "Sleepycat"
5. "DB4Objects"
6. "Geat Bridge"
7. "Genezzo Systems"
8. "Licensing Model; Open Source Adoption Curve"
9. "Growth Capacity; Conclusions"