Ever pondered how companies make money from free and open source development projects? Could you open source your code and still make a profit? Con Zymaris puts forward the case.
How to make money from Open source
About The Author
Eugenia Loli
Ex-programmer, ex-editor in chief at OSNews.com, now a visual artist/filmmaker.
Follow me on Twitter @EugeniaLoli
a 2-liner is nice, but not very informative
could it be that you forgot a link?
Just leverage the open source stack by writing your proprietary apps on top of it. And we gave back by sponsoring some kernel development a few years ago.
I’m very dubious of the services model except for some niche markets.
The link was there, but there was an additional ” there that your browser did not work around and so it didn’t render the link.
Proprietary software is not going to go away. I think the key is for there to be symbiosis between proprietary developers and open source developers. As I mentioned before, proprietary developers can leverage the lower levels of the open source stack while putting the proprietary stuff at the higher ends of the stack.
A lot of people in the open source community want all software to be free of charge and open source. However, there is software out there that should never be open source such as military software (missile guidance, fighter jet ADA code), dam controling software, and any other thing that deals with national security.
1) Hire Linus
2) Claim that you now own the Tux logo
3) Start licensing Tux to companies who sell Linux support
4) Profit!
You confuse open source with open access. There are many open source products used in national security efforts, as well as many open standards.
Isn’t that a little bit not-fair? Say, hundreds of developers code some open source software for free, and then some company starts to sell licenses or packages or whatever services and making money, without the original developers see anything form these profits.
You know what, you’re right, it is unfair.
Maybe those developers should simply not code? Then nothing they make will be used in a way other than how they want it to be used. I mean, guns can be used to kill people, airplanes can be used to kill people, Bittorrent can be used to ki…I mean, pirate copyrighted material, so surely it makes the most sense to just not do anything.
Isn’t that a little bit not-fair? Say, hundreds of developers code some open source software for free, and then some company starts to sell licenses or packages or whatever services and making money, without the original developers see anything form these profits.
If it’s GPL licensed, they couldn’t sell licenses, but of course they’re free to sell support. You can sell services and support for just about anything, not just open source, and someone else makes money off of someone else’s endeavours.
If it’s BSD licensed, then they can do just about whatever they want with it (so long as they abide by the BSD license). In that case, the developers knew what they were doing, and knew it was a possibilty going into it. Of course, someone else can come in and sell support for that product.
Or they can dual-license like Trolltech and MySQL (I think).
Is ICBM chip guidance software open source with closed access?
I’m fairly impressed. It’s easy as 1-2-3. Create a killer application… build an huge community… code for free then stop and ask for money… customers won’t have time to modify code instead they will ask you… re-license… did author care to consider there are companies who employ tens of people for each of these tasks? When not hundreds, sometimes…
If it was so simple, we’d have thousands of successfully running OS business instead of an handful of success stories (from business perspective, of course). Instead we have a very few succesfull companies and lots of underpaid developers (when they don’t end up working for free… oh sorry… for glory!).
I’m a bit tired of hearing about people who learned a tale and keep repeating it even if facts are mostly proving it doesn’t work.
I think I mosltly agree with OSS Dude: hire Linus and wait for hundreds people start working for you for free. In the end, it would cost u much less than other ways…
Basically Dual Licensing proves the point that you cannot make money from open source alone. If your product is good, it doesn’t need support and that basically is the biggest misnomer about Open Source Business models.
When was the last time you needed technical support for Firefox or XMMS or Acrobat?. If you needed help, you’d fire off a question to USENET/IRC and get the answers. WOuld you pay for getting help on setting up Firefox to block pop-ups or would you just simply get a buddy to show you how?
Open source only works if you’re a hardware company. IBM/Sun/HP/Dell/Nokia love Linux because they don’t have to waste millions on developing drivers/OS/apps. They love the fact that Linux is basically held together with duct-tape and bailing wire so they happily trot out their “Global Services” to “help” you get it working.
sure thing. just ask SCO!
I’ll agree with a lot of what you say, but it does seem to work for Trolltech. The dual-license isn’t good for KDE in the long term, but that’s another story.
I don’t know why you say it’s a “cop out”. It’s not like rational companies care about extremist ideologies anyway. I doubt Trolltech would be where they are today without a GPL version.
Should that be a 3 step plan?
No, but applications that deliver warnings that one is going to fall on your head are.
Pointless argument? Don’t bait.
i believe hw meant by cop out that a second “licensed” product that costs money is needed.
read the story and was unimpressed. do they believe customers are going to go to the company they got thr free system for support? There are groups of individuals that do this freelance work as theur day job. So accpording to the article, maybe companies can make money by being ASPs, but that s eventual. Im a big fan of oss , but apparently its not for profit.
I don’t know why you say it’s a “cop out”.
There’s a couple of reasons:
1) It’s a cop out because these companies want to desparately get the affection of the open source/FLOSS community – but at the same time they want to also drive Mercs and Beamers and fly first class. So how do we justify that? Throw in the boogey man that companies don’t want GPL
2) It’s a cop out because these guys know that once they make the open source product do everything the closed source version does, your normal paying customers will not pay for stuff they can get for free. For example, Sendmail creates a product that absolutly sucks in open source form (ever tried figuring out sendmail.cf?) but works marvellously in the closed source enhanced version.
In OSS, anybody can compete with the original developers. Do you pay $150/hour to MySQL’s engineers or do you pay $12.50 to some techies in Bangalore to do the widget frosting?
Imagine if linux didn’t need support or that none of the apps on Linux needed support, do you still think IBM would love Linux? how about Redhat?
All these software businesses who profess to be in love with Open Source really hate the idea. Off the record Marc Fleury hates that a bunch of Indian guys can take JBoss and make an AS for a fortune 1000 customer. MySQL hates that only 1 in 10,000 companies actually buys a support contract while the rest of them use MySQL without paying. Redhat hates that Novell and Mandrake and others are in the Linux distro business. Trolltec probably hates GTK/Gnome because it’s an open source toolkit with backing from Redhat/Sun/Nokia.
Don’t even get me started about the people who love open source – they do NOTHING for Open Source. Google USES linux but did they contribute Google Desktop Search to Beagle?
I totally agree here. There was (is) a time when people thought that companies were entering OSS market because they loved the idea. Of course they didn’t. They need to behave like all other companies and look for profits.
However, let’s have a subtle syntax difference here: problem is not open-sourcing per se. Rather, real problem is GPLing your code. Opening your source code is not a bad thing because your code still is yours. Yes, maybe you don’t wanna disclose full details but since you have IP shield, that’s not the center of all problems.
One gets into troubles when he/she decides to throw his/her code away and then tries to make money out of it. When everybody is trying to sell same thing. OSS advocates try to make you think “the best will win”. Actually, who has more money will win.
OSS is a social phenomen. When you decide to go OSS you should do that for social purposes and forget you can make money out of it. Maybe you will be able to raise some cash, but in the end, profits are not your goal. If done that way, OSS can only be good for developers around the World.
so open source is about money now??
The author states under the “Paying the bills” section:
“Whilst your code is indeed open source, and your users could extend it themselves, most businesses do not have the time nor the inclination to undertake this kind of activity; it’s not their core business. Firms will instead turn to you.”
Again two points:
1) First of all about the “firms will turn to you” part, it’s a well known fact that most of the times you never go back to the developer or the company that made the goods. Do you go to a Toyota dealership to get an oil changed for $59.99 or do you get it changed at Jiffylube for $19.99.
Let’s just say, if I want to get a feature added to Linux and I’m willing to pay someone, do I go to Linus Torvalds (or OSDL) or do I look for a guy that does linux programming? If I wanted to get something. Do I go to Microsoft to develop a windows program or do I go and find some windows programmers off MSDN. So it’s not always the case that people come back to the original widget developer if others can provide the same widget at less cost.
2) Secondly, that’s not true that firms don’t want to modify software themselves. Open Source proponents are quick to state that majority (90%) of all software programmers are employed by companies for to develop software for their internal consumption. For companies like Walmart, Open Source is a godsend because their IT guys can do all the widget frosting.
The only companies that don’t have IT depts are the small guys and they really couldn’t care less about having Linux – they use Quickbooks to keep accounts and have an AOL email address as their web presence.
Of course it’s about money! It always was!
If not directly, it is indirectly related about money.
OSS zealots will tell you it’s about avoiding lock-in, which is…about money.
They will tell you also it’s about freedom, which is…about money.
They will tell you it’s the great equalizer, which is…about money.
They will tell you it’s about learning from the example of others without having to pay to get formal schooling, which is…about money.
They will tell you that you can take an existing piece of software and readily adapt it to whatever specialized needs quickly, which is…about money.
They will tell you that many eyes produce good quality products because people will do it for personal pride, and not merely for a paycheck, which is…about money.
Why do companies like IBM want to be on the Linux bandwagon? Because it’s about…money.
Software that’s sufficiently flexible,stable, well documented, easy to use, and does the job it was designed for well, is not a candidate for someone to make money off of support and modifications. There’s also no guarantee that even though the original developer created the system and therefore has a big advantage in terms of ramping up to make changes (one thing many people completely miss is that it can take awhile to know a system well enough to make worthwhile changes, even with well implemented, well designed code, if something is large and complex enough), that someone will actually go to the original developer to do it, for whatever reasons they choose, because they may decide to do the changes in-house, and not distribute them, and not worry about trying to sell service or the product they’re using.
OSS has its place in the world, but its place is not to rule the world, and proprietary software will always have a place in the world, never to rule the world, either, and never has. For either one to completely stomp the other one out of existence would slow down technological progress.
I think this guy is living in a dreamland. He is very optimistic about people and companies.
Soon as you start charging for something, people will just go to the next OSS guy who isn’t charging anything yet.
If you make a good program, people won’t find any need for service/support from it.
If the customer has the code, they can just take it to someone else. (they idea of knowing the code better then others is what I take as saying “make your code very cryptic so no one would want to touch it, but yet it’s so great cause it’s open”
Soon as you get going, someone else will pop up and do the same thing completely for free so then you don’t have a model.
People don’t like the idea of paying for support. It implies the software will need support, if your support is how to use it, or fixing bugs for a fee that annoy people, they won’t want to use it. People want to pay for software and never look back to the company, unless something goes wrong, then they want to yell at them and demand they fix it for free.
Free software gets killed by companies offering trial, demo, reduced versions of their software. The big thing for free software is being able to just try it out without paying anything. If you like it you probably have no issue buying it. Soon as companies offer trials, this gain is gone. Adobe has trials for things like Elements, which get people into it, then they don’t mind spending the 99 bucks or so for it, and it’s from a big company they know.
I also think they author is extremely out there on his idea that you get all sorts of advertising and so forth from being OSS. At best that will get you known to people who go to some geek sites on the net, if that site even picks it up. You could get your program on the front page of slashdot everyday, your still not connecting to many people.
OSS works for some things, but just being a software company is not it. It works if your using it in other things. It can work if your a hardware company and need software to go on it, but make money from the hardware. It works if your a company like Tivo who sells a full product that happens to have some OSS stuff in there, but no one buys a Tivo because of this, nor does it matter. (Tivo might not be a great example because the rest of their business model sucks).
It also works if your a service business, not service for your software, but you have to have software to support your actual services, so you have clients users get for free, but to have them do anything they are paying you. Say maybe a weather app to be very simplistic, the app is free, but to get the data you pay a subscription.
I don’t find his examples that convincing. 10 million dollars a year isn’t very much (not bad, but not that great either), and I would like to know how many employees they have and what their actual profit in the end is. Furthermore what’s stopping that company from going belly up soon as someone decides to do one better and make the same thing, but give it completely away for free.
Open Source projects/companies getting killed by other Open Source projects/companies to me is a very big issue. And furthermore getting killed by non Open Source companies. If you want to build a great browser and do, someone else will come along and make one too, but at the same time if your trying to make money off it, your going to get no where when apple and MS give theirs for free, Opera has just enough room for some diehards.
you can if you market it well enough and add stuff in it that the free version does not….
GPLing it !DOES NOT WORK! unless if you put restrictions on it like redhat did or have a dual license like mySQL has.
other than that, it cuts costs and puts people out of work.
So, why would you want to replace company employees with volunter people as they strive to find work? You know the computer industry has one of the highest unemployment rates right now… probably partially thanks to OSS.
It’s about people that make a living, not liking something just because it’s free.
It is possible to make money with open source software, but it is not as easy as with closed source software …
How do those who work on gnome and kde for example, make a profit? Do they have other sources of income?
And other major oss projects?
Basically Dual Licensing proves the point that you cannot make money from open source alone. If your product is good, it doesn’t need support and that basically is the biggest misnomer about Open Source Business models.
I absolutely agree with this. It seems to me that unless your program is not a pain in the ass to install/use and therefore doesn’t need a lot of support, but there’s no way you could make money with OSS. It also seems to me that the people who are making profits with OSS are really doing it with the services they’re selling, not the software.
RTEMS (originally meant “Real Time Embedded Missile System”, but since changed because of its wider application) is open source and has been for many years. It was originally used for missile guidance systems by the US military and has since become further involved in avionics and other such stuff.
http://www.rtems.com/
“It also seems to me that the people who are making profits with OSS are really doing it with the services they’re selling, not the software.” That is pretty much the point being made.
There is also nothing to stop you selling GPL software as well as selling support/services for it.
Create some open source software that does something that no one does but that no one can use. Then sell support services that make it work.