Open Source Business Models

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Facilitated by Josh Crawford, Brattleboro Tech Collective

It's easy to make the case for open source from a technology and community perspective, but business models based on open source projects are a bit more illusory. This session will invite participants to share what's working for them, and how they're melding "free" and "open" with "profitable" and "sustainable".

Notes

These notes were taken by Sameer Siruguri. Please contact me if you have any questions -- at [MY LAST NAME] AT gmail.you know what

Attendees

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Prospective Agenda

The actual discussion ricocheted a bit between different topics

  1. What models work
  2. Trying to sell services as services is hard; Fortune 500 might look for out of the box solutions but not every one does.
  3. How to compete with for-profit shops --- e.g., convince someone that Drupal is better than Conterra. (People love labels (brands) – they crave that.)
  4. How to adequately charge customers of open source projects (by transaction, by capacity, etc)?
  5. How do developers of an open source system (as opposed to consultants providing implementation help) create a revenue model?

Marketing Your Open Source Based Business

Sales and marketing approach is different in the open source world, try to offer more business strategy consulting as part of the package.

Anecdotally from a for-profit software company --- marketing and sales cost are 70% of the license fee. That's not really where the profit center is.

SaaS systems can do their marketing for themselves because they offer free out-of-the-box solutions, that people get productive with, then call the company to get extensions and customizations. This is true of Plone and Joomla --- there are out of the box, easy to install, solutions that people can readily use and then call into the Plone/Joomla folks to get help on.

Cal State has spent $500 MM in deploying (not even licensing) CRM products.

Open Source and Patenting

Should open-source businesses put open-sourcing of code into their client contracts?

  • Most clients don't care.
  • Surprisingly, it's university legal departments that need open source education! They are reluctant to pay for software that they don't own completely.

Some Models That Work

TOR

Funding for this system, that provides privacy and anonymity, comes from organizations that recognize the need for such a service. Paradoxically, the users of the system themselves, i.e. people trying to protect their privacy, cannot pay for it because they don't want to identify themselves in the first place. Instead, the revenue source is someone who wishes to support their ideals. This is like a non profit, with a mission based model, and grants to fund that mission.

SFCCP, Isabela

People working with SFCCP have created a volunteer network of developers who have known each other for ten years; when they met f2f for first time after ten years of remote collaboration, they decided to build a business model to continue doing the work they were doing. A staff of three people in SF do project intake which is farmed out to the developer network; they have had some customer specifically asking for free software; all their code is open source; nobody really cares one way or the other; some customers have asked for training on existing software.

Tech Underground is another example of such a tech collectives --- TU itself doesn't make any revenues but its existence as an umbrella body helps members get more business, while all or some of them utilize and develop for various open source projects/frameworks (Drupal, Joomla, etc.)

Floss Manuals Platform, Adam Hyde Created ecology of documentation, network of writers; organized book sprints, which Adam is paid to organize; documentation created becomes generally available (open sourced documentation); some open source projects that are being implemented by others have paid for documentation to assist their businesses.

Running Multiple Businesses Discussed a model of running two businesses: one is a consulting business which can include non open source work but the coding work from here can get migrated to the other business based on providing services on top of open source products (kind of like the Red Hat model) The value add here is that the provider is a credentialed authority and they provide access to a "certified community" of sorts, which is worth paying the premium for the underlying open source software (a distribution of which could potentially be obtained for free from someone who has already paid for it.)

Ad-based Revenue Models

There is a possibility of using ads as a revenue source: it's very lucrative with Joomla, they pull $180K-200K with ads on Joomla websites + Ads injected into feeds by Feedburner + just started image ads. Primary income source for the project, revenue goes to OpenSource Matters (legal fees, op costs, trademark) Huge community – 200,000 people on forums.

Miscellaneous

Providing paid support: non profit open source geospatial services, they provide paid support for (for-profit?) enterprise clients.

Open Source and Patents

Protect open source from people taking patents on a version of the system – how? There are lawyers that will use prior art to challenge patents, pro bono (e.g., SFLC.)