How to Make Money with OSS – Business

Models

T-76.651 Seminar on Distributed Product Development

Helsinki University of Technology

Arttu Heikkilä

2004-DEC-07

Introduction

Open source software communities have understandable amount of knowledge, motivation and resources

Open source ideology is widely pontificated by Stallman, Perens, Raymond OS religion/ideology

Backround

Ideology is against the business attitude

Anti-business organizations founded by ’OS founders’ e.g. GNU, FSF

GNU GPL license is totally against the business

Backround

OS License

Most of OS uses GPL GPL cannot be combined with other OS

license

Backround

Business model

Business model needed to convert the technology to economic value.

Business model describes the core value creating logic of the organization

OS license plays key role in business model

Backround

Markets needs OS business models

” One of the common concerns fo entrepreneurs and investors are potential ”business models” that enable for-profit firms to take advantage of free or open source software ” (Cusumano, 2004)

Backround

Business vs. OS communities

Goals of free software ideology and business do not match

What kind of OS license should be selected?

OS is interesting in business point of view, OS communities are against business

Motivation

Goal of the research

A literature research

Which business models seem to be suitable for small software companies?

This paper do not try to list all possible money making methods, but the basic ones. Also, this paper does not describe the business models for hardware manufacturers.

Research question / Method

Paper structure

Introduction OS Licenses OS Business models Discussion Conclusion

Paper structure

OS Licenses

Public domain Ideal for commerializing Rarely used

GPL and LGPL Most used Virus –effect ”distribution is trigger” -loophole

OS Licenses

OS Licenses cont.

BSD Can easily be taken within business University of California has to be mentioned

Artistic Not widely used Option if wanted BSD-styled but less restrictive than GPL

MPL / NPL leaves more rights for the original author Good option in business point of view

OS Licenses

OS Licenses - conclusion

(Valimaki and Oksanen, 2002)

OS Licenses

OS Licenses - conclusion

If business is: Software development with help of OSS

BSD or artistic OSS Public domain (difficult to find suitable) GPL OSS cannot be used (virus-effect)

Outsource the R&D MPL/NPL (GPL)

OS Licenses

OS Business models - selection

Thompson (1999) Research Service Customization

OS business models

OS Business models - selection

Strategies by Koenig (2004) Optimization Dual Licensing Consulting Subsription Patronage Hosted Embedded

OS business models

OS Business models - selection

Classifications by Open source initiative (2004) Support Sellers

distribution, branding, after-sale services Loss Leader Widget Frosting

Drivers/interfaces etc Accessoring

books, coffee cups, t-shirts etc

OS business models

External R&D

Idea The whole internet becomes your R&D and QA

Idea does not work, it’s ideal Slower than internal R&D Difficult to control

OS business models

Dual Licensing

(Valimaki, 2003)

OS business models

Dual Licensing

Wide distribution by ”poison pill” Some basic right (view, use, modify,

redistribute) is restricted

Glorified business model by articles Needs balancing between ideology /

business Examples: MySQL, Sleepycat software

OS business models

Consulting - Customization

Idea Consulting in using OS Customization of current OS products for specific

purpose

Clear logic of money making Consulting and services markets are rising

OS business models

Services – support and maintenance

Idea Money from media dirstribution, branding, training,

consulting, custom development and post-sales support

”Support sellers” Customers do not want to pay from

Code refactoring documentation

Example: Cyclic, Cygnus, Yggdrasil

OS business models

Hosting

Idea Rent the software (do not distribute / sell)

GPL license not in charge before distribution Enables to piggyback from large amount of

OSS Examples: Amazon, Google, salesforge.com

OS business models

Brand licensing

Idea Make product open, but leave the rights of

product trademarks and related IPRs for original author

Companies have to pay when using rights to the trademarks / IPRs

Not a business model for small company (difficult)

OS business models

New license

Idea Possible to create some new, contrivance license

to piggyback others effort

Developers are suspicious Do not write your own license if possible

OS business models

Classification of investigated OS business models

Software business concept Dual licensing Cusomization Own license

Services concept Services Hosting business

Research External R&D

Marketing Brand licensing

OS business models

Conclusion

OS business future is bit risky to predict Literature presents very sceptic, neutral and really

optimistic opinions

Future research What are the needed actions to enable OS

developers to interest to develope software licensed under other than GPL license?

Conclusion

Conlusion

My own opinion OS is great opportunity for some products Limited amount of cathedrals in the bazaar Sceptic to believe in piggybacking others results The best ideas remains

Conclusion

Conclusion – about the course

Thanks for the interesting course with professional visit-lectures

4 DLs model was great in order to get the paper ready =)

LaTex Use of %-marks Compiled result differs in different computers

References

Cusumano, M.A. (2004) Reflections on free and open software. Koenig, J (2004) Seven open source business strategies for

competitive advantage Open source initiative (2004) Open source case for business Thompson, B (1999) Linux means business Valimaki, M. (2003) Dual licensing in open source software industry. Valimaki, M. and V. Oksanen (2002) Evaluation of open source

licensing models for a company developing mass market software

Questions?

Business models

LicensesStructure of paper etc