How to make money from free software
Posted on October 21st, 2008 by sherrilynne
Image by Getty Images via Daylife
How can you make a business out of something that is available for free? It seems an unlikely model for business success, but the people at the bottled water companies sure seem to have it figured out.
However, it’s something that folks in the open source community have been grappling with for years. If your software is available for free online, how do you expect to make any money out of it? By offering value added customisation and support services has been the answer so far.
But now, a report from IT industry analysts The 451 Group, concludes that open source is no longer a viable business model in the software sector. Click here to read the rest of this Tech Talk column.
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Interesting points of view, congrats too with the being on the panel for Neville & Shel’s blogradio show.
Thanks Leo.
It would be a very fundamental misunderstanding to assume that Open Source was ever a “Business Model”, any more than fresh air is a business model. The “Open Source Business Model” has always, from day one, been an abbreviation for “The provision of consulting and support services relating to free software”. Anyone who ever thought otherwise was labouring under a delusion, and in that respect this conclusion of the report is meaningless.
The value in IT lies within its exploitation to create “Information Systems”, the technology component is akin to bricks and mortar – of little value until constructed into a building. The value component comes from the business systems specialists who architect business solutions using the available technology components. The services offered by providers in the Free Open Source Software (FOSS) space are in levering the technology components delivered through FOSS to create Information Systems solutions, i.e. consultancy and support. This is nothing new, there are millions of systems houses around the globe who provide such services for proprietary packages, and their major revenue streams are in the provision of support and consulting services, the actual license revenue they receive is very small. It is directly akin to running a car dealership or selling computer printers – the revenue stream is not in the initial sale, it is in the post sale relationship. The report authors are either naive in believing that it was ever otherwise, or cynically manipulating the more naive consumers of their “report”.
Open source is essentially a statement, by software developers, about the over-valuation of commodity product by greedy software vendors – AT&T/Bell Labs, Microsoft et. al., who through transient monopolies massively overvalued their own contribution to the use of computing in the building of Information Systems – vendors who hype, position and sell their products as completed buildings when all they actually have to offer is a range of differently-coloured bricks. People will pay for value, and mature purchasers see far more value in services than in commodities. FWIW