How to profit from open source

Business models to balance profit with community.


So you want to make a small fortune in open source software? It's simple, the joke goes: Just start with a large fortune. The open source revolution began at least two decades ago, but businesses and programmers are still struggling to understand the best way to share wonderful code and pay the mortgage.

There have been some notable successes: Sun paid $1 billion for MySQL, an eye-popping amount given that MySQL was celebrating raking in $50 million in revenue not too long before. Red Hat has a market cap of more than $6 billion.

Yet for all of this wealth, there's a feeling that these businesses succeeded by being hybrids. They use the open source vision to attract users, but their business success comes by pushing proprietary options. Thus, the dark secret is that their open source version are merely a form of marketing.

Calling this a bait-and-switch may be too cynical, but all users can feel the commercial tilt. Many companies, for example, find it is cheaper to buy a full commercial licence for MySQL than to hire a lawyer to see if they are in compliance with the open source licence. Red Hat makes a big distinction between the free version, distributed under the name Fedora, and its enterprise products sold under the name Red Hat. Lest there be any expectation that their software is truly free, both MySQL and Red Hat offer 30-day trials, a phrase that's not usually associated with the ideals of open source. Remember Oracle CEO Larry Ellison's famous interview with the Financial Times where he said, "If an open source product gets good enough, we'll simply take it."

Other companies that try to be pure and share their code widely discover that users are happy to share the software but not so ready to pay enough to support the programmers.

Zack Urlocker, a board member and executive for several open source companies, points out the trade-off between the degree of sharing and revenue: "Apache has a great licence model that enables the wide adoption of open source software, but there have been few significant businesses, none approaching even $100 million in revenue, based on a permissive licence model" such as Apache's.

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