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Making Money Using Open Source Software?
Posted by
Cliff
on Wed Mar 09, 2005 12:55 PM
from the software-isn't-the-product dept.
from the software-isn't-the-product dept.
GamblerZG asks: "As many of us probably know, convincing people to run Free Software can sometimes be a tedious task. However, there are a lot of factors that help us in that regard, and, perhaps, the biggest of them is a simple truth: Free Software is free. It's hard to argue with such statement. I know it, because I faced it today, trying to convince my fellow co-worker that it is possible to profit by writing GNU-licensed code. 'How company can make money, if its products are available for free?' That was a valid question indeed, and I could not find any simple answers to respond with. That makes me wonder, whether there are articles on the Internet, which explain and analyze how Open Source business models work? Do you know any ways to prove that such models can be profitable?" It can be done, you can check out a recent interview with an Open Source Entrepreneur on NewsForge for some hints. What other ideas and business plans do you think would be a good match for a business with an Open Source core?
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is it true? (Score:5, Funny)
Re:is it true? (Score:5, Funny)
I thought the second step was obvious - patent ellipses.
Parent
Re:is it true? (Score:4, Interesting)
For example, where I work at a research hospital, the software I work on is used for analysis of MRI images. It's not GPLed, but it's open source, free, and pretty much anyone can get access. Our money comes from grants.
In my previous job, I worked at a major defense contractor. Software wasn't written for "sale" persay, there either. Instead, we were given a contract by a government agency to develop a piece of software for them. Of course, we couldn't open-source that software because it was sensitive, but I'm sure there are plenty of other cases of "software by contract" out there where the submitter or recipient of the contract has no financial interest in software sales - just in getting the contract filled.
Parent
No-brainer (Score:5, Informative)
Re:No-brainer (Score:3, Insightful)
Re:No-brainer (Score:3, Insightful)
No one ever went broke underestimating the intelligence of the American public
Make something idiot proof and the world will make a better idiot
I checked with my company's IT guy - he's in full agreement. I must admit, it's fun listening to him teach the executives how to use e-mail.
Re:No-brainer (Score:5, Insightful)
Parent
Re:No-brainer (Score:3, Interesting)
Re:No-brainer (Score:3, Insightful)
Here, have a clue on the house. The people who run sendmail.com? It's CTO is the original author of sendmail [sendmail.com]. How's that for making money writing open source software?
As for redhat, are you saying that having someone who knows how to make 50 software packages work together across 2000 seats in an enterprise situation isn't worth the price of admission to Red Hat Enterprise? Do they need to have written all that software themselves in order to make money off of it? Apparently not, or they'd be out
Here is my question?? (Score:5, Interesting)
However, he also stressed "living the mission" where there mission is to essentially alievate pain, help people live longer better lives." And in his next breath he said that his company would sue anyone who copies their ideas to do remote patient check ups on pacemakers etc.
So I asked, doesn't this contradict the mission, how can you on one hand be for helping people but writing proprietary software that maximizes your revenue? Why don't you open source it all, wouldn't that be a better fulfillment of the mission? He responded by saying that it is essential that the company do this to ensure that it can be financially healthy to continue to provide these services and develop new ones.
It seemed pretty logical to me, but I want to hear what the
Parent
Re:Here is my question?? (Score:3, Insightful)
They should look at their costs, and their income. Does it take locking something up 15 years that was probably trivial to come up with? (I don't mean the programming just the basic concept that is patented). How much of their cost is on patenting everything? That cost needs to be looked at too.
I would imagine cutting pay at the top to something that is still plenty high (speculating, maybe the
Re:No-brainer (Score:3, Insightful)
If GPL code directly calls your code, your license must be compatible with the GPL.
However there are millions of other open source licenses out there that doesn't have this problem, and if you've got a hardon for the GPL, you can write the "main" program using a modified GPL that states that proprietary plugins may be added to the code, then write proprietary plugins.
Re:No-brainer (Score:3, Interesting)
Beyond that, I wonder if companies like Red Hat have actually made a profit over their lifetime despite having 95% of their product developed by people they didn't have to pay. (Yes, I could research the answer, but I'm too lazy).
Oh come on. You're so full of it. (Score:3, Funny)
Re:No-brainer (Score:4, Interesting)
They created the QT library, and they are giving it away under GPL. They make a profit from companies that need the library for non-GPL products.
Parent
Re:No-brainer (Score:5, Interesting)
However, I would argue that the reason they make that money is because they have smartly found a niche that encourages it - writing libraries that everybody wants to use. And, of course, they do what I would suggest to would-be OSS developement companies -- dual licensing.
IMO, dual licensing is key to OSS. For non-commercial purposes, one is basically free to do what they want (or it's licensed under GPL, whatever). But for commercial purposes, the license becomes more restrictive and demanding of money.
TrollTech really is probably the model the OSS community should look towards...
Parent
Re:No-brainer (Score:4, Insightful)
Trolltech is an excellent example. They would not have nearly as many paying customers if it wasn't for the free version. Everyone in unixland knows KDE, and a good part of them use and like it. Enough of them are programers who have played around with the source enough to pass the qt learning curve and see how great it is. When the boss decides to start a new project they are not in position of either asking for qt, or evaluating all toolkits. The latter is hard to do, because by the time you know a toolkit isn't great you have half your application written already.
Trolltech in fact mentions kde to those who are considering their product. When you evaluate something new it is hard to know if it is any good. It is hard to get customers to act as a reference, and even when they will there is always a question if the reference is honest. KDE is there, they can point to it and say "See, they have several million lines of code built on qt". That is worth a lot.
In short, sell the GPL version as the demo, and the free software built around it as proof that your code is good. Doesn't work so well for non-libraries though.
Parent
Re:No-brainer (Score:5, Informative)
Are you kidding? Redhat contribute to a lot of high-profile open source projects [redhat.com]. They also provide hosting [redhat.com] to many projects.
Parent
The product is free; support isn't (Score:5, Insightful)
Re:The product is free; support isn't (Score:3, Insightful)
A lot of times (at least in the beginning) the developer and support personnel are one and the same person. So typically someone will do an OSS project in their spare time and then once it's complete they do the customizations/support for extra cash.
Also, even if you charge the same, keep in mind that the difference is that the product is usually still available (GPL or whatever) for people to use. That means that people who don't
Support! (Score:5, Interesting)
Re:Support? (Score:3, Insightful)
Execs will not use a product company wide until it has proven itself.
If you want to get your foot in the door, suggest a testbed in just one part of the company, and hope to God you don't have any problems or complaints about your setup. If your solution works better (worth the cost of switching other offices), then you will probably make the sale since you have proven yourself with the testbed.
Re:Support! (Score:3, Informative)
-N
One Possibility... (Score:5, Insightful)
Then, sell consulting to design, write, install, support, and maintain those extensions.
Again? (Score:5, Funny)
Okay, it's been 2 weeks guys, so we have another programmer who wants to make money programming, but has no idea how to create a solid business model, so let's all put in some work and tell this guy how to make money with FOSS instead of those of us who have figured it out running our own businesses.
It's possible. (Score:5, Insightful)
Just take a quick look at IBM announce today they're making 38.8 million off Open-Source-based services [blogspot.com] on a single location in the span of four years.
If that is not money, I dare not fathom what is.
Re:It's possible. (Score:5, Insightful)
No, IBM did not. They made that money off of support, not development.
Parent
Well... (Score:5, Funny)
Honor system (Score:5, Funny)
OSS piracy (Score:5, Funny)
As we have already seen today [slashdot.org], the GPL is under attack from evil forces known as "pirates." These shadowy folk silently steal source code and violate the GPL, infringing on the rights of GPL authors. They are nothing more than thieves getting a free ride off the work of others, and I for one am disgusted at the idea of it. As you can see in the previous article, clearly Slashdot is also sickened by the idea of copyright infringement and piracy.
Some have even called for a lawsuit against these pirate thieves. Suing individual infringers has always been a position that Slashdot and its readership has supported, so it's only fair that the original GPL authors protect their rights and safeguard their material from being stolen in the future. I think we should all support any lawsuits against these infringers to protect the rights of GPL authors everywhere.
I appluad Slashdot and its readers for always taking a proactive stance against piracy and copyright infringement in general, and I would like to join the cause against this "source code theft." Piracy is a major threat facing OSS today.
This is easy (Score:5, Insightful)
Er (Score:5, Funny)
In Soviet Russia it's a valid question, my friend, but not in English.
It's not the software that matters (Score:5, Insightful)
The TrollTech approach (Score:4, Insightful)
The Apple Model (Score:3, Informative)
I think we'll start to see this model adopted more and more.
Money with OSS (Score:3, Funny)
Wrong question (Score:5, Insightful)
Simple answer: it's extremely dificult to do so.
The question you should be asking is 'How can a company make money, if it gives away software for free?', and the answer should be more obvious - it can do so if its product is not the software it's giving away.
For instance, IBM's "product" is the tailor-made services and consultancy it provides. The software is merely a tool they use to provide it.
You might argue that keeping such tools to yourself is a commercial advantage over your competitors. That's true to an extent, but there are also downsides - e.g. if you provide your own proprietary operating system instead, you don't get benefits contributed by the community, and your competitors are more attractive because there is no lock-in.
I do this now (Score:4, Insightful)
Recent examples include things like displaytag library [sourceforge.net], Hibernate [hibernate.org] and HTML Area [dynarch.com].
Of course, this means I must take a wide berth around GPL'd code, but there is enough stuff under BSD/Apache/whatever to get the job done.
Here's one example in Education (Score:4, Interesting)
In brief, the Sakai project was started by a few large institutions who were tired of buying into the licensing fees of other learning management system products like WebCT and Blackboard. They decided to create their own and make it open source - both free as in beer and speech. However, the support for Sakai comes at a price, albeit a much lower price than the aforementioned commercial products were offering.
In the end, you recieve a completely open learning managment system created and maintained by developers at these institutions and supported by commercial interests.
Longtail vs. Lessig (Score:3, Interesting)
"What's changed is the presumption that the primary rights-holder is the best at extracting the commercial potential of creative material. Instead, anyone can do it: the advertising company that remixes an old movie to sell a car; the Linux t-shirt done Warhol-style, or just plain old DJ magic. "
"Let them eat cake" Well now that cake is actually free and we all want to sell it. Now if you can put a custom birthday signature on that cake you might have a business. This is one of the reasons film school is starting to see a new wave of interest. Communication and creativity, not business processes, are going to be the only things left after the so called Web2.0 is done modernizing commerce.
Some Resources (Score:5, Informative)
-101 Ways to Make Money off Open Source [manageability.org]
-How to make money with Open Source Software [lathi.net]
-Making an open source living [builderau.com.au]
-eWeek:How to Make Money Off Open Source [eweek.com]
I am not intending to be snitty in suggesting that you search Google; there were tons of other seemingly-good resources contained within it, and it might just be a case of different search terms. You might be able to team the information gained there with the advice of people here.
Also, if you can gain access to the class papers from the Boston Embedded Systems conference, particularly those from Bill Gatliff in 2003, there were tons of developers there who lectured on this very thing, citing examples and explaining the ins and outs of open-source licensing. I thought Bill Gatliff did an excellent job, and you may be able to contact him through his website for some resources.
OSS business models don't work.. (Score:3, Interesting)
The reason why OpenSource works for Redhat and SuSE is because they don't write much OpenSource, the community does, they just pick the whole work of other, package it nicly, write some installer programms, fix some remaining bugs and then sell it. If there wouldn't be a large community to actually write the software they wouldn't have much of a chance, since there wouldn't be much that they could package. Supporting their products is another source for there income, for which their OpenSource activity is of course a great way to advertise it.
So if you expect to write original OpenSource software and expect to get a large return from it, you can basically forget it. If everybody can download your software for free you won't stand much of a chance to sell it. If you however sell a service and not a piece of software there is a good chance that OpenSource won't hurt you, since people will still buy your service. There are also models which work by releasing older versions as OpenSource and selling the current version as close source.
Overall making money by writing OpenSource doesn't work, what works however is using OpenSource as advertisment to services you sell. However selling services doesn't work for all kinds of software, so if your software doesn't require much service around it, you are out of luck. If you want to make money with your software there are probally better ways then OpenSource, you should see OpenSource as a way to ensure the users freedom, not to ensure yourself a larger income.
Is it so hard to grasp? (Score:4, Informative)
I pay plenty of bar tenders to make me "Open-source" drinks that I know damn well how to make on my own because I'm just no good at it or I don't want to take the time to go to the store or I'm too tired to make it etc. etc..
People pay for hamburgers at restaurants all the time, even though even little kids know what goes in them, because they don't want to go to the store and buy all the stuff and they don't have the tools to prepare it or the skill to do it well. They just want to eat. It's a matter of convenience and skill and action.
You just have to choose the right market. When a bar tender is behind the bar she doesn't pay another bar tender to make her a drink that they both know how to make, but after her shift is over and she's dead tired, relaxing on the other side of the bar she will. Likewise, you probably won't be able to sell your OSS products to people who make their own OSS products. You sell them to people who need solutions to problems that you can provide using tried and true OSS code. To sound really cliche, if you're selling OSS stuff you're a "solutions provider" and your solution just happens to involve free software, but businesses will still pay you to solve their problems because you are doing work, your tools are just free.
The support model sucks (Score:5, Interesting)
We've had this problem, so I'm not speaking theoretically. Most of our users bought support with the purchase of our commercial product, but after one year many of them didn't want to renew because they hadn't had any problems and didn't know what they were paying for.
A business plan that is based on support is at direct cross purposes with creating high-quality, easy-to-use software.
The case of LaTeX (Score:5, Interesting)
"GMZ: Was this always meant to be free software ? Did you ever try to "get rich" with it? Do you regret that you didn't?
LL: At the time, it never really occurred to me that people would pay money for software. I certainly didn't think that people would pay money for a book about software. Fortunately, Peter Gordon at Addison-Wesley convinced me to turn the LaTeX manual into a book. In retrospect, I think I made more money by giving the software away and selling the book than I would have by trying to sell the software. I don't think TeX and LaTeX would have become popular had they not been free. Indeed, I think most users would have been happier with Scribe. Had Scribe been free and had it continued to be supported, I suspect it would have won out over TeX. On the other hand, I think it would have been supplanted more quickly by Word than TeX has been." (From TUGboat 22 (2001) [tug.org]
Just a very succesful case of money made out of free/open source software that is often overlooked (and maybe one of the oldest cases as well!)
Support, installation, bounties (Score:5, Interesting)
1) Support. Provide support for the software. Fixing or adapting it to the customers requirements for money.
2) Installation. Really a subset of support. Will install and train in the usage of OSS for money.
3) Add/Create OSS for money. They customer wants something. You will code it.
Answer to the Question (Score:4, Funny)
Volume.
Re:I don't think it was a valid question: (Score:5, Informative)
Yeah, but can anybody spot the other problem?
"How can a company make money if its products were available for free?"
The if...were is a hypothetical subjunctive; the writer is making a statement contrary to fact. The company's products are not available for free; the case is being postulated where they are.
Lots more details in Wikipedia [wikipedia.org], of course.
(No, I'm not a card-carrying pedant. It's made out of plastic.)
Parent
Re:I don't think it was a valid question: (Score:3, Informative)
The question about making money is referring to the present - the same point at which the products are hypothetically available for free. English isn't a language where every 'if' clause takes a subjunctive. This sentence isn't expressing doubt or disbelief; it's a condition posed as a question.
Re:Openflows makes money supporting Open Source (Score:3, Interesting)