The Open Source Business Model

Last updated on: April 10, 2006 at 8:56 pm by Desh Kapoor

The Open Source Business Model 2006-04-10T20:56:00-05:00 Desh Kapoor

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Open Source Business model is here to stay! What is it? Here it is laid out in simple and very succinct terms by the JBoss folks on their website!

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The Professional Open Source methodology is based on the following:

We hire and pay experts in the open source community to write exceptional and innovative software full-time. Unlike first generation open source providers, we control the direction and source code for our projects. This way , we can ensure that all bug fixes and patches are rolled into future versions of our products.
We only use open source licenses that are friendly to end-user IT shops, independent software vendors, and the community itself.
Directly and through our Certified Partners, we deliver the best support services available; all of which are backed up by the real product experts. Services include the JBoss Subscription , Consulting, and Training.

p>IT Manager’s Journal gives some very good information on how the Open Source Business Model is structured. This paragraph gives at a high level as to how the various businesses are using the Open Source Model:

There are many strategies around open source platform applications and utilities aside from Linux or an open source solution stack. These strategies include substantial marketing and service alternatives that are creative and highly competitive. An open source initiative, for instance, may establish an industry standard. A relatively straightforward and simple open source marketing decision may reposition a company or product. For example, using the "patronage" strategy, IBM embraces and extends open source software with refinements that may help them pursue new markets or position themselves against established competitors more effectively. While some open source strategies are fairly obvious, others may have hidden agendas such as monopolizing a software segment or leveraging a patent portfolio. Likewise OSS creates product strategy and business model challenges for many traditional software vendors. Companies like Sun, BEA, and Wind River currently feel the impact of OSS on their business as OSS threatens to commoditize parts of their software portfolio.

These are the Seven Basic Strategies around which an Open Source Business model is generally woven around.

The Optimization Strategy
The Dual License Strategy
The Consulting Strategy
The Subscription Strategy
The Patronage Strategy
The Hosted Strategy
The Embedded Strategy

Here is the bottomline that a company MUST understand while creating its business model for the Open Source Intervention in the technology market!

There are a number of ways to chart successful open source business strategies. Open source provides a powerful tool for getting a business on a faster revenue trajectory, for improving value, and for out-maneuvering the competition. Some of the business models in this discussion parallel traditional commercial software; others invoke new services or businesses. Examples like Amazon, Google, and Neoteris demonstrate that Linux and other OSS can even help companies that are not strictly in the software business achieve tremendous growth and profitability in a relatively short time.

Business managers should understand open source business strategies and determine which strategies are useful for their companies to adopt. Investors should consider the models here when evaluating companies they may be considering for their portfolios. Identifying trends quickly and taking action can be a powerful advantage. Hopefully this article provides a clear introduction to the open source business dynamics that are permanently changing the software industry.

Tags: Open Source, IT

Business

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