Open Source Isn't A Business Model... Just Like Free Isn't A Business Model

from the but-both-are-important-parts-of-a-business-model dept

Wed, Oct 22nd 2008 11:41am — Mike Masnick

Marshall Kirkpatrick had an interesting post at ReadWriteWeb last week declaring that "pure open source is no longer a viable business model." The post (and the title) are based on some research from The451 Group (which does very good research, I should mention). While the actual report costs quite a bit of money, the firm did put up a blog post discussing the research, and it's not as inflammatory as the title might have made it out to be.

The simple fact is that "open source" has never been a business model -- in the same way that free, by itself, has never been a business model. They both can be a very important part of a business model, but anyone who thought that "open source" was a business model probably also believed that "give it away and pray" was a business model. The research report simply highlights that point, effectively pointing out that, while some companies may have incorrectly thought it was a business model, "open source" by itself has never been a business model. Those that bet on "open source as a business model" rather than figuring out how open source works in a business model all realized they needed to change strategies down the road.

Unfortunately, the problem is that many will simply read the bottom line of these reports, rather than the details, and think they mean that open source is a failure as a part of a business model. And that would be a huge mistake. Ignoring the opportunities that are opened up for other business models by open source is just as silly as ignoring how "free" can be a part of almost any business model today. Brushing them aside as not worth pursuing is a strategy that will almost certainly come back to haunt those who underestimate the importance of both concepts.

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Filed Under: business models, economics, open source, software

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another mike, 22 Oct 2008 @ 12:12pm

free has never been the business model
Free and open can not work as the sole component of the business model. You can't make a profit off of zero income. But it can be a very profitable piece of the advertising, or rather the promotional, side of the company. Giving away marginal cost resources to promote scarce resources. It can also be a cost savings, reducing overhead and support costs with FOSS instead of proprietary software.
I remember something interesting from the tech bubble at the turn of the century (it still sounds weird that our generation has a turn of the century). You could scan the press releases for the companies that were collaborative, open source, web enabled, fully integrated solutions, blah blah, and know that there would be cheap office furniture available in about six months from their liquidation auction. So many places were just buzzword factories that thought they would be raking it in just by "being" open source.
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Anonymous Coward, 22 Oct 2008 @ 12:14pm

Hey, open source developers can sell t-shirts. Oh wait... http://store.mozilla.org/
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Anonymous Coward, 22 Oct 2008 @ 12:26pm

Mike, you always do really great work, but this particular post made me lol. I think you need to say "business model" a few more times in this post.
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Niles Gibbs, 22 Oct 2008 @ 12:30pm

Just like "Charge money" isn't a bsiness model
Of course "free" or "open source" isn't a business model. "Charge money" isn't a business model either. They are parts of a business model. In whatever business you're in, you have to decide, what to charge money for (like scarce goods), what to give a away for free (like infinite goods, or advertising swag). A model is the relationship between the whats, hows, the whys, not just one phrase like "free".
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Tom The Toe, 22 Oct 2008 @ 12:34pm

How many times can you say it?
Let's see "business model(s)" 12 times in 8 sentences and two paragraphs, that not nearly enough.
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Cannen, 22 Oct 2008 @ 12:36pm

Linux tends to be free. Support costs money. Without the open source "linux" there would be no support to make money on.

This is the same way it could work with music/movies/books. You give away the digital good and make money from the fanbase on the concert/tour, t-shirt, liner notes, art, artist availability, endorsement, signed copies, etc, etc. The list goes on. That is one reason why Mike has Techdirt. Not only is it an interest that he has - discussing tech - but it also establishes him as an expert in the subject of economics of technology. Giving away something often makes more money than selling something.

OpenSource isn't "the" business model. It contributes to the overall set of products - or serves as bait for other services.
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Chris Maresca, 22 Oct 2008 @ 1:13pm

The European view...
... we just held a conference in Paris discussing the future of commercial Open Source and one of the more entertaining comments was a French government minister calling commercial open source 'fake open source'.

His point was that end users like him used open source to have a diversity of support options. As soon as the software was locked up by one company, it was, to him, no longer open source even if there was an open source license and development model attached to it.

Funny enough, the 451 Group did a report a couple of years ago about the top 10 "open source business models"... 7 of those were companies we had worked with ;-) We've always been very careful to separate open source as a strategy from any particular business model.

Chris.
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Joshua BA, 22 Oct 2008 @ 1:50pm

Of course open source isn't a business model
The term "open source" is a name for a development model. Open source relates to business models in exactly the same way that using drywall instead of plaster when building a house is related to a business model.

Furthermore, using the term F(L)OSS when talking about methods of software creation or business models is incorrect (I know the article didn't mention it but already some comments are using it). Free Software has nothing to do with business models or even development models. It only references software that's licensing and distribution meet a certain ethical ideal. Calling Free Software part of a business model makes about as much sense as calling free speech or the freedom to not incriminate one's self parts of business models.
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Anonymous Coward, 22 Oct 2008 @ 1:52pm

even though source codes for open source software such as linux are available for free nothing stops any1 from selling the product in question, granted its not easy to sell something that you can download legally for free but im sure it cant be done (im thinking here of various music artists that managed to find good business models to sell there music in particular Trent Reznor).

the value of Open Source has to do with a sense of community were the product in question is continually updated and "competing products" push and help each other in bettering the end product.

Open Source = better end user satisfaction.
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Anonymous Coward, 22 Oct 2008 @ 2:03pm

Re:
oops.

that was suppose to be im sure IT CAN be none not it cant
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Jake K, 22 Oct 2008 @ 2:17pm

It's kinda sad that you have to even clarify this issue.
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Sos, 22 Oct 2008 @ 3:30pm

Re: Of course open source isn't a business model
The term "open source" is a name for a development model.

No its not. A development model is a methodology for product creation, for example Agile or the Waterfall methodology.

Open Source is model for determining infrastructure, customer relationship, finance and distribution channels. Therefore its a business model.
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bigpicture, 22 Oct 2008 @ 4:05pm

Business Model?
Open Source never was a business model, open source is a method of developing software. As to how to monetize that software becomes the Business Model. In general that is not done from sale of the actual software itself, it is done by using the software as part of a set of services that have value. Look at what Red Hat has to say about that, and the concept of a total solution using existing hardware/software, and new additional hardware and software.
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Jesse, 22 Oct 2008 @ 4:37pm

Models are the best
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kg, 26 Oct 2008 @ 5:54pm

open source is a licensing model
@8, 12 & 13:
it's neither a development or a business model:

a business model is a model/plan for how to run a business/make a profit off of a given good/service

a software development model is a model/plan for how to design and implement a given piece of software, and for sundry activities (example: inter-team communication; expectations on the date of delivery; clarification of requirements)

Open Source is a licensing model: it refers to a set of licenses with common or similar terms, the main thrust of wh/ is that the licensee has unrestricted access to look @ and modify the source code, and redistribute it freely so long as the original terms of the license are observed (said terms mostly being that redistributed copies/modifications also be under the same license terms/ proper attribution given)
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