Monetizing Open Source Software
A Work In Progress
Introduction
Open Source Software (OSS) has a very pragmatic business model. Despite claims from some quarters, it is not destroying the software industry. Instead, it is powering a broad based explosion of new business and new opportunities.
OSS does challenge one major business model – that of selling software, especially infrastructure or enabling software, as a product. If it isn't possible to sell software (at least some software) as a product, then the question becomes one of what can be done to make money – how to monetize OSS. This essay explores several ways of doing this and addresses several myths.
Myths
The first myth is that because OSS is “free”, it isn't possible to make money on it. That, since the software is available for no charge, it destroys the economic viability of the software industry.
There are two things that are true:
First, where OSS competes with Proprietary Software, OSS has a tremendous competitive advantage. This is a simple fact of business life – when faced by a competitive product which has lower cost, you must lower your own costs, increase your products value, or face declining market share.
Second, OSS – specifically the GPL - prevents you from taking the work of others and selling it. You can use it, you can enhance it, you can redistribute it, you can build a variety of product offerings on top of it – but you can't sell it.
One common myth is that OSS is free. This isn't precisely true; OSS is available at no charge and can be freely redistributed, but there are a variety of costs (monetary and non-monetary) associated with it. Using OSS allows making tradeoffs between investing time and investing money; proprietary software requires an investment of money.
Another myth is that OSS is made by hippies in a garage. In fact, companies like IBM, Intel, AMD, Sun, Red Hat and Novell are among the largest contributors to OSS. Large companies contribute for a variety of reasons – but all the contributions have the goal of making money. These companies are OSS advocates because it is in their best interests.
A common claim is that OSS licenses require you to give away your own source code. This is absolutely false – you retain full control of all software that you write. What the OSS licenses, especially the GPL, do mandate is that you can not redistribute OSS software unless you follow the OSS terms.
Rather than destroying the software industry, OSS is driving a new, broad based entrepreneurial software market by enabling the creation of new software, services and business with minimal investment and then allowing these companies to scale as they grow. Initial work can be done with almost no investment, and a full spectrum of commercial support and enhancement added as the business grows and matures.