Slashdot: Is Open Source Software a Race To Zero?
Great discussion over @ Slashdot: Is Open Source Software a Race To Zero?
I really think the open source approach has lots of benefits, for the software itself and all parties involved. However, I would say it will probably take a decade before sound business models based on open source are really understood and start to become mainstream.
At this point in time, (as most people) I still think it is considerably harder/trickier to make money developing software as open source than it is with closed source. At least for small companies. A few reasons:
- reduced barrier to entry for new competitors as they can easily leverage the fruits of your hard work. Even more so if you choose a more liberal license such as a BSD, EPL or Apache (JBoss and MySQL use GPL, for instance).
- lower profit margins, if you decide to adopt a services-based business model instead of one based on selling product licenses, which is a common approach.
- the overhead of maintaining the open source software while developing the closed source extensions or providing the related services, the very activities that will actually make money, could be unbearable.
The TextUML Toolkit is open source (EPL) since release 1.1. The decision of making the TextUML Toolkit open source was based on the fact that I (a.k.a. Abstratt Technologies) never intended to make any money directly off of it, wanted to attract external contributions and maybe get some visibility to other future offerings. But I wouldn’t have done it if I had any plans of selling the TextUML Toolkit as a product on its own.
Well, I am interested in your thoughts. Do you know of cases of small companies making good money from developing and selling open source software (using liberal licenses such as the EPL)?
To include BSD and EPL in the same breath is a bit misleading. EPL has strong copyleft provisions that ensure that while people can use your software and can build cool things from it and around it, they cannot merely grab it and run away with it. It’s really the middle ground between the completely viral nature of GPL and the “free love” of APL or BSD.
Generally people won’t pay a lot of money for something they can get for free. They’ll pay a bit for the nice packaging, but that’s it. Freetards are taking over the world, so generally those who are enamored with their high profit margins better be prepared to have them undermined by open source efforts. The only way to avoid having the wave of change wash over you is to be the one who’s always on the leading edge of it. Expect last year’s profitable software to become an open source commodity next year; plan hard for the next innovation to drive your profits or plan to provide less profitable services around the software commodity space.
I liked an article I read the other week that said open source is free as in “free puppy”. That puppy is going to need love, attention, and food not to mention expensive trips to the veterinarian. So while you can build a business around breeding puppies, there are great many other ways to profit from puppies.
Comment by Ed Merks — November 26, 2008 @ 12:29 am
You are right, Ed, BSD and Apache are more liberal licenses than the EPL. My (intended) point was that they do not impose restrictions on how extensions to an open-source core are to be licensed, so from that point of view they are all similarly permissive.
Comment by rafael.chaves — November 26, 2008 @ 1:01 am
Interestingly enough, I just learned about the CAOS blog by the 451 Group. This post is great:
http://blogs.the451group.com/opensource/2008/10/13/open-source-is-not-a-business-model/
But there are many other interesting posts on that blog. Obligatory read for anyone in the business of software considering the open source venue.
Comment by rafael.chaves — November 26, 2008 @ 9:31 pm