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Open Source Proves Elusive as a Business Model
mouser:
I fret about the business models i see succeeding on the internet. The internet was supposed to let the masses compete with the big guys.. But when I look around it seems to me like just another example where the super giants are getting rich and everyone else is scrambling to get some attention without the slightest intention of coming up with a business model for profitability, and instead is just hoping to get enough press to get them a ticket to the lottery of being bought out by one of the big guys.
There has to be a better, more widely applicable model for open source developers to survive financially..
..To Ms. Kroes’s point, there is an open-source alternative, and usually a pretty good one, to just about every major commercial software product. In the last decade, these open-source wares have put tremendous pricing pressure on their proprietary rivals. Governments and corporations have welcomed this competition... Whether open-source firms are practical as long-term businesses, however, is a much murkier question... in the last decade, open-source software has become more of a corporate affair than a people’s revolution... The larger technology companies have tended to buy these one-trick ponies for strategic purposes.
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http://www.nytimes.com/2009/11/30/technology/business-computing/30open.html?_r=2&ref=technology
Note that the article itself is your typical useless business article that seems of interest only to wall street people trying to decide which firms to invest in -- but i think any article that sparks discussion of how open source can become a more viable thriving model is worth noting.
from http://www.gadgetopia.com/post/7002
40hz:
There might be better alternative business models if there were something even remotely resembling a level playing field. Unfortunately, that's not the case.
One of the biggest myths of western capitalism is the myth of the 'free market.' Free markets no longer exist. And many economists would argue that they never really did. All of the world's economic systems and marketplaces are regulated. Some may be regulated less formally, or to a greater or lesser degree, but all of them are regulated.
In a regulated marketplace, the most established businesses with deepest pockets* have a significant advantage since much of the regulatory system is designed to protect their interests. In such an environment, innovation is often viewed as a threat rather than an opportunity, unless the innovation is minor - or is being brought to market by a big company.
So here's the problem in a nutshell: Any real advantage a small company might have can almost always be trumped by greater capital resources, litigation, or regulation.
Most successful small tech developers know (as do their investors) that no matter how breakthrough their product or service is, it will only be a matter of time before someone with deeper pockets:
* Buys out one or more of the developer's partners or investors.
* Files IP or patent infringement charges against the developer regardless of merit.
* Steals the developer's product/service outright and defies them to successfully sue to get it back -or-
* Attempts to get legislation passed to effectively outlaw the developer's product or service.
Small companies don't have the resources to fight against these tactics for any length of time. And the bigger kids on the block know it.
So from a purely business perspective, becoming a nuisance and then selling out to the highest bidder is probably the current most effective business model - if you look at it from the viewpoint of profitability, investor return, and capital preservation.
From a societal and technical perspective, we're all made poorer by this approach. But for the people putting in the time and money to develop a new product or service, this may be the only way they can reasonably expect to make something for their efforts.
And for an individual or small company, 10% of something is a better return than 100% of nothing.
:(
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*Note: having 'deep pockets' applies to individuals as well as businesses.
That's why it's so important to get your net worth up (just above $1 million in the USA) to the economic tipping point. Once you get there, you'll discover "the system" starts working for you in the form of more favorable interest rates, better investment opportunities (courtesy of 'qualified investor' rules), and access to various legitimate tax strategies.
The old adage "The best way to make serious money is to have serious money to begin with!" was never truer than it is in the USA. The USA may occasionally forgive failure - but it always rewards economic success..
mouser:
From Kevin Kelly's site today:
http://www.kk.org/newrules/blog/2009/12/the-ancillary-market-is-the-ma.php
The software is free, but the manual is $10,000. That's no joke. Cygnus Solutions, based in Sunnyvale, California, rakes in $20 million per year in revenues selling support for free Unix-like software. Apache is free but you can buy support and upgrades from C2Net. Although Novell, the network provider, does sell network software, that's not what they are really selling, says Esther Dyson: "What Novell Inc. really is selling is its certified NetWare engineers, instructors, and administrators, and the next release of NetWare." One educational software exec admitted that his company's help line was actually an important profit center. Their main market was the ancillary products they sold for their flagship software, which they had a chance to do while helping customers.
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This is what i keep seeing -- people are finding a way to make money off of open source software.. but the way there doing it looks something like this:
* Let open source mostly hobbyist coders write software in their free time; because it's a hobby, they tend not to spent much time writing documentation, manning support forums etc.
* Now the businesses come in and sell 3rd party support and documentation materials for the open source software.
It's kind of a vicious cycle isn't it? The coders aren't getting paid, and the people who are getting paid depend on the software to be hard to use and without a good support system in order to make money..
JavaJones:
Yes and no. The coders choose to make their work available for free. Many of those same developers are part of larger companies paying them - at least in part - contribute. And even though the larger company may make most or all of its money off of support or other services, and not the software itself, some of the devs still benefit. But the real trick of it is, if support is where all the money is, devs are not barred from providing it... they just don't *like* it. So maybe it sucks that support is where the money is, but that's really because support is needed *and* the software is made freely available. If either one of those things weren't true, things would be different. If devs spent more time making more intuitive software or built-in help; or if they chose to charge for their apps; or if they were willing to spend part of their time investment on support...
- Oshyan
40hz:
Just because the NY Times and Wall Street got it wrong doesn't mean we have to.
The "FOSS Business Model" remains elusive because FOSS is not - and never was - meant to be a business model. The whole concept behind FOSS is as far from business as you can possibly get. If a viable business can arise out of a FOSS project, that's all well and fine. But it's purely a side-effect. It plays no integral role in FOSS philosophy.
FOSS is not a business model. It's a social movement. Or maybe a philosophy, if you prefer. For people like Richard Stallman, it could even be considered a religion.
But whatever FOSS is, in and of itself - it is not a 'business.'
So there's no vicious circle. Nobody's getting ripped off. You can't really steal something that's being given away. You can't burn the developers by charging for installation or technical support services because the governing licenses not only permit doing that - they encourage it. And the people who are involved in FOSS projects understand and agree with that.
You also have to be careful not to lump things together too much when you're talking about FOSS. Not all FOSS projects are created equal. And a large number of FOSS coders are also professional coders so it's not completely accurate to characterize all FOSS development as being a hobbyist effort.
And I also don't think the "business plan" is to deliberately release excessively complex and poorly documented code in order to force people into paying for tech support. I think it's more a natural outcome of the FOSS development process.
Most coders get into FOSS in order to do what they love on something they care about. And many are professionals who want to avoid the whole code review and approval process they live with at work. Unfortunately, one big side effect of going that route is that the code tends to get a little sloppy and exhibit some sprawl.
The same goes for the relative absence of quality documentation. Most coders HATE to write documentation - and FOSS projects are dominated by coders. So if serious documentation does get written, it's often because somebody (usually a satisfied user with a technical writing background) nominated themselves to do it and put the time in.
What I think many professional (as in compensated) coders don't get is that the bulk of the people involved in FOSS development really don't care if somebody decides to make money off tech support (or anything else) as long as the terms of the license governing their codebase is honored. Money is not what motivates them to get involved. They're doing it because they have the time and talent; want to do it; and believe in it.
Those that don't quit the FOSS world and go on to other things.
So to the point about there being a "vicious circle," I really don't think the FOSS developers would see it that way.
I know it comes as a jolt to a many that there are talented folks who are willing to generously provide their personal time and effort to produce something that will be given away. But that's the way it is with FOSS. Considering the amount of rage FOSS seems to induce in some people, I'm sure there are more than a few professional coders who can't (or simply won't) believe that's what's going on.
And maybe that's why these coders aren't involved in FOSS projects. :)
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