I know this article is focused on the business level, but I'm finding this to be true on a personal level as well. Contributing to open source not only leads to personal improvement but it essentially creates a public portfolio of your work. This can lead to more exposure which in turn can lead to more opportunities (and better paid ones too).
Open Source might not yield immediate benefits (i.e a paycheck) like say freelancing, but it is an investment in your future.
I am just surprised that in 2013 we are still having this discussion.
There are several ways "to make money with OS"; Service-based models (like support), Dual-licensing models (think Qt, MySQL, etc), Community vs "Enterprise" packaging, Extensions to popular packages, Consulting, Platform ownership, etc etc etc. Why such big surprise?!?
I don't think it's a huge surprise, I just think that there is a lack of understanding for a lot of people. Articles that may encourage more open source are always welcome in my books :)
It's certainly possible, but for many people, it's an added obstacle. I've been doing open source since 1997, and love it, but it's so much more difficult to find a way to make money off it than simply selling some product or service.
That said, if you're not using open source software as part of your infrastructure, keeping only the 'crown jewels' proprietary, you're probably doing it wrong.
Let's say you have a really popular open source project with an enterprise version (which pays your bills). Anybody can start up a competing app with similar features and either give it out for free or charge, making it more difficult for you to make money and stay in business.
The alternative is to have a service-based business. For one or two people, this isn't very scalable.
This story is a bit misleading. If you study the successful companies using open source as a business model you will find they all raised large amounts of venture capital. That was during the window when open source as a business was a brand new idea.
That window has now all but closed and it is exceedingly difficult to find examples of successful companies that bootstrapped their way to success running an open source business.
>There have been only 3 successful open source companies ever: MySQL, Jboss, and Redhat
See now, there's just no reason to go around saying things like that. Even if that were true (it's not), how would you know that it's true? Do you have a complete database of profitable businesses in your head? I doubt it. A significant number of open source companies are privately held, and there's really no telling how successful they are.
Anyway, right off the bat, you missed Mozilla Corporation.
Beyond that, the question of whether a company that does nothing but develop FOSS is irrelevant. The important question is whether developing FOSS can be a major part of a successful business strategy. You might start by asking Google and Apple.
Isn't Mozilla Foundation a non-profit? Wikipedia says it owns a taxable entity, the Mozilla Corporation, but gets the majority of it funds from donations from Google.
I think the companies listed only develop Open Source software and sell services. Google and Apple may use and support Open Source projects, but the real money makers are proprietary.
Mozilla Foundation is non-profit. Mozilla Corporation is for-profit, and makes most of its revenue by selling the default search engine slot in Firefox to Google.
>I think the companies listed only develop Open Source software and sell services.
That's true, but I think it's looking at the situation completely wrong. It's sort of like saying that making left shoes is unprofitable because there are so few successful businesses that exclusively manufacture left shoes.
They create some of the most used open source scientific computing software, and still manage to make money (also, a great place to work in, lots of really smart people)
While this model might not work for everywhere, its possible, it just takes more effort though.
>Check out Enthought http://www.enthought.com/
They create some of the most used open source scientific computing software, and still manage to make money (also, a great place to work in, lots of really smart people)
Sounds like an outlier that proves his rule. How many more companies make far more money each with proprietary products in that domain? Mathematica, Maple, Matlab, SPSS, ...
Bootstrapping to success is difficult, period. I think it would be hard to find examples of companies that bootstrapped their way to success running almost any kind of business (some SaaS apps and mobile app things, maybe).
Nonetheless, I think it's entirely possible, and we [Fogbeam Labs] are certainly working very hard on a new "Open Source company". The thing is, you're right that "open source as a business model" is no longer a new idea, and simply being open source isn't enough to guarantee a certain level of buzz and attention. So it's harder now, but that doesn't mean it can't be done. To us, being "open source" is a differentiator, but it isn't necessarily the main thing that separates us from our competition. We think it's important, we think it's The Right Thing To Do, but we still have to deliver more value than the other guys at the end of the day and we're going to have to learn to out market the other guys.
Exactly. RedHat was able to grow into a publicly traded company because they happened to be in the right place at the right time and were lucky and were smart.
In the years since, people have made money on FOSS. But nobody has come close to making money from FOSS at the scale of RedHat. Making money in a way that scales off FOSS is hard enough that it put Sun out of business.
Open Source isn't a business model anyway, and it never was. It's a development model. Building a business around Open Source implies the need to develop a correspondingly suitable business model, but "open source" per-se is not a business model.
Our main product is a desktop application built on top of the Firefox web browser. It is triple licensed GPL/LGPL/MPL. We make money by selling add-ons and a plus version, all of which is also sold under an OSS license (modified BSD). Similar to what Red Hat does, we modified the BSD to prohibit the use of our trade name (International registered wordmark) in any secondary distros of our OSS. In the end, all you have is a brand. Protecting that, protects the revenue stream.
Our[1] entire model is based around open source software. And I mean real open source software... developed in the open, with an open bug tracker, discussion on public mailing lists, etc.
Now, we don't have a lot of outside contributors at the moment, but we're certainly open to them and the code, bugs, etc. are already "out there". And all (or almost all) of our stuff is (or will be) Apache License V2 licensed.
Eventually we'll have a mix of both "productized" versions of existing projects (somewhat akin to the way Red Hat "productize" Linux) and projects that we started and wrote the bulk of the code for from scratch. Our goal is to very much follow the Red Hat model with subscriptions being a major part of our revenue stream, and then complemented by professional services, training and other add-ons.
In the end will we "make money with Open Source"? I don't know, but we're going to try, because A. it's what we believe in, B. it's The Right Thing To Do and C. it makes the world a better place whether we succeed or fail.
Indeed. That's never been in dispute. You can also make money playing violin in the subway.
The thing is, if you want to make money, there are a lot better ways to make money than playing violin in the subway. And if you want to make money with software, there are a lot better ways to do it than to give your product away and hope that some of your users will give you charity or pay you for support.
Wait until we see a case study come through about a company selling a SaaS product who decided to stop charging subscription fees and instead open source it and charge for support, showing how that was the key to how they made their fortune. Then maybe we can talk about this as an option worth recommending over simply selling your software for money.
I don't really feel that way, and it's not really something I've spent a lot of time looking into, but. There is one thing that bothers me and if you feel like talking about that that'd be cool.
Most of time there's some example of people making money with open source it comes off a little like "you can do open source development and have it play into this other thing that makes money". The other thing is often support or some "service" that people can use your product with.
And it's easy to see how that makes sense for something like a Linux distro (although you'd still ultimately want it to not need "service"). But, like, if I was Cosmigo and had made Pro Motion, I would not be sure how to go about it if I wanted to open source it and make money from that. Surely no one wants a pixel art tool that requires "service", and so on.
Might just be that I haven't seen the right examples because I haven't looked into it that much because I'm not actually that interested in this kind of thing. But yeah, it is one thing that has been bothering me, so.
Pro Motion is a Pro Tool. I capitalize that because the Pro Tools can charge higher prices for a license to use their software, and nobody complains because professionals make that investment back right away.
Here are some other examples of Pro Tools: Adobe Creative Suite, Avid, Visual Studio and Xylinx ISE.
I picked the last two examples on purpose because Visual Studio and ISE are compilers. Visual Studio does a lot of languages but for simplicity let's assume it's just Visual C# and ISE does several languages but Verilog is arguably the most important.
The only way compilers can charge top dollar is by cheating: the open source compilers have demonstrated a higher quality, broader support, faster bug fixes and more features than their competition. Pro Tool Compilers can only exist on a closed system. For Visual C# it's Windows. For ISE it's the Xylinx patented chip architecture. It might seem impossible that enough professionals would be interested in an open source project that they would rather spend their time developing the tool they need rather than buying it, but that's what happened for C compilers. Even Apple releases XCode for free.
It may take years for other Pro Tools to become open source. The Gimp is not going to replace Adobe CS anytime soon. But it will happen eventually because as a professional I would rather have a tool I can customize to my needs. Adobe's move to always-online products is a huge turn-off for example.
So in the meantime there's a lot of money to be made by selling Pro Tools – but that's not where the market is going.
Selling a service may never be a money maker for Pro Tools; but professionals have to climb the learning curve anyway, even if they paid Adobe first. It might make more sense to look at how most professionals learn Adobe's products in the first place: they either pirate the software or learn it using someone else's copy (such as at school). They only really pay once they've entered the business world.
In the business world suddenly a service contract makes total sense! It might not be a service contract for the Gimp (hah! lol) but would it be nice if there was a company that offered enterprise training and support? Oh wait, Red hat, IBM, SAS, the list goes on and on.
Where open source would really make a difference is that anyone, anywhere in the world, could download the software for free (and not need to feel guilty about it). In fact, the feedback from professionals all over the world would be worth 100x what Adobe gets now from licensing fees.
Disclaimer: I work at ActiveState, named in the article.
I'd just like to point out that ActiveState is not VC funded and is profitable. We are able to grow other parts of the business from core products that are enhanced open source (much, but not all, of which is contributed back to the core open source projects). Most of this is in support and services, but we also have highly regarded tools products and a popular IDE (Komodo, of which we fully open sourced the core editor).
Not sure why there are so many negative vibes to this article.
37 comments
[ 8.0 ms ] story [ 76.3 ms ] threadOpen Source might not yield immediate benefits (i.e a paycheck) like say freelancing, but it is an investment in your future.
There are several ways "to make money with OS"; Service-based models (like support), Dual-licensing models (think Qt, MySQL, etc), Community vs "Enterprise" packaging, Extensions to popular packages, Consulting, Platform ownership, etc etc etc. Why such big surprise?!?
That said, if you're not using open source software as part of your infrastructure, keeping only the 'crown jewels' proprietary, you're probably doing it wrong.
But it's going to be very difficult.
Let's say you have a really popular open source project with an enterprise version (which pays your bills). Anybody can start up a competing app with similar features and either give it out for free or charge, making it more difficult for you to make money and stay in business.
The alternative is to have a service-based business. For one or two people, this isn't very scalable.
That window has now all but closed and it is exceedingly difficult to find examples of successful companies that bootstrapped their way to success running an open source business.
There have been only 3 successful open source companies ever: MySQL, Jboss, and Redhat
See now, there's just no reason to go around saying things like that. Even if that were true (it's not), how would you know that it's true? Do you have a complete database of profitable businesses in your head? I doubt it. A significant number of open source companies are privately held, and there's really no telling how successful they are.
Anyway, right off the bat, you missed Mozilla Corporation.
Beyond that, the question of whether a company that does nothing but develop FOSS is irrelevant. The important question is whether developing FOSS can be a major part of a successful business strategy. You might start by asking Google and Apple.
I think the companies listed only develop Open Source software and sell services. Google and Apple may use and support Open Source projects, but the real money makers are proprietary.
I agree that the list is still wrong.
>I think the companies listed only develop Open Source software and sell services.
That's true, but I think it's looking at the situation completely wrong. It's sort of like saying that making left shoes is unprofitable because there are so few successful businesses that exclusively manufacture left shoes.
They create some of the most used open source scientific computing software, and still manage to make money (also, a great place to work in, lots of really smart people)
While this model might not work for everywhere, its possible, it just takes more effort though.
Sounds like an outlier that proves his rule. How many more companies make far more money each with proprietary products in that domain? Mathematica, Maple, Matlab, SPSS, ...
Nonetheless, I think it's entirely possible, and we [Fogbeam Labs] are certainly working very hard on a new "Open Source company". The thing is, you're right that "open source as a business model" is no longer a new idea, and simply being open source isn't enough to guarantee a certain level of buzz and attention. So it's harder now, but that doesn't mean it can't be done. To us, being "open source" is a differentiator, but it isn't necessarily the main thing that separates us from our competition. We think it's important, we think it's The Right Thing To Do, but we still have to deliver more value than the other guys at the end of the day and we're going to have to learn to out market the other guys.
In the years since, people have made money on FOSS. But nobody has come close to making money from FOSS at the scale of RedHat. Making money in a way that scales off FOSS is hard enough that it put Sun out of business.
Now, we don't have a lot of outside contributors at the moment, but we're certainly open to them and the code, bugs, etc. are already "out there". And all (or almost all) of our stuff is (or will be) Apache License V2 licensed.
Eventually we'll have a mix of both "productized" versions of existing projects (somewhat akin to the way Red Hat "productize" Linux) and projects that we started and wrote the bulk of the code for from scratch. Our goal is to very much follow the Red Hat model with subscriptions being a major part of our revenue stream, and then complemented by professional services, training and other add-ons.
In the end will we "make money with Open Source"? I don't know, but we're going to try, because A. it's what we believe in, B. it's The Right Thing To Do and C. it makes the world a better place whether we succeed or fail.
[1]: http://www.fogbeam.com
The thing is, if you want to make money, there are a lot better ways to make money than playing violin in the subway. And if you want to make money with software, there are a lot better ways to do it than to give your product away and hope that some of your users will give you charity or pay you for support.
Wait until we see a case study come through about a company selling a SaaS product who decided to stop charging subscription fees and instead open source it and charge for support, showing how that was the key to how they made their fortune. Then maybe we can talk about this as an option worth recommending over simply selling your software for money.
Or how about OnVelocity? They provide a source code repository and have hosted version.
Or SugarCMS ?
Or couchdb with couchbase?
It seems to me that there are plenty of Saas companies that share their products as open source.
"Indeed. That's never been in dispute."
SugarCRM venture round http://www.sugarcrm.com/about/sugarcrm-investors
CouchBase venture round http://www.venturecapitalupdate.com/funding/08/16/couchbase-...
If you raise tens of millions of dollars you can put off the need to become profitable for quite some time ;<).
There's a balance between monetizing before the next quarterly earnings call and developing a real product.
I believe free software is an industry-wide sea change and any company that fails to adapt will go the way of the dinosaur.
I've also seen plenty of people try to argue that you can't make money on free software. I'd like to discuss it – anyone around here feel that way?
Most of time there's some example of people making money with open source it comes off a little like "you can do open source development and have it play into this other thing that makes money". The other thing is often support or some "service" that people can use your product with.
And it's easy to see how that makes sense for something like a Linux distro (although you'd still ultimately want it to not need "service"). But, like, if I was Cosmigo and had made Pro Motion, I would not be sure how to go about it if I wanted to open source it and make money from that. Surely no one wants a pixel art tool that requires "service", and so on.
Might just be that I haven't seen the right examples because I haven't looked into it that much because I'm not actually that interested in this kind of thing. But yeah, it is one thing that has been bothering me, so.
Pro Motion is a Pro Tool. I capitalize that because the Pro Tools can charge higher prices for a license to use their software, and nobody complains because professionals make that investment back right away.
Here are some other examples of Pro Tools: Adobe Creative Suite, Avid, Visual Studio and Xylinx ISE.
I picked the last two examples on purpose because Visual Studio and ISE are compilers. Visual Studio does a lot of languages but for simplicity let's assume it's just Visual C# and ISE does several languages but Verilog is arguably the most important.
The only way compilers can charge top dollar is by cheating: the open source compilers have demonstrated a higher quality, broader support, faster bug fixes and more features than their competition. Pro Tool Compilers can only exist on a closed system. For Visual C# it's Windows. For ISE it's the Xylinx patented chip architecture. It might seem impossible that enough professionals would be interested in an open source project that they would rather spend their time developing the tool they need rather than buying it, but that's what happened for C compilers. Even Apple releases XCode for free.
It may take years for other Pro Tools to become open source. The Gimp is not going to replace Adobe CS anytime soon. But it will happen eventually because as a professional I would rather have a tool I can customize to my needs. Adobe's move to always-online products is a huge turn-off for example.
So in the meantime there's a lot of money to be made by selling Pro Tools – but that's not where the market is going.
Selling a service may never be a money maker for Pro Tools; but professionals have to climb the learning curve anyway, even if they paid Adobe first. It might make more sense to look at how most professionals learn Adobe's products in the first place: they either pirate the software or learn it using someone else's copy (such as at school). They only really pay once they've entered the business world.
In the business world suddenly a service contract makes total sense! It might not be a service contract for the Gimp (hah! lol) but would it be nice if there was a company that offered enterprise training and support? Oh wait, Red hat, IBM, SAS, the list goes on and on.
Where open source would really make a difference is that anyone, anywhere in the world, could download the software for free (and not need to feel guilty about it). In fact, the feedback from professionals all over the world would be worth 100x what Adobe gets now from licensing fees.
You can pay us to make your life easy, or you can maintain everything yourself.
I'd just like to point out that ActiveState is not VC funded and is profitable. We are able to grow other parts of the business from core products that are enhanced open source (much, but not all, of which is contributed back to the core open source projects). Most of this is in support and services, but we also have highly regarded tools products and a popular IDE (Komodo, of which we fully open sourced the core editor).
Not sure why there are so many negative vibes to this article.