Open source business models - good examples?
Hello wonderful community!
I'm in the process of researching different business models and I would really appreciate some community input!
Is there any interest in business models for open source software out there? Do you have knowledge of/experience with open source business models that effectively embodied their projects' values and proved sustaining and sustainable? Do you have a vision for the ultimate open source business model? If you would be willing to share it I would love to hear it.
Theodore Taptiklis Fri 21 Mar 2014 11:35PM
I think there's a long-standing business model that you should look at that pre-dates the internet, the invention of the corporation and the industrial revolution: the mutual society. Here's a definition from the EU:
A mutual enterprise is an autonomous association of persons (legal entities or natural persons) united voluntarily, whose primary purpose is to satisfy their common needs and not to make profits or provide a return on capital. It is managed according to solidarity principles between members who participate in the corporate governance. It is therefore accountable to those whose needs it is created to serve.
What's interesting about mutual societies is their longevity...some are 250 years old.
They are not exactly 'open-source' in that they are not software-based - but they are entirely open in the way they operate.
If you are interested we could talk about this some more...
Benjamin Knight Sat 22 Mar 2014 12:19AM
@robertguthrie , @richarddbartlett, which models have you seen work well?
Richard D. Bartlett Sat 22 Mar 2014 2:43AM
@benjaminknightloom my problem with the article you've linked ("Why there'll never be another RedHat") is the definition of success. I have no ambition of comparing favourably with monopolistic privacy harvesting behemoths like Microsoft and Amazon!
I'm more interested in the Wordpress model. Wordpress is a pretty good piece of free software, built in a way that encourages interoperability with other technologies.
Anyone can develop plugins (additional functionality) or themes (custom look and feel), and charge what they want for them.
The reason Wordpress is so resilient is because it's openness supports an massive ecosystem of business models, many of which provide no direct value back to Automattic (the parent company that owns Wordpress.com). There are tens of thousands of people earning a living off Wordpress, that have no relationship with Automattic.
Automattic run wordpress.com. Anyone can go to wordpress.com for a free hosted version of the software. The software is good but it is limited. Automattic makes its money by removing these limitations. For example:
- $18/yr for a custom domain name
- $60/yr to host video on your site
- $2/GB for storage upgrades
- $13/yr for URL redirection
- $20-150ea for premium themes
- $30/yr to customise your own theme
- $30/yr to remove the ads
- $130 for a one-off data transfer service
Now consider Automattic is a $1B company and 20% of websites are Wordpress sites and you start to get an idea of how successful this approach is.
Danyl Strype Sat 22 Mar 2014 9:27AM
One of the most beneficial results of the software freedom movement is provoking a move away from the broken metaphor of software as a “product” - like vegetables or nails - and towards the more appropriate idea of software as a means of providing services. In a free code software business, software plays the same role as the law does for lawyers, or numbers do for accountants. Just as they don’t need monopoly ownership of laws or numbers to run a successful business, software developers don’t either.
A few weeks ago I went to the DrupalSouth conference (many thanks to the friendly public servants who shouted me a ticket), and met people from scores of businesses who make their living by matching various packages of free code (GNU/Linux, Apache, MySQL, Drupal, CiviCRM etc) to the needs of clients, from small businesses to huge operations like Māori TV. As in @richarddbartlett’s Automattic example, these companies make money adding real value on top of the raw code, rather than by imposing an artificial scarcity in the supply of it, using heavy copyright enforcement.
Then there is the subscription model. TimeBanks USA released their CommunityWeaver 2.0 time exchange server under the GPL. TimeBank groups anywhere in the world can host their own instance of the software for their own use, or they can use TBUSA's hosted version, paying an annual fee proportionate to the number of members they have, which funds development (similar to Loomio's gifting model).
Another fascinating case I came across recently was the “open source shareware” model described in this blog post:
From the post:
You can, at present, go to the website for this very same piece of software and download a trial version. If you want the full functionality, you pay a small amount and receive a license key. You know. Shareware.
But, of course, the software itself is still completely, 100% Open Source. Under the GPL. Everyone is free to grab the source from GitHub, make just about any modifications they like, compile it and — if they feel so inclined — distribute it. So long as they adhere to the GPL, of course.
Danyl Strype Sat 22 Mar 2014 9:30AM
BTW Nic Suzor from the QUT School of Law has been researching this issue of free culture business models too:
Dominik Steinacher Sat 22 Mar 2014 3:13PM
I am working for Magnolia International and we are selling an open source Java based content management system. Our business model is the following:
- We sell software products (licenses), support packages (SLAs) and enablement services.
- The license Type is a software subscription per year for utilization including software maintenance (releases, patches & fixes) and software support (3rd level product support).
We have 3 different products. We have a free communinity version (under GPL) that is not scalable and therefore only for smaller websites. Here you have no vendor support, only community support and there are a few enterprise Features missing.
Then we have 2 different Magnolia CMS Enterprise Editions with special license agreements. The Standard and Pro Edition. Here you will have all the features and scaling possibilities you need for an enterprise content management system. You have as well 4 different support service levels you can choose from.
So the way we do money is through yearly licensing and software, we have no upfront payment models for our software. We sell as well enablement services like training and consulting. The thing we don't do is the implementation of the project itself.
Here are some links:
Hope that helps.
Malcolm Colman-Shearer Sun 23 Mar 2014 4:26AM
Magnolia sounds a little bit like Wellington's very own Silverstripe. Their CMS package is free and open source. They provide all kinds of services on top of their core product and by the looks of it, some of the services are totally independent of the software. Training, user research, web strategy etc. http://www.silverstripe.com/services/
Simon Tegg Sun 23 Mar 2014 11:24PM
How MYSQL solved its Sales and Marketing Problem:
cc @vivienmaidabornloo, @michaelelwoodsmith
vivien maidaborn Sun 23 Mar 2014 11:34PM
I have also been reviewing were we are at and what the options might be from here. great lifecycle chart off wiki kind of reassuring
Danyl Strype Mon 24 Mar 2014 1:03AM
Funny, that lifecycle curve @vivienmaidabornloo shared looks exactly like the classic speculation bubble curve a friend showed me recently (and the BitCoin price curve against which he compared it). Where do folk think Loomio is on that curve right now?
Danyl Strype Mon 24 Mar 2014 1:03AM
I agree with @richarddbartlett that the article on Red Hat starts out with some pretty questionable assumptions about "success", but I think the author hits the nail on the head towards the end:
Build a big business on top of and around a successful platform by adding something of your own that is both substantial and differentiated. Take, for example, our national road and highway system. If you view it as the transportation platform, you start to see the host of highly differentiated businesses that have been built on top of it, ranging from FedEx to Tesla.
In other words, build a business by leveraging (and contributing to) the commons, rather than trying to monopolize or privatize it. This is something everyone in business needs to realize. For example, instead of trying to hobble the public education system to engineer demand for business-run Charter Schools, businesses could be created to support and contribute to the public education commons.
vivien maidaborn Mon 24 Mar 2014 7:29PM
@strypey I am fervently hoping that we are at the bottom of the trough and the release of version 1.0 will see us begin climbing the slope. Yeah I agree it is a very familiar curve:)
David Best Tue 25 Mar 2014 2:41PM
The increasing consumer demand for a digital interactive experience is driving the change for new business models, that offer a fast and efficient delivery process. However, to survive the digital transformation, and remain competitive, the new business delivery model must be inclusive. Products and services that incorporate a universal design strategy will ultimately offer a better user experience delivery model that meets customer expectations.
The ability to use new emerging technologies is currently at the heart of social inclusion, with those excluded being left out of many work, entertainment, communication, healthcare and social benefits. As the population ages and as governments enact accessibility regulations, all organizations need to understand what accessibility is and how it impacts their services, customers, employees, and facilities.
Accessibility is not just about legal compliance; it's also about revenue, return on investment, and profitability. Fundamentally, accessibility is about expanding market scope to include all people. The World Health Organization (WHO) reported that there are over one billion people with disabilities in the world, of whom between 110-190 million experience very significant difficulties. This corresponds to about 15% of the world’s population. The prevalence of disability is growing due to population ageing and the global increase in chronic health conditions.
Crowd sourcing provides a platform for collaborative intelligence, but if it excludes those with disabilities, then it is not inclusive. User Centred Design must be integrated at all levels of the business model, and not just in the Development phase. That is, appending the WCAG2.0 to the Loomio design criteria is insufficient, and like all other social collaboration tools it will fail to meet the needs of disabled people. To be truly inclusive, and to emerge as a global leader, consider the talents before the disability, and include disabled persons in the decision making process. It is estimated that about 92% of the internet websites are inaccessible to blind and low vision people. Don't make the same mistake as the other social collaboration tool companies, and limit your market reach.
Benjamin Knight · Fri 21 Mar 2014 10:34PM
I think the classic RedHat model of offering support services around an open-source platform (in their case a Linux distribution) might be about the best known model out there. Having said that, it's not super widely used successfully, as this article points out - the article also argues that new models providing SaaS on top of an open-source platform make more sense. Which is essentially what Loomio is doing with the customised whitelabel offer in the crowdfunding campaign.
Acquia and Alfresco are apparently examples of OS SaaS models that have worked well.
There's an article here that summarises a few different OS business models, and another one here