Tuesday, June 10, 2008

Business Model for Open Source

There are a lot of people wondering how open souce technology make money, as they are giving out their most valuable technology to other people. Here are some business model for open source:

  1. Support - This is normally how people think open source business is all about. Enterprise user need proffesional support, if not they will not use the technology, they can't afford to have breakdown and can't fix it. Microsoft (proprietary technology) offer support, so does Java.
  2. Customization of software - Another form of open source business model is to allow the developer to build customization of the software on top of open source technology. Some user will outsource their development, and it's (normally) cheaper to use open source technology. So, these people that work with open source technology will offer their expertise to build the customized software. Example, LAMP (Linux, Apache, MySQL andPHP)  is used for a lot of web application development.
  3. Vertical component - Some open source software suite is quite general, it is not suitable for some industry unless there are some plugin or module built speciafically for them. For example, CRM is the general software suite, so the developer can build a specific module for a construction company and sell the solution to these companies.
  4. Selling accessories/hardware - There are open source company that offer their sofware as open source and selling the hardware that support it. For example, Digium has created Asterisk (open source PBX system), and sell the hardware.
  5. Built then sell it - You built an open source technology with the help of community and attract the big boys to buy it. Yahoo bought Zimbra for $350 millions,  Sun acquire MySQL for $1 billion, Citrix bought XenSource for %500 millions. You can see that are a lot of money involed in open source technology.
  6. Get Hired - If you work as open source developer, your chance of getting hired is very high as you has proven yourself.
  7. Training - Provide necessary training on how to use or develop open source technology. Some people rather pay for training than use expensive technology and pay for training too. ;-)
There and many more ways you can make money from open source technology. However, I don't think proprietary technology will fade away, there are still a lot of people prefer to use proprietary technology because of the completeness of support, documentation, and ease to use, mainly due to open source is updated more often and this also means that are more version to support. Both of them will coexist for a long time and have their own supporters.

I am sure there more ways to make money from open source, please leave your comment.

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