Greed is good: 9 open source secrets to making money

Low-cost marketing, hard bargains, keeping competitors in check -- profiteering abounds in the open source community

In the beginning, open source software looked like a saintly gift to the commonweal. Programmers would work hard, then give away the fruits of their labor to anyone who wanted it. Everyone would benefit from this act of pure charity.

Over time, however, companies realized they could make money and give away the software at the same time. They could do well by doing good. This wasn't a shock to some of the original open source advocates -- it was how some intended it to be. Richard Stallman, for one, always said that "free speech" was more important to him than "free beer." He embraced the idea that companies could charge anything they like -- as long as the user could fiddle with the code and distribute the result.

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Many companies took this as a blessing to make money and serve their destiny. The smartest figured out how to use open source to strengthen their business, spread their brand, and bolster their power. Open source was not so much a charity as a different kind of marketing, a way to squeeze into the marketplace.

The savviest open source devotees embrace this self-interest. Everyone along the chain, they note, must be motivated to contribute for a reason. The genius of open source, they explain, is that it helps coordinate our selfishness and turn it into something that benefits everyone. The contributors become equals, and there's little squabbling about rights to blocks of code. The sharing lets everyone concentrate on the quality of the software, not on licensing issues.

Here are nine ways companies use open source to profitable ends. While these approaches may offend the naive, most fall under the heading "Before you do good you must do well." A project backed by a flourishing business is much better than a pile of code that may or may not be fixed in the future. Freedom without stability isn't worth very much.

Open source profiteering strategy No. 1: Open source as low-cost marketing

Advertising costs money. Trade shows are expensive. Marketing budgets are never adequate. Many companies see open source as a cheaper alternative. Releasing all or part of the product as an open source package can attract users who will use the product and discover what it does. The product speaks for itself and brings in the users, then the sales force steps in when it's time to upsell.

Some open source companies such as MySQL have said it's a mistake to focus too much on how many are getting the product for free. It's not usual for companies to cite figures where 90 percent or more are not paying. They usually don't cost the company very much because the open source packages cost little to distribute.

The trick is to make sure that the moneymaking features are compelling enough to support the rest of the product. They should be a small part of the product but crucial for the folks who will pay. Sometimes the extra may be a feature that increases stability for enterprise clients that want their software to run smoothly 24/7. Others offer privacy and force users of the open source version to broadcast their work to the world. These small features are supporting hundreds if not thousands of companies today.

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