Profiting from open source -- without selling out

Here are 8 business models for balancing openness with revenue

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Open source business model 7: Sell FUD
The major open source software licenses don't make a distinction between commercial and noncommercial usage, but that hasn't stopped some open source companies from implying that commercial companies should buy some kind of license.

Indeed, many open source sales teams have learned the beauty of playing "good cop, bad cop" with the users. The licensing fee may or may not be necessary, they suggest, sowing the seeds of confusion. After a bit of debate over whether the GPL applies, they suggest politely that just buying a commercial license will free the user from any legal worries and at the same time support the product.

Open source business model 8: Cripple your product
The word "cripple" sounds negative, so no one uses that word. It's better to "enhance" the enterprise version and give away the community version -- crippling without the nasty name.

Of course, this model gets pretty close to the "open source as marketing ploy" approach that is so bothersome to open source believers. James Phillips, one of the co-founders of NorthScale, says, "There are companies that require a supplier relationship and will pay for open source software. Holding back feature sets, in my opinion, just confuses the customer."

Puppet Labs' Kanies rebuts these purists: "You absolutely have to have something to sell -- no one will pay you just because they use their awesome software." He adds, "If you happen to make usable, simple software that just gets out of their way, you won't even know the users exist." So, he suggests, rather than remove features from the free version, you might get the same push to paid by making the free version onerous to use.

Wealth is in the eye of the beholder
At their core, all eight of these open source business models try to balance the amount of openness against the need for revenue. On one end are the businesses that stay small and very open, and at the other end are those that use the open source core to sell a proprietary product.

Users may enjoy the freedom of open source, but they almost always pay for it with the responsibility to shoulder more of the development load. In some cases, the proprietary packages are better deals when they efficiently spread the cost of development among all users; this approach is often best when the user community doesn't include many programmers who can’t contribute much to the mix. But the proprietary code can be a real headache for those with the ability or the need to change or improve the software.

At the end of the day, will anyone become wealthy in the open source business? It all depends whether the wealth is measured in dollars or lines of code.

This article, "Profiting from open source -- without selling out," originally appeared at Follow the latest developments in open source at

Copyright © 2010 IDG Communications, Inc.

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