show me the money

“Show Me The Money”Stefano Maffulli

Community Manager

Funambol This document is licensed under the Creative Commons BY-SA 3.0 license.

© 2009 Dirk Riehle, Stefano Maffulli http://dirkriehle.com. Some Rights Reserved.

Summary

Where is the money How to get the money Why Open Source is good for you How Funambol does it Conclusions

The bad news

The IT market is exiting its worst year ever with spending dropping a

projected 5.2 percent from 2008 to 2009. 2010 is about balancing the

focus on cost, risk and growth. For more than 50 percent of CIOs, the IT budget will be zero percent or less in

growth terms. It will only slowly improve in 2011.

The good news

More good news

IDC's latest studies, "Asia/Pacific (Excluding Japan) Open Source Software Adoption in

2009" … reveal that organizations have started to evaluate open source software

(OSS) as a viable alternative while they are trying to find ways to reduce their

operational expenses.

Where is the money?

At least some of it!

A bit of history

Richard Stallman1985

Linus Torvalds1996

Eric Raymond et al.Open Source Initiative

2001

What is Open Source anyway?

A marketing pitch for Free/Libre Software

What is Free/Libre Software then?

Four simple principles A user of software must be free to:

Run the program for any purpose Study the program and adapt to new uses (need

source) Modify the program to suit her needs (need source) Distribute copies, gratis or for a fee, to help others

Embedded in legally binding documents The declaration of independence for a

digital society

Commercial or non-commercial?

There is no such thing All Free/Libre Open Source Software

is commercial

Free/Libre Software can be sold Stallman sold copies of GNU to support himself Only further copies cannot be limited

Money is in Open Source.

But how to get it out of thereif further copies cannot be stopped?

What changes in Commercial Open Source?

Community It's crucial, can make the difference

Revenue streams and business models Cannot count copies, cannot sell 'per copy'

Copyright, patents, trademark and secrets “Intellectual property” is treated differently

Benefits of a User Community

Sales Prospect is already a user Process is faster and easier

Sales funnel for Commercial Open Source

Download Install Use Lead Prospect Customer

Sale

Benefits of a User Community

Marketing Can turn users into evangelists Creates credible testimonials

Product Management Get feedback rapidly from users / market

Get almost-free market research

Community is source of innovation

Benefits of a User Community

Engineering Fast feedback about bugs, performance Wide testing in unusual circumstances Software code

Extensions and add-ons

Pre-screening of potential employees

Benefits of a User Community

Support User community is self sustaining

Fast source of support at any time, in any language Web searchable content Maintains its own documentation

Reduced support costs

Three macro business models

Three macro sources of revenues

Revenue Streams / Business Models

“Pure Free/Libre” “Added Value”“Dual licensing”

More Respect of users freedoms Less

Indirect revenues

Direct revenues (mostly)

Mixed direct and indirect revenues

The “pure” model

Also known as “Service Model” Commercialization of support, training,

assurance, consulting Can (or not) monetize software developed

internally

Example: RedHat Variant: service delivered over a network

Cloud computing or SaaS Can be tricky to balance openness and avoid

free-riding

The “Dual licensing” model

One code base with two licenses A free software license, usually copyleft A non-free software license

Useful to segment customers Free/libre version creates a community Those afraid of copyleft can buy a different

license

Example: Trolltech, Sleepycat

The “Added Value” model

Also known as “freedom deprived” or “open core” Commodity free/libre core available gratis Revenues from non-free extra software

A way to directly monetize development Need careful management of copyright Need careful management of community

Contributors to core can feel expropriated

Example: MySQL, SugarCRM

The “Intellectual Property” issue

In brief: Know the existing licenses

http://www.fsf.org/licensing/licenses Don't invent a new one

http://opensource.org/licenses It's not that complex, but it's a different game Especially for embedded systems: be careful

http://www.fsfe.org/projects/ftf/

Deserves a dedicated session

CompanyAcquirer /

IPOExit / IPO

DateValue on that Date

Open Source License

Business model

Red Hat IPO Aug 99 ~$1BSame as upstream

OSS + Services

Suse Novell Nov 03 $210MOpen Source

LicenseOSS +

Services

Innobase OY Oracle Oct 05 undisclosed GPL2Dual

license

Sleepycat Oracle Feb 06 $50M?Sleepycat

License (copyleft license)

Dual license

JBoss Red Hat Apr 06 $350M LGPLOSS +

Services

Zimbra Yahoo! Sep 07 $350MZimbra PL

(Based on MPL)Dual

license

XenSource Citrix Oct 07 $500M GPL2OSS +

Services

MySQL Sun Jan 08 $1B GPL2Dual

license

SugarCRM TBD TBD TBDSugar PL (based

on MPL)Dual

license

Funambol TBD TBD $1B ;-) AGPLv3Dual

license

The leading provider of Open Source mobile cloud sync

Based on open standard OMA DS (SyncML) Cross platform push and synchronization

Supports most handsets

Funambol

Funambol's way to dual licensing

Two segments Funambol Community Edition, for enterprises

Affero GPLv3, copyleft, closes the SaaS loophole

Funambol Carrier Edition, for large installations Proprietary license and add-ons

“Do not upsell your community” guideline Do not sell anything to our open source community Nope, do not even sell them support

The (Mobile) Cloud is the future

• Revenues will come from – Software usage (e.g. per user per year,

based on bandwidth consumption or a similar model)

– Recurring revenues are sustainable (and the market likes them)

• Advertising – the software is free, the ads pay for it– Advertising is what made the Internet

Companies

Conclusions

There is money in Open Source It doesn't come for free There are many ways to profit respecting

user's freedom Identify your revenue stream Love your community

Contact

Stefano Maffullimaffulli@Funambol.com

http://www.funambol.com

Resources

The 451 Group: http://blogs.the451group.com/opensource/

Open-Core Licensing: http://bit.ly/1IOZpG

Making Billions with Open Source, Revisited http://bit.ly/FkqrR

Top Commercial Reasons Why Open Source Communities Matterhttp://bit.ly/42FwB4

On open source business strategies (again) http://bit.ly/1N69fA

Dirk Riehle: Open Source Economics - The Economic Motivation of Open Source Software: Stakeholder Perspectives http://bit.ly/isuiG

Roberto Galoppini: Commercial Open Source is a Juggling act http://bit.ly/1qLfS

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© 2009 Dirk Riehle and Stefano Maffulli

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