Open Source Software Open Source Software Business ModelsBusiness Models

-Michael Brittingham-Michael Brittingham

-Dan McMillan-Dan McMillan

-Kevin Haselwander-Kevin Haselwander

Open Source SoftwareOpen Source Software

““Software that is freely available to anyone Software that is freely available to anyone in a form that can be easily modified”in a form that can be easily modified”

--Stair and ReynoldsStair and Reynolds

Some examples are Some examples are LinuxLinux (OSS operating system; compare with (OSS operating system; compare with

Windows)Windows) MozillaMozilla (OSS Web browser; compare with (OSS Web browser; compare with

Internet Explorer)Internet Explorer) RR (OSS statistical computing and graphics (OSS statistical computing and graphics

program; compare with Statgraphics)program; compare with Statgraphics)

IssuesIssues

Reasons to Switch to Open Source SoftwareReasons to Switch to Open Source Software

How are companies making money off software How are companies making money off software that is free?that is free?

Will these models last?Will these models last?

How do these models interact with proprietary How do these models interact with proprietary software companies such as Microsoft?software companies such as Microsoft?

Why Switch to OSS?Why Switch to OSS?

Easier to avoid “vendor churn”Easier to avoid “vendor churn” This happens when companies are forced to This happens when companies are forced to

buy the newer versions of proprietary buy the newer versions of proprietary software (Windows ’98 to 2000 to XP)software (Windows ’98 to 2000 to XP)

Open source is continually improving on the Open source is continually improving on the open market; any new program that is written open market; any new program that is written can be downloaded and added to your current can be downloaded and added to your current programsprograms

Example: Sabre Holdings currently making a Example: Sabre Holdings currently making a switch to MySQLswitch to MySQL

Why Switch to OSS?Why Switch to OSS?

The switch is not only made because of low cost.The switch is not only made because of low cost. Companies are not willing to sacrifice low cost for an Companies are not willing to sacrifice low cost for an

inferior product.inferior product. "Cost savings weren't really a factor in our decision to "Cost savings weren't really a factor in our decision to

go open source, what got us into it was that it was go open source, what got us into it was that it was simply the best technology open to us." simply the best technology open to us."

-John Novak, -John Novak, CIO La Quinta InnsCIO La Quinta Inns

"[While] cost is a huge driver for our decision-making "[While] cost is a huge driver for our decision-making process, we cannot risk choosing an inferior solution process, we cannot risk choosing an inferior solution to save money. We couldn't even consider open to save money. We couldn't even consider open source if it weren't at par with—or in some cases source if it weren't at par with—or in some cases better than—commercial alternatives." better than—commercial alternatives."

-John Alberg, co--John Alberg, co-founder of Employeasefounder of Employease

Open Source Business ModelsOpen Source Business Models

TraditionalTraditional Support Sellers Support Sellers Loss LeadersLoss Leaders Widget FrostingWidget Frosting AccessorizingAccessorizing

NewNew Service EnablerService Enabler Brand LicensingBrand Licensing Software FranchisingSoftware Franchising Sell it, Free itSell it, Free it

Traditional: Support SellersTraditional: Support Sellers

Companies that package together open Companies that package together open source software, and make their money source software, and make their money from either selling the software, and/or from either selling the software, and/or charging to service the softwarecharging to service the software Red Hat is the leader in this industryRed Hat is the leader in this industry

Traditional: Loss LeadersTraditional: Loss Leaders

Company that generally gives away Company that generally gives away software for free and makes money from software for free and makes money from selling additional softwareselling additional software Example: AdobeExample: Adobe Example: FedoraExample: Fedora

Traditional: Widget FrostingTraditional: Widget Frosting

Company that sells hardware and Company that sells hardware and packages it together with open source packages it together with open source softwaresoftware Silicone Graphics: Supports and ships SambaSilicone Graphics: Supports and ships Samba VA LinuxVA Linux

Traditional: AccessorizingTraditional: Accessorizing

Company that sells books, compatible Company that sells books, compatible hardware, t-shirts, bumper stickers, coffee hardware, t-shirts, bumper stickers, coffee mugs, dolls, etc.mugs, dolls, etc.

Example: Example: O’ReillyO’Reilly sells more of the sells more of the compatible hardware, manuals, softwarecompatible hardware, manuals, software

Open Source Business ModelsOpen Source Business Models

TraditionalTraditional Support Sellers Support Sellers Loss LeadersLoss Leaders Widget FrostingWidget Frosting AccessorizingAccessorizing

NewNew Service EnablerService Enabler Brand Brand

LicensingLicensing Software Software

FranchisingFranchising Sell it, Free itSell it, Free it

New: Service EnablerNew: Service Enabler

Company that distributes open source Company that distributes open source software primarily for generating revenue software primarily for generating revenue through on-line servicesthrough on-line services i.e. On-line gamingi.e. On-line gaming

New: Brand LicensingNew: Brand Licensing

Company that charges other companies to Company that charges other companies to use their brand name or trademarksuse their brand name or trademarks

New: Software FranchisingNew: Software Franchising

This model uses a combination of the This model uses a combination of the preceding models; brand licensing and preceding models; brand licensing and support sellers in particular. Once a support sellers in particular. Once a company has established a competitive company has established a competitive advantage, they use their established advantage, they use their established brand name to sell off franchises as their brand name to sell off franchises as their way of accumulating revenue.way of accumulating revenue.

New: Sell it, Free itNew: Sell it, Free it

Company that starts out selling proprietary Company that starts out selling proprietary software, and converts the product over to software, and converts the product over to open source software at an opportune open source software at an opportune time.time.

Current status in the market, Current status in the market, and a look at future trends…and a look at future trends…

VA Linux stock priceVA Linux stock price

Red Hat stockRed Hat stock

Microsoft stockMicrosoft stock

Red Hat vs. MicrosoftRed Hat vs. Microsoft

Is Open Source here to stay?Is Open Source here to stay?

Red HatRed Hat has shown that an open source has shown that an open source company can produce stable numbers in a company can produce stable numbers in a fluctuating market.fluctuating market.Businesses are continually considering the Businesses are continually considering the switch to open source software, not only switch to open source software, not only because of cost, but because of its reliability and because of cost, but because of its reliability and economic value.economic value.A company can modify a program according to A company can modify a program according to their own specific needs.their own specific needs.Technical support no longer comes from one pre Technical support no longer comes from one pre determined source.determined source.

Is Open Source here to stay?Is Open Source here to stay?

Business models are too young to Business models are too young to determinedetermine They are only 6-8 years oldThey are only 6-8 years old

New Models are being developedNew Models are being developed Open Source Software Development Lab in Open Source Software Development Lab in

BeavertonBeaverton