September 12th, 2013 — Software
We may not see or hear much about open source in the latest cloud or Big Data offerings, but it’s playing a significant role in the most disruptive trends in enterprise IT.
Just as we’ve seen with open source in cloud computing, it is an integral part of trends that currently are disrupting consumer and enterprise IT markets, including hybrid cloud computing, automation and devops, and Big Data.
Read the full article at LinuxInsider.
March 12th, 2009 — Business strategies, Software
UPDATE An updated version of the business strategy classification can be found here. UPDATE
How does IBM’s open source strategy compare to Sun’s? Or Microsoft’s? What’s the difference between MySQL’s strategy and JasperSoft’s? Are some strategies better suited to engaging with organic open source communities, rather than inorganic? What on earth is the Open Core model?
These are some the questions we hoped to try and address with our Open Source is Not a Business Model report, published in October last year. As I mentioned yesterday, however, without an agreed set of definitions and a common vocabulary it is difficult for a broader understanding the implications of the various models to develop.
One of the ways we might be able to do that is to map the categories we used in our report to the taxonomy used in other reports, for example, the one published by Carlo Daffara that updates the original taxonomy used as part of the FLOSSMETRICS and OpenTTT efforts.
I believe it is possible to map the two together, and provided an example of how this could be done. But I am aware that it is impossible to align our taxonomy with others in the industry and encourage better understanding without publishing more details of the categories we used.
I have also noticed some confusion about various strategies (including Open Core) in recent days, so publishing our classification provides a single resource we can point towards.
Of course, there is more to Open Source is Not a Business Model than just the classification, and for some insight into how these strategies are being used, by which vendors, and to what end, I’d encourage you to take a look at the complete research report.
The report also includes details on how the various development, licensing and revenue strategies influence each other; the relative strengths and weaknesses of each strategy category; how third parties generate revenue from open source; the commercial implications of permissive and reciprocal licenses; future revenue generation strategy trends; sales strategy trends; and more besides.
I will also be speaking about the report and its results at various events on my forthcoming US trip.
With all that in mind, here’s the classifications we used:
- Vendor Open Source
The software is distributed using an open source license, and all contributions are public, but development is dominated by the employees of a single vendor.
- Community Open Source
The software is distributed using an open source license and is developed in public by a community of individuals and/or vendors.
Mixed Open Source
The product or service provided by the vendor is based on a combination of projects using open source software developed publicly by multiple vendors and/or communities.
- Hybrid Vendor
Development is dominated by the employees of a single vendor, and some functionality is developed behind closed doors.
- Hybrid Community
The underlying software is developed in public by a community of individuals and/or vendors, and some functionality is developed behind closed doors.
- Hybrid Mixed
The product or service is based on a combination of projects using open source software developed publicly by multiple vendors and/or communities, and some functionality is developed behind closed doors.
Vendor Licensing Strategy
- Dual Licensing
A single code base is licensed to different users using either an open source or a commercial license.
- Open-Core License
The core code is available using an open source license, but enterprise or professional versions include open source code and closed source extensions and are licensed commercially. (See also Andrew Lampitt’s definition).
Open source products are complemented by separate closed source products that are developed and sold separately under a commercial license.
- Single Open Source
There is a single code base with a single, open source license.
- Assembled Open Source
The product or service includes code from multiple open source projects that utilize multiple open source licenses.
The product is based on open source code but is not available under an open source license.
(It is of course possible for a vendor to have more than one revenue trigger. In fact, our analysis indicated that the majority of vendors were deploying more than one revenue generation strategy, with some utilizing four different triggers for a single product.)
- Commercial License
A traditional commercial license not approved by the OSI or the FSF.
Annual, repeatable support and service agreements — effectively an insurance policy against the need for ad hoc service and support, which may also provide updates and other services.
Ad hoc support calls, service, training and consulting contracts.
- Embedded Hardware
The open source software is distributed as part of a hardware appliance, or with a commercially licensed hardware product.
- Embedded Software
The open source software is embedded within a larger commercial software package.
- Software as a Service (SaaS)
Users pay to access and use the software via the Internet.
The software is free to use and is funded by associated advertising.
- Custom Development
Customers pay for the software to be customized to meet their specific requirements.
- Other Products and Services
The open source software is not used to directly generate revenue. Complementary products provide the revenue.
As I say, this list is being published in the hope that it encourages greater understanding and enables the emergence of an agreed taxonomy, and we would welcome any comments and suggestions as to how it could be improved and/or manipulated to complement existing taxonomies.
February 14th, 2009 — Software
I wrote last year about how netbooks represented one of the first times Linux was going head-to-head on a more level desktop playing field against Windows. With word of a recent ‘hybrid,’ pre-installed Windows/Linux computer from Dell, I think we may be seeing a similar situation where Linux is not as handcuffed by the hardware, support and monoculture that was the Windows of old.
Why would a hardware manufacturer such as Dell do this? It actually makes a lot of sense. There is today a need for instant computing — for a PC to boot up and perform basic Internet-connected functions in an instant, the way you turn on and use a calculator. There is still also a need for greater and deeper performance, though I would guess most users will find waiting for boot-up in Windows a daunting proposition once they’re used to the instant on. Furthermore, I know that Linux can handle these greater and deeper performance tasks from experience. I also recognize, however, that it is still, amazingly, a Windows world sometimes with some applications, such as Webinar software or some media software, widely used but still stuck in MS monoculture. It’s sometimes convenient to have the option of Windows around, I’ll admit. However, the ease and proliferation of desktop virtualization certainly has the potential to level things out with Linux in this regard, too.
I’m still somewhat concerned about what is going on with netbooks, where we’re actually seeing limited Linux options in the face of demand for the open source OS. However, I honestly don’t know how long people will tolerate using Windows XP, which has actually been retired by its maker at the ripe old age of nearly nine years. In addition, for every version of netbook without Linux, there will likely be versions that include it, for reasons I’ve stated previously. Windows 7 may be a different story, but there is no way it will enjoy the desktop-dominance-from-the-start of any of its Microsoft predecessors.
I’m also encouraged, as well, to see Dell offering this hybrid line of computer that put Windows and Linux side by side with capable hardware support for both. Don’t think it means much for Linux to be a quick-boot option? Check out some of Linux Foundation Executive Director Jim Zemlin’s thoughts, which I think help put this potential in perspective.
I think we can expect to see more of these pre-installed, dual-boot devices — similar to what is being offered from Dell, which has already led the way on desktop Linux. That’s a good thing and an opportunity, but also a true test for desktop Linux and its potential.
October 13th, 2008 — Business strategies, Licensing, Software, The 451 Group
(Or “freedom of speech won’t feed my children”)
Last month I noted that Matt Asay, one of the highest profile proponents of open source software, had changed his position on the use of proprietary extensions as a means of attracting paying customers to software based on open source code.
Having previously advocated a 100% open source approach, Matt conceded that “If adding a hint of proprietary software to a solution is done in such a way to encourage a purchase but not compel long-term lock-in, I’m no longer convinced that this is wrong. If it puts food on the table without putting anyone out, where is the harm?”
Matt is not the only open source advocate to have accepted that proprietary and open source software are not mutually exclusive, as has been proven by the findings of The 451 Group’s latest CAOS report, “Open Source is Not a Business Model“.
With this research report we were trying to answer the age old question “How do vendors generate revenue from open source software?”. In order to answer it we analyzed the business strategies of 114 open source-related vendors, including open source specialists such as Red Hat and Alfresco, and those for which open source is used more tactically, such as IBM and Oracle.*
Some of the more interesting findings are as follows:
- The majority of open source vendors utilize some form of commercial licensing to distribute, or generate revenue from, open source software.
- Half the vendors assessed are using hybrid development models — combining code developed via open source projects with software developed out-of-sight of open source project members.
- Vendors using hybrid development and licensing models are balancing higher development and marketing costs with the ability to increase revenue-generation opportunities from commercially licensed software.
- The license used for an open source project (reciprocal or permissive) has a strong influence on development, vendor licensing and revenue-generation strategies.
In order to assess the business strategies used by open source-related vendors it was necessary to categorise the business models used by open source vendors. We therefore assessed each vendor’s strategy related to license choice (reciprocal or permissive), development model, vendor licensing strategy (e.g. dual licensing, open-core licensing) and revenue generation triggers (e.g. commercial licensing, subscription, support services, other products).
While it had been previously thought that there are a handful of business models related to open source, our research indicated that this is an over-simplification. There are over 80 different combinations of development model, vendor licensing strategy and primary revenue trigger being used today by the vendors we analyzed.
The report also busted some other open source-related myths, such as the idea that open source vendors are reliant on ad hoc support services, and that open source eliminates the need for direct sales. We found that:
- Ad hoc support services are used by nearly 70% of the vendors assessed, but represent the primary revenue stream for fewer than 8% of open-source-related vendors.
- Most vendors generating revenue from open source software are reliant on direct sales staff to bring in the largest proportion of revenue.
There are plenty of other juicy statistics in the report, which examines the influence of license, development model, vendor licensing strategy, and revenue triggers on each other, as well as the strengths and weaknesses of the various strategies, and how the use of revenue generation and sales strategies will change over the next two years.
There is also room for a bit of history, examining the origins of open source-related business models, and the evolution of business models over time to accommodate hybrid development and licensing strategies.
As for the overall conclusion. I have already hinted at the findings in a couple of posts, noting that:
- “Open source is a business tactic, not a business model. Open source is not a market in and of itself, nor is it a vertical segment of the market. Open source is a software development and/or distribution model that is enabled by a licensing tactic.”
- “The cat is already out of the bag when it comes to open source related business models and there is no way it is going back in.”
- “There is very little money being made out of open source software that doesn’t involve proprietary software and services.”
The line between proprietary software and open source software is becoming increasingly blurred as open source software is embedded in broader proprietary hardware and software products and proprietary extensions are used to attract more customers.
Some open source purists will no doubt be dismayed that so much software distributed using open source licenses finds its way into commercially licensed products. More pragmatic observers will no doubt be encouraged by the widespread adoption of open source development and distribution principles.
Either way, the fact is there are few vendors generating revenue from open source software that are following a pure open source approach when it comes to developing all of their code in the open and licensing all of their software under open source licenses.
The report was released on Friday to existing subscribers and is also available for purchase. An executive summary (Pdf) is also available. Look out for future details on a live webinar where I’ll discuss the findings in more detail.
*We were aware that the inclusion of (mostly) proprietary vendors such as these might disproportionately influence the results so we also filtered the findings to include only those vendors that could be considered “open source specialists”. We found that over 40% of these specialists are developing some software out-of-sight of open source project members while more than 50% are using some form of commercial licensing strategy. Full details in the report itself.