A STUDY ON REVENUE
MODEL OF
OPEN SOURCE
By
07030244004
Kshitiz Goel
SDM – 07-09

AGENDA
Objective

 Methodology
 Introduction
 Open source License
 Revenue Models
 Key Elements of Revenue Model
 Model vs Factor Matrix
 Findings, Recommendations & Conclusion

OBJECTIVE
 To
identify various revenue streams for
commercial open source products.
 To identify the various critical success factors
for choosing an open source business model.

METHODOLOGY

INTRODUCTION
Software Software Software Free
Projects Publishing Subscription software
Product Customer Product Family Parameterize Core
Focus Project d Product Product
Copyright Licensed or Licensed with Licensed with Licensed
Transferred Restriction Restriction with Open
source
License
Income One time License Fee Service Fee Indirect
project fee and from
Application Services
Rent etc.

Open source Licenses
OR
Copyleft Copyright

GENERAL PUBLIC LICENSE
Free Non
License

NON GPL
Microsoft, the world's largest software maker, has used source code
from a leading open-source operating system [Berkeley System
Distribution or BSD] in its Windows 2000 and XP product.

REVENUE MODELS

DUAL LICENSING
One Product two License

 one for free distribution and free use
 another for proprietary use.
Copyright and control of the core product development is

held in one hand, the original developer.
When to use: You are a market leader

Why client adopt: The client really likes the open-source

product and needs it for commercial use.

CASE: MYSQL
Product SQL Database
Free License GPL
Users Approx. 4 Million Users
Customers Around 0.1 % of Users
Main Income License (>50%), brand, Services
Development Inhouse
Marketing Direct
Technology Standardized (SQL)
“Our software is 100% GPL, and if yours too is 100% GPL (or OSI compliant),
then you never have to pay us for the licences. In all other instances, you are
better served by our commercial licence.” (MySQL, 2003)

DISTRIBUTION AND SERVICE MODEL
Sell support/customization and other Professional

services.
 Training
 Consulting
 Custom Development
 Post sales Support
Strategy requires a large base of clients that want

to use the product.
 Controlled by Value Driven Pricing & competition

CASE: RED HAT LINUX
Providing the product on CD rather as an online

download.
One survey of 113,794 Linux users indicated that 37% of

respondents preferred to obtain LINUX in CD.
Providing support services to enterprise customers -

Enterprises are willing to pay for accountability.
Support for installation, answering technical questions

and training employees to use the product.
Upgrade Services - Enterprises can now enter into long-

term agreements with distributors to ensure that they get
the latest upgrade.
Provide onsite assistance


THE ECOSYSTEM STRATEGY
Company creates a network of partners or

preferred independent software vendors (ISVs).
Software Franchising

Brand Licensing

 Support Sellers
Red Hat & Oracle is one of their major partners.


DUAL PRODUCT MODEL
Penetrate the market by releasing an open-source

product & sell a different product .
Example: Eclipse and its non open source plug-ins


THE WEB-BASED ADVERTISING MODEL
Software generate revenue through

advertisements.
Firefox has a Google search bar built into the web

browser.
Mozilla Foundation raked in a whopping $75 million

in revenues in 2007 & 85 % of from google.

KEY ELEMENTS OF REVENUE MODEL

MODEL VS. FACTOR MATRIX
Model Product Distribution Services and Community and
Development Model Implementati Partners
on
Dual Licensing Uniform Core Republisher / Complete set Does not Interfere
Product OEM Model of services
Service Base Various Services Reseller or Agent User required Help a Lot
Model services like
support &
integration
Web-based Online Services Direct Contact Deployment Play important
Advertising model and Product with Customer service Role
Dual product Product Family Distributor / Deployment & Not Much
model Dealer Model integration
service

HYBRID MODEL
Change the availability of source code

 Right to view (i.e., to see the code in the first place and possess a copy
of it)
 Right to use (i.e., to compile the source into executable form and run the
resulting application)
 Right to modify (i.e., to make changes to the source code)
 Right to redistribute (i.e., to give the source code to a third party,
potentially in either modified or unmodified form)
Change the treatment of different users

 License with Different term for Commercial & Non Commercial Users
Change the treatment of different types of use

 Source license could allow personal use or internal use within an
organization at low cost or no cost.
 Prohibit or require higher license fees for use of the software to provide a
service to other users.

FINDING
Most of the open source vendors are there to do

business and earn profits.
 The majority of open source vendors utilize some form of
commercial licensing to distribute, or generate revenue
from, open source software.
 Most vendors depend on direct sales staff to bring in the
largest proportion of revenue.
 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.
 The license used for an open source project (GPL or Non
GPL) has a strong influence on development, vendor
licensing and revenue-generation strategies.

RECOMMENDATIONS
Hybrid revenue model which combines a number of

different revenue streams, can be used effectively
to generate maximum profits.
Vendors must choose complementary

development, licensing and revenue strategies in
order to maximize revenue-generation
opportunities.

Thank You