How do you make money with Free Software? Edmunds Sprūdžs LATA (Latvian Open Technology Association) board member
Contents <ul><li>Free and Open Source </li></ul><ul><li>Is this the real question? </li></ul><ul><li>The main business mod...
Free and Open Source <ul><li>“ Free Software” means it respects the users' essential freedoms: </li></ul><ul><ul><li>the f...
Is this the real question? <ul><li>“ How do you make money with Free Software?” </li></ul><ul><ul><li>Open source  is  com...
Is this the real question? <ul><li>“ What are successful business strategies that can be implemented on top of Free Softwa...
European Governments <ul><li>“Belgian Government Chooses ODF: ...” </li></ul><ul><li>“Danish resolution B103 would require...
Dual Licencing <ul><li>The same software code distributed under the GPL (General Public License) and a proprietary license...
Open Core <ul><li>Based on the Free Software version but with the addition of proprietary plug-ins. </li></ul><ul><ul><li>...
Product Specialists <ul><li>Companies that created, or maintain a specific software project, and use a Free Software licen...
Platform Providers <ul><li>Companies that provide selection, support, integration and services on a set of projects, colle...
Software Selection <ul><li>Companies that provide selection, support, integration and services on a set of projects, colle...
Training and Documentation <ul><li>Companies that offer courses, on-line and physical training, additional documentation o...
Indirect Revenues <ul><li>A company may decide to fund Free Software projects if those projects can create a significant r...
“ Mixed Source” <ul><li>A company may find it beneficial to open up some parts of its proprietary software code on open so...
Questions?
Thank you! Edmunds Sprūdžs LATA (Latvian Open Technology Association) board member
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How do you make money with Free Software? [Edmunds Sprūdžs] on Baltic Spark

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Baltic Spark, http://www.balticspark.org, 2010.04.16

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  • The philosophy of open source considers issues in terms of how to make software “better”—in a practical sense only. It says that nonfree software is an inferior solution to the practical problem at hand. For the free software movement, however, nonfree software is a social problem, and the solution is to stop using it and move to free software. For the sake of our todays discussion, we will use “Free Software”, but we don’t exactly look at it as a solution to a social problem - rather the other way around. We use a the word “free” to clearly state the software is not charged for.
  • There have been free and open source vendors selling solutions in this space for over 15 years. Open source is not suddenly going &apos;commercial&apos;; it always has been.
  • There is no time to waste - Free and Open Source Software is on the rise.
  • Belgian Government Chooses ODF: &amp;quot;From September 2008 on, all document exchanges within the services of the Belgian government will have to be in an open, standard format, according to the proposal. ODF is the only accepted standard in the proposal.&amp;quot; Danish resolution B103 would require the government to define and use open file formats. * &amp;quot;Parliament directs the government to ensure that the use of information technology, including software, within public authorities is based upon open standards... No later than January 1st, 2008, the government should introduce and maintain a set of open standards that can serve as inspiration for other public authorities. Hereafter, open standards should be a part of the basis for public authorities&apos; development and purchase of IT software, with the aim to further competition.&amp;quot; French Gendarmerie: 70,000 desktop PCs were migrated to OpenOffice.org. It started in 2005 and is now finished The French tax agency: 80,000 desktop PCs were migrated to OOo in 2006. * &amp;quot;The agency has calculated that switching its 80,000 desktops to Office XP (from MS Office 97) would cost around €29.5m, but switching to OpenOffice.org only €200,000. Although this cost is a one-off saving, Lapeyre points out that due to the need for regular upgrades it will effectively save this amount every five years.&amp;quot;
  • GPL (General Public Licence) is one of the typical licences under which FOSS software is distributed. Dual licensing works because of the strong coupling clause in GPL, that requires derivative works or software directly linked to be covered under the same license. Dual licensing : the same software code distributed under the GPL and a proprietary license. This model is mainly used by producers of developer-oriented tools and software, and works thanks to the strong coupling clause of the GPL, that requires derivative works or software directly linked to be covered under the same license. Companies not willing to release their own software under the GPL can obtain a proprietary license that provides an exemption from the distribution conditions of the GPL, which seems desirable to some parties. The downside of dual licensing is that external contributors must accept the same licensing regime, and this has been shown to reduce the volume of external contributions, which are limited mainly to bug fixes and small additions.
  • Zimbra - email and collaboration Open Core (previously called “split Free Software/proprietary” or “proprietary value-add”): this model distinguishes between a basic Free Software and a proprietary version, based on the Free Software one but with the addition of proprietary plug-ins. Most companies following such a model adopt the Mozilla Public License, as it allows explicitly this form of intermixing, and allows for much greater participation from external contributions without the same requirements for copyright consolidation as in dual licensing. The model has the intrinsic downside that the Free Software product must be valuable to be attractive for the users, i.e. it should not be reduced to “crippleware”, yet at the same time should not cannibalize the proprietary product. This balance is difficult to achieve and maintain over time; also, if the software is of large interest, developers may try to complete the missing functionality in Free Software, thus reducing the attractiveness of the proprietary version and potentially giving rise to a full Free Software competitor that will not be limited in the same way.
  • Product specialists : companies that created, or maintain a specific software project, and use a Free Software license to distribute it. The main revenues are provided from services like training and consulting and follow the original “best code here” and “best knowledge here” of the original EUWG classification [DB 00]. It leverages the assumption, commonly held, that the most knowledgeable experts on a software are those that have developed it, and this way can provide services with a limited marketing effort, by leveraging the free redistribution of the code. The downside of the model is that there is a limited barrier of entry for potential competitors, as the only investment that is needed is in the acquisition of specific skills and expertise on the software itself. Most activities revolve around training, consulting, installation and configuration support, custom development and maintenance.
  • Platform providers : companies that provide selection, support, integration and services on a set of projects, collectively forming a tested and verified platform. In this sense, even GNU/Linux distributions were classified as platforms; the interesting observation is that those distributions are licensed for a significant part under Free Software licenses to maximize external contributions, and leverage copyright protection to prevent outright copying but not “cloning” (the removal of copyrighted material like logos and trademark to create a new product). The main value proposition comes in the form of guaranteed quality, stability and reliability, and the certainty of support for business critical applications.
  • Selection/consulting companies : companies in this class are not strictly developers, but provide consulting and selection/evaluation services on a wide range of project, in a way that is close to the analyst role. These companies tend to have very limited impact on the Free Software communities, as the evaluation results and the evaluation process are usually a proprietary asset. Many of them - no example.
  • Training and documentation: companies that offer courses, on-line and physical training, additional documentation or manuals. This is usually offered as part of a support contract, but recently several large scale training center networks started offering Free Software-specific courses.
  • Indirect revenues : A company may decide to fund Free Software projects if those projects can create a significant revenue source for related products, not directly connected with source code or software. One of the most common cases is the writing of software needed to run hardware, for instance, operating system drivers for specific hardware. In fact, many hardware manufacturers are already distributing gratis software drivers. Some of them are already distributing some of their drivers (specially those for the Linux kernel) as Free Software.
  • How do you make money with Free Software? [Edmunds Sprūdžs] on Baltic Spark

    1. 1. How do you make money with Free Software? Edmunds Sprūdžs LATA (Latvian Open Technology Association) board member
    2. 2. Contents <ul><li>Free and Open Source </li></ul><ul><li>Is this the real question? </li></ul><ul><li>The main business models on the market today, examples </li></ul><ul><li>Questions </li></ul>
    3. 3. Free and Open Source <ul><li>“ Free Software” means it respects the users' essential freedoms: </li></ul><ul><ul><li>the freedom to run </li></ul></ul><ul><ul><li>the freedom to study </li></ul></ul><ul><ul><li>the freedom to change </li></ul></ul><ul><ul><li>the freedom to redistribute copies with or without changes. </li></ul></ul><ul><li>“ Open Source” is a development methodology; “Free Software” is a social movement. </li></ul><ul><li>Nearly all Open Source Software is Free Software. </li></ul>
    4. 4. Is this the real question? <ul><li>“ How do you make money with Free Software?” </li></ul><ul><ul><li>Open source is commercial software. </li></ul></ul><ul><ul><li>At no stage do open source licences preclude the commercial exploitation of the software. </li></ul></ul><ul><ul><li>Open source licences are not anti-commercial, they are anti lock-in. </li></ul></ul><ul><ul><li>Gartner: usage of Free Software has reached 100% in 2009.* </li></ul></ul><ul><li>“ What are successful business strategies that can be implemented on top of Free Software?” </li></ul>* Gartner website, http://www.gartner.com/it/page.jsp?id=801412 , accessed on 15.04.2010
    5. 5. Is this the real question? <ul><li>“ What are successful business strategies that can be implemented on top of Free Software?” </li></ul>* Gartner website, accessed on 15.04.2010
    6. 6. European Governments <ul><li>“Belgian Government Chooses ODF: ...” </li></ul><ul><li>“Danish resolution B103 would require the government to define and use open file formats.” </li></ul><ul><li>“The French Gendarmerie: 70,000 desktop PCs were migrated to OpenOffice.org.” </li></ul><ul><li>“The French tax agency: 80,000 desktop PCs were migrated to OpenOffice.org.” </li></ul><ul><li>Slower Open Source Software adoption in the Baltic States. </li></ul>
    7. 7. Dual Licencing <ul><li>The same software code distributed under the GPL (General Public License) and a proprietary license. </li></ul><ul><ul><li>Dissemination of the product with reduced costs. </li></ul></ul><ul><ul><li>Creation of external eco-system of add-ons. </li></ul></ul><ul><ul><li>Visibility. </li></ul></ul><ul><ul><li>Low external participation (limited code contributions. </li></ul></ul><ul><li>MySQL </li></ul>
    8. 8. Open Core <ul><li>Based on the Free Software version but with the addition of proprietary plug-ins. </li></ul><ul><ul><li>Reduction of R&D. </li></ul></ul><ul><ul><li>Reduced Maintenance Costs. </li></ul></ul><ul><ul><li>Increased Dissemination. </li></ul></ul><ul><ul><li>External eco-system of add-ons. </li></ul></ul><ul><ul><li>Difficult to balance the open and the closed parts, external groups may create substitutes for the proprietary parts. </li></ul></ul><ul><li>Zimbra </li></ul>
    9. 9. Product Specialists <ul><li>Companies that created, or maintain a specific software project, and use a Free Software license to distribute it. </li></ul><ul><ul><li>Reduction of R&D. </li></ul></ul><ul><ul><li>Reduced Maintenance Costs. </li></ul></ul><ul><ul><li>Increased Dissemination. </li></ul></ul><ul><ul><li>External eco-system of add-ons. </li></ul></ul><ul><ul><li>Low barrier of entry for third-parties. </li></ul></ul><ul><li>Alfresco </li></ul>
    10. 10. Platform Providers <ul><li>Companies that provide selection, support, integration and services on a set of projects, collectively forming a tested and verified platform. </li></ul><ul><ul><li>Reduction of R&D. </li></ul></ul><ul><ul><li>Reduced Maintenance Costs. </li></ul></ul><ul><ul><li>Increased Dissemination. </li></ul></ul><ul><ul><li>External eco-system of software and additions. </li></ul></ul><ul><ul><li>Platform engineering requires large R&D efforts even with shared resources. </li></ul></ul><ul><li>RedHat </li></ul>
    11. 11. Software Selection <ul><li>Companies that provide selection, support, integration and services on a set of projects, collectively forming a tested and verified platform. </li></ul><ul><ul><li>Cost of software selection can be partially shared between customers, as most adopters have large share of common needs. </li></ul></ul><ul><ul><li>Limited market. </li></ul></ul><ul><ul><li>May be perceived as in partial competition with existing specialists. </li></ul></ul>
    12. 12. Training and Documentation <ul><li>Companies that offer courses, on-line and physical training, additional documentation or manuals. </li></ul><ul><ul><li>A significant portion of training development costs can be shared across customer. </li></ul></ul><ul><ul><li>Economies of scale. </li></ul></ul><ul><ul><li>Re-use of community developed material. </li></ul></ul><ul><ul><li>Limited market. </li></ul></ul><ul><ul><li>May be perceived as in partial competition with existing specialists. </li></ul></ul><ul><ul><li>Human intensive, most of it cannot be replicated at low cost. </li></ul></ul>
    13. 13. Indirect Revenues <ul><li>A company may decide to fund Free Software projects if those projects can create a significant revenue source for related products, not directly connected with source code or software. </li></ul><ul><ul><li>Software drivers to run specific hardware. </li></ul></ul>
    14. 14. “ Mixed Source” <ul><li>A company may find it beneficial to open up some parts of its proprietary software code on open source-like terms. </li></ul><ul><ul><li>Reduction of R&D. </li></ul></ul><ul><ul><li>Reduced Maintenance Costs. </li></ul></ul><ul><ul><li>Increased Dissemination. </li></ul></ul><ul><ul><li>External eco-system of software and additions. </li></ul></ul><ul><li>Enterprise by HansaWorld </li></ul>
    15. 15. Questions?
    16. 16. Thank you! Edmunds Sprūdžs LATA (Latvian Open Technology Association) board member

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