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Open Source Revenue Model


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Open source is always perceived as the distribution of the free software and its source code (so that the receiving party will be able to improve or modify it). The report includes the concept of various Revenue models used by open source vendors and identify challenge and issues they are facing. In this report I have tried to answer to few questions like: Indentifying the current revenue channels, and factor which differentiate different open source vendors; Analysis of trends in open source revenue models; Identifying the critical success factors for choosing an open source business strategy; Why a company might adopt an open-source model; How open-source licensing works; What business models might be usable for commercial open-source products and what special considerations apply to commercial products released as open source.

Published in: Technology

Open Source Revenue Model

  1. 1. A STUDY ON REVENUE MODEL OF OPEN SOURCE By 07030244004 Kshitiz Goel SDM – 07-09
  2. 2. AGENDA Objective   Methodology  Introduction  Open source License  Revenue Models  Key Elements of Revenue Model  Model vs Factor Matrix  Findings, Recommendations & Conclusion
  3. 3. 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.
  5. 5. 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.
  6. 6. Open source Licenses OR Copyleft Copyright
  7. 7. GENERAL PUBLIC LICENSE Free Non License
  8. 8. 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.
  10. 10. 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.
  11. 11. 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)
  12. 12. 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
  13. 13. 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 
  14. 14. 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. 
  15. 15. 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 
  16. 16. 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.
  18. 18. 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
  19. 19. 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.
  20. 20. 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.
  21. 21. 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.
  22. 22. Thank You