The document discusses how companies can profit from open source software by creating communities around their projects, driving demand while reducing licensing costs. It highlights different motivations for releasing open source code, such as market education and competitive advantages, and provides examples of successful business models from Red Hat, IBM, and others. Overall, it emphasizes that there is no singular open source business model, but rather diverse approaches to leverage open source for complementary services and products.

1. Open source business models
How do you make money giving stuff away, anyway?
Dave Neary
SDN/NFV Community Strategy, Red Hat
April 2017

2. Introductions
• Dave Neary
• SDN/NFV Community Strategy at
Red Hat
• 20 years in Free/Open Source
Software
• @nearyd on Twitter for live tweets

3. How do you make money?

5. Why do companies release code
as open source?

6. What is your goal?

7. “We want to create a community”
Why?

8. Reasons to create a community
• Market education – seed new technology
• Lead generation – want to grow sales
• Ecosystem enablement – provide a low-touch way for people to
integrate with your platform
• Portfolio leverage – seed market with core tech to up-sell
• Competitive hedge – first to market with open source, or undermining
proprietary competitor
• ...

9. Why do companies release code
as open source?

10. Economics 101: Supply and demand

11. Economics of Open Source
• Open Source drives licensing costs for software to zero
• “Cost” is not just money
• Maximise demand, mindshare

12. Economics 101: Substitutes

13. Open Source as a substitute
• Compelling open source projects undermine demand for proprietary
alternatives
• “Innovator's Dilemma” - difficult for proprietary companies to react

14. How do you make money?

15. Economics 101: Complements

16. Complements of open source
• Services
• Software
• Hardware
• Documentation
• Advertising
• Support
• Consulting
• Training

17. Community types
• User & Deployer communities
• Engaged user – Want to share experiences, help others advocate project
• Deployer/developer – Packagers, integrators, documentation, translation,
people who bridge code to user
• Core developer communities
• Extension developer – plug-ins, extensions, integration with 3rd party
applications
• Core developer – Core code

18. Community types

19. Target audience
• Education
• What problems do I solve?
• How do I fit into what people know?
• Promotion
• Channels (blogs, conferences)
• Press and analyst relations
• Marketing message on website
• Download and install process

20. Example: Linux
• 1990s: Unix market fragmentation
• Late 1990s: Linux begins to disrupt – adopted by Oracle, IBM as
standard platform
• Linux use-cases expanded – HPC, embedded
• 2015: Operating system is a commodity

21. Example: Red Hat
• 1990s: Red Hat solves a pain point for early Linux users – how to install
and integrate many independent pieces of software
• Late 1990s: Oracle and others choose Red Hat Linux to standardise
packaging and delivery
• Early 2000s: Red Hat successfully leverages early adoption through
application certification and high standard of support to grow
subscription revenues
• 2015: Red Hat has $2bn in revenues, 70% from Linux business

22. Example: IBM
• Late 1990s: IBM invested in Apache and Linux
• Leverage Linux on IBM z Series, and Power64
• Grew huge services organisation around operationalisation of open
source in enterprise

23. Example: O'Reilly and Associates
• 1993: Began publishing books on open source (Perl, system
administration)
• 1999: Began running OSCON, the Open Source Convention
• Leading technical editor, event organiser

24. Example: Google
• Uses open source to run core business (advertising, search)
• Android – open source mobile platform – disrupted mobile OS market
(Symbian dominated) by enabling OEMs to modify core platform
• Built on open source Java platform

25. Remember: There is no open
source business model
Only people using open source as a development and/or
distribution model, and leveraging that market to sell
complementary goods

26. Thank you!
Image credit: opensource.com
Dave Neary <dneary@redhat.com>
SDN/NFV Community Strategy