1. Business models
of open source software and free software
Trung Huynh
Senior Product Manager at Project LANA

2. By 2011, 80% of all commercial software
will contain open source code.
Open source impossible to avoid, Gartner says, Network World

3. Executive Summary
• “Free software” means software that respects users' freedom
and community.
• “Open source” refers to a program in which the source code
is available to the general public for use and/or modification
from its original design free of charge
• Open Source business model:
– The service model
– The distribution with value added model
– The double license model
– The mutualization model
• These business models are profitable and sustainable over
time

4. Who Am I ?
• Fontys Universities of Applied Sciences
• Lead Developer @ Minus3 Amsterdam
• Founder @ VNSolutions
• CTO @ Purple Asia Digital
• Sr.Product Manager @ Project LANA

5. The Free Software
• Free Software Foundation
(FSF) by Richard Stallmand
1985
• Must respect four
freedoms:
– The freedom to launch
software for any use
– The freedom to study the
way software works and thus
to freely access its source
code
– The freedom to redistribute
and sell copies
– The freedom to enhance
software and publish the
results

6. Open Source Software
• Free Distribution • Distribution of License
• Source Code • Not specific to a product
• Integrity of Author’s Code • Not restrict other
• No Discrimination software
• Technology Neutral

7. What’s the difference between free
software and open source software?
• Who’s freedom?
• What freedom?
Tim-Oreilly and Richard-Stallman

8. FREE SOFTWARE OPEN SOURCE
• Freedom of the code • Freedom of the developer
• Source code will ALWAYS be • Code CAN be included in
available and can never be proprietary works under
restricted. certain conditions.

9. Why could this matter
to you?
• Many developers don’t read licenses.
• Open source developers need to be aware of
the licenses they use.
• The right license depends on the code and the
community.
• Licenses encourage certain behaviors,
discourage others.

10. OSI Approved licenses
• 68 Approved Licenses
• To name the few :
– Apache License, BSD, MIT
– LGPL, Mozilla (MPL), Eclipse (EPL/CPL)
– GPL …

11. 3 kinds of Licenses
They require that any modified software and any program
including this software in a derived product must be placed
under the same license
Examples:
• General Public License (GPL)
• Mozilla Public License (MPL)
They contain a clause allowing users to mix the software with
proprietary software and place it under a proprietary software
and place it under a proprietary license, on the condition that
the free module remains under a free license
Examples
• Lesser General Public License (LGPL)
• Berkeley Software Distribution (BSD)
• License MIT
Anyone can transform a source code under this license without
acknowledging its original developer
Examples:
• Xfree86
• X Consortium
• License Apache

12. The service model
• Simple service model:
– commercialization of services that have no link
to a specific product
– A variant of this model : Application Service
Provider model
Growth levers :
–Extending the number of services offered
–Specializing the services offered to develop a competitive
advantage

13. The service model
• Indirect monetization model:
– commercialization of services associated to
software developed or packaged internally
Growth levers :
•Increase market size
•Maximum number of users

14. Examples
– Zend is the leading provider of software and
services for developing, deploying and
managing business-critical applications in
PHP.
– Zend Offered :
• Zend PHP Server – Zend Framework =>
Enterprise version
• Zend Training and Certification

15. The value added distribution
Programmers
• Selling a standard version of Programmers
Programmers
an existing product.
• The “sale” is generally made
as a yearly subscription to the Software distributer:
product and a set of attached packages the different
services source codes
Bugs singaling,
patch
development, Subscription to
proposal for the more
improvement advanced version
Free distribution of the
community version
Objective-expanding the
community
Community of
programmers Customers

16. Example
Revenue $909.3 million (increase 22%) in 2011
Red Hat offers two versions:
•The Enterprise version which is tested and whose
interoperability is warranted
– Red Hat Enterprise Linux, or RHEL, which allows only
two users to have RHEL simultaneousl
– RHEL Advanced Platform, which allows an unlimited
number of user to have it at the same time
• The “community” version (Fedora)
• Even though Fedora does not provide any revenue, Red Hat
is careful not to neglect its community version and
participates actively in its animation

17. The double license model
– An open source license for the standard
product
– A license that is more protected, which
comes with a guarantee and is generally
linked to a product that offers more
functionalities

18. The double license model
• The open source license has to be proliferate copylefted.
• The commercial version must be under proprietary license
• This solution allows the combination of the free licenses’ advantages
=> Community

19. Example
• Magento offers 2 versions :
– The community version, which contains
85% of the commercial version
=> Open Software License (OSL 3.0)
– The commercial version:
» Enterprise : $14,420 / year
» Enterprise Premium : $49,990 / year
=> Magento Enterprise Edition License
• Also offered
–Consulting
–Training

20. It is best for open source companies to
work on an already established market
• Working on an established market ensures:
– That consumers are educated. Potential customers have precisely identified their
needs, which makes the monetization of the serivce sold by the open source
company easier
– That a benchmark exists. Open source companies are plagued by confidence
issues from users, which tend to decrease if one or more proprietary software
have already proven their efficiency. The existence of a benchmark also highlights
the pros of an open source product (price, quality of service, etc.)
• Open source’s main successes emerged on a market that was under the sway of a
proprietary software seller:
1. Database: MySQL et PostgreSQL vs. Oracle, IBM and Microsoft
• ERP: Compiere vs. Oracle and SAP
• CRM: SugarCRM et Compiere, vs. Siebel o Oracle
• OS: Red Hat vs. Microsoft

21. The mutualization model
• The mutualization model consists in the development of a relatively
simple version of the product and the subsequent development of
modules on demand

22. Example
• Concrete5 entered the CMS scene in 2008, and since then has been
making solid headway to becoming one of the premier go-to web
publishing platforms available today.
• C5 offers :
– Free version of CMS
– Addition feautures are developed upon request
– Certain features will be sold on Marketplace

23. Thank you