Tuesday, 10 June 2008

How to make money from open source

Every now and again, I poke my head out from the echo chamber that is the open source world, and get bombarded with one question. How do you make money from open source?

Many people have answered that question in the past, so consider this a re-heat of last night's dinner, as it were.

Of course, for some open source developers, the very question is offensive. They create open source software for reasons other than financial ones (as described in my previous post). But for others it's an important question, and I for one would like to finesse my response.

The often used answer is that one makes money because of open source, and not with it. Let's unpack this. There are many examples of this being done successfully, such as;
All decent business models. And making money from open source is also possible at the level of the individual as well.
  • Doc Searls makes money talking about open source at conferences and through writing about open source in Linux Journal. He also gets paid for consultancy services. This is interesting from my perspective, as Doc doesn't write code (I am not a developer either).
  • Jeremy Ruston, my boss, made money selling his one-man open source company to BT. Note he didn't sell the code itself; that is held in trust by a not-for-profit outfit called UnaMesa. Even still, the amount exchanged was sufficient to make him happy.
I'm not sure how much this helps the average salesman, though. They're looking for direct ways to make money, not indirect ways. Open source is a hot topic right now, and its inevitable that those charged with bringing in money will ask how open source can help them do that. And these unfamiliar methods of making money might be unsatisfying for those who are new to the topic.

I think that the best answer is to say that there are two possible approaches.

The first is to use open source as an enabler. Rather than asking how you'd make money with an open source product, look at your existing and upcoming business opportunities and figure out whether open source can play a role in them. The benefits of reduced costs and improved flexibility might make all the difference.

The second is to put open source at the heart of your business model. To attempt this, you'd really need to get under the skin of open source; understand how the community works, understand the unique benefits of open source and how it's changing the world, and then try and identify new business models in the same vein as those listed above. It's not straightforward, but it could be lucrative.

In this day and age, where commoditized open source solutions are leading their respective fields, it's incumbent on the salesmen of large companies to get their heads around open source, so they can understand in turn where the opportunities lie. With their knowledge of the market and commercial acumen, they may just hold the key to the next wildly successful business built using open source.

Photo shared under a Creative Commons licence by WhatKnot.

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