Open Source Service Companies

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Concept described by Dirk Riehle at

The article discusses Open Source Software and Open Source Business Models


Having contrasted community-based and corporate-based Open Source Software typologies, says that the former has key competitive benefits over both corporate-based and proprietary business models. The best solution is to have service companies based on community-based open source software.

From Rielhe at

"the open source service company ... comes in at least two kinds: One provides first-level support and implementation services; the other provides second-level support, training, and development services.

Clients of the first kind of firm are typically IT users who employ the firm's services to put the open source product into place in their IT operations. Clients of the second kind of firm typically need to get trained on the product or need to have a technical problem fixed that they can't handle themselves.

The strength of a service business usually lies in its ability to:

  • recruit and retain the right people,
  • reliably set up and execute specific service processes, and
  • bring to bear expert domain knowledge and unique intellectual property.

In the open source situation, this is usually labor economics. Technical skills around the open source product are a key part of determining an employee's value to a firm. Anyone who's smart enough can develop these skills because the open source software is available to people outside the firm.

Hiring and firing becomes easier because there's a larger labor pool to draw from, and switching costs between employees are lower compared with the closed source situation. Given the natural imbalance between employers and employees, this aspect of open source is likely to increase competition for jobs and drive down salaries. Lower salaries aren't as much of an advantage to the software vendor as might be expected because in the more transparent and competitive open source situation, such cost savings are likely to be (at least partially) passed on to customers." (

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