Open Source Software Service Model

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Thomas Prowse:

"This well-established OSS business model is premised on charging for services to support the use of OSS software. While there are many companies of various sizes that have implemented this as their core business model, the best example is Red Hat, which generated $750 million in revenue last year and has a $6 billion market cap.

At a high level, this business model is designed to benefit from large-scale adoption of certain types of OSS software. The OSS company target those user companies and organizations that prefer or require commercial support for the OSS. For example, the Red Hat business model focuses primarily on the popular Linux open source operating systems. In targeting user companies, it may offer its support service to a bank that is using Linux in its enterprise servers. In most cases, the OSS company positions itself as a supplement or alternative to relying on support from either the applicable open source community or an internal support team within the user company. In addition, this class of OSS company typically focuses on the addition of complementary services and products to drive revenue opportunities.

A recent post by Glyn Moody entitled 'Why No Billion-Dollar Open Source Companies?' discusses the challenge that the fundamental economics of OSS are bringing to the service-based OSS business model. Glyn's post has triggered a very interesting and healthy debate on OSS business models in general." (