Open Source Software Business Models

Description

Edy Ferreira & Stoyan Tanev:

"OSS profitability and business models are still poorly understood and there is no single framework that would explain their potential determinants. The most critical issue for an OSS business is that the licensing terms used allow the free redistribution of the licensed software. Therefore, it is usually not feasible to base revenue on licensing fees.

Rajala et al. identify the following essential elements in any business model for software companies:

• product development

• source of revenue and pricing

• sales channel options

• servicing and implementation approach [1]

Jussi Nissila identifies the key elements of any software business model in slightly different terms:

• value creation and revenue logic

• market offerings and positioning

• product development, implementation and servicing

He also argues that, in the case of open source business models, the above key elements must be complemented by the:

i) extent of community development and review;

ii) style of development method as more open or more closed;

iii) license type as more restricted or more liberal; and

iv) importance of the OSS in the end product. Importance ranges from pure OSS where no proprietary components are added, OSS driven where the core is open source with proprietary component added, to proprietary software driven where the core is proprietary with some open source components added.

Dual Licensing seems to be one of the most popular ways of making money. In addition to the revenues that comes from selling the fee license, this model may also provide complementary revuenues through technical support and services.

Dual-licensing [2] differs from a purely free model. First, the OSS community does not have the development power to start competing products because the control of the core is held by the original developer. Second, users have the possibility of buying a proprietary license.

There are two fundamental legal requirements for a commercially successful dual-licensing model: the i) need of a license with a strong copyleft clause; and ii) possession of undisputed rights over the software." (http://www.osbr.ca/ojs/index.php/osbr/article/view/827/800)

More Information

1. Open Source Software - Business Aspects
2. Open Source Commercialization
3. Open Business ; Open Business Models; Open Source Business Models

Also:

1. Open Source Hardware Business Models