Free as in speech, not beer
- Article 5 of 16
- LinuxUser & Developer, September 2005
In the first of a series of articles on the changing market for open source software, Rob Buckley looks at how various companies have met the challenge of making money from the open source software model
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Contrary to popular opinion, making money from open source software is not a Bad Thing. Even that most “communist” of licences, the GPL, does not forbid companies from charging for open source software. Yet it is difficult to argue that it’s as easy to make money from open source software as it is from proprietary software.
So what makes anyone want to start a company based around open source? Building a profitable company that will last for years is a challenge that proves too much for many, anyway. But basing that company around open source software would seem to many like trying to run a marathon with lead weights tied to your feet. Tell many investors that you’re trying to start a company whose customers will be able to freely copy its products and even sell them and you’re unlikely to get the bus fare home out of them, let alone get seed capital. Even if you raise funding, ensuring you make enough money to pay the bills, feed the family and take on competitors can prove too much: there are fewer avenues to make money and many potential customers either unaware of or unwilling to use open source software.
Yet for over a decade, companies have been successfully basing their businesses around open source. Many have radically different business models from proprietary software companies, while others have gone for hybrid models.
Over the next few issues of LinuxUser, we’re going to look at how the market for open source software is changing: why large organisations are now willing to give open source are chance; how venture capitalists and other investors are adapting to open source; and how the business infrastructure of Europe is changing to support open source initiatives. In this, the first of the series, we’re going to look at how various companies have met the challenge of making money from open source.
“It’s the natural evolution of IT”
The oldest viable model for open source profit has been in services and support. It’s the model used successfully by the likes of Red Hat and Novell, who make no or little money from their Linux distributions, but who make millions of dollars’ profit from selling support licences and consulting services off the back of them. It is, in a sense, the purest way to make money from open source.
“It’s the natural evolution of IT,” says Mark Taylor, CEO of Surrey-based Sirius IT. “IT has been made up of three parts: the hardware, the software and services. With cost taken out of hardware and open source doing the same thing for software, that leaves the future in the services side.”
Taylor started Sirius, a services and consultancy firm, in 1998. Formerly technology director for an IT management and training company, he was “bored out of his brains” and decided to do something he might enjoy instead. Being a long-term user and advocate of open source and seeing the future of the IT industry in open source, he decided to start up his own consultancy to advise firms on how to use open source software. He now advises organisations such as Pentax, Toyota and the MoD on how to migrate their systems, where appropriate, to open source software, and provides additional support and consulting services.
Progress was slow at first: at the time, open source was little known so few organisations were interested in moving their core systems over to such an unknown. So Sirius, in common with many open source vendors of the time, had to educate potential customers about open source, as well as try to sell its services to these prospects. Nevertheless, the company was able to find companies that were interested. “It’s company policy to go for ‘low-hanging fruit’. Some companies are not even ready to listen to the open source story right now, so we only go for people who have an actual interest in it.”
To produce this requires two things, says Taylor: interest at the technical level and a board-level sponsor who is willing to listen to the merits of open source. This kind of interest mainly comes about through media articles, conferences, newsgroups, forums and other forms of “open source PR”, Taylor believes, and he has tried to create as much open source word of mouth as possible through these channels.
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