oss business models
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Free softwarebusiness models
Arnaud Laprévote – research project directorarnaud.laprevote@mandriva.com
MANDRIVA 2010 inclura le
TASK ORIENTED DESKTOPVous VOULEZ le tester
Summary
● Why?● Who are you for talking to me like that ?● Market● Analysis grid● Activities● Revenues sources● Domains● Conclusion
WHY ?
WHO ARE YOU TO
SPEAK TO MELIKE THAT ?
OSS business models:
not a choice, but ...
Market
● Economic and Social Impact of Software & Software-Based Services - Smart 2009/0041 (Pierre Audoin Consultants)
● Software and Software Based Services market in Europe : ● 2008 : 228.6 billion Euros in 2008 ● 3.7% CAGR by 2012● 2012 : 264.8 billion Euros.
Yes, size matters
Information systems market
GDP : gross domestic product proportions hold
Revenues for France
● Software revenue growth● 2005 – 7%● 2006 – 6%
● Software and hardware service revenues growth● 2005 – 7%● 2006 – 6,5%
But small actors
● 1st european editor: SAP ● 2nd european editor: SAGE
Pcs in the world
● Nber of PCs sold in 2007 : 271 millions● 1 billion of PCs in the world● 2 billions of PCs planned in 2012 ?
3% of energy expenses
And linux ?
1,2 %30%
What isopen source ?
Free to ...
Free of charge:=(
€€€€€€€€€€
Free of charge=
Free of any business ?
Mandriva One of the five main Linux solutions editors in the
world The only european one Quoted at Euronext stock exchange 80 people 500 contributors Sold in 150 countries Available in 80 languages More than 3 million users Offices in France and Brazil
Value chain
Hardware
Linux OS
Service companies
Proprietary Applications
Open Source Applications
Cap GeminiAtos, Eds, IBM Global Services
OpenWide, IdealX, Linagora
Oracle, SAP,BEA, IBM
PostgreSQL, Jonas ObjectWeb, Nexedi, Nuxeo
Mandriva, Redhat, Novell/Suse
HP, IBM, Dell
Level 1: Hardware platform
Level 2: Software platform
Level 3: Applications
Level 4: Services
Founders
Level 0: Chips and boards
Intel, AMD, Via
● 2 millions● 90 000 ● Angola ● Nigeria 11 000● Brazil 25 000
End of the interlude
What is a business model ?
A business model is a term used for a broad range of informal and formal descriptions that are used by enterprises to represent various aspects of its business, including its purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.
Dimensions
Taille (de l'entreprise, des clients, du CA, du bénéfi ce, des effectifs)
Domaine d'activité et spécialisation (ou pas) Métier principal Sources de revenues Proximité au code source Proportion de R&D Organisation
QualiPSo Survey
7
13
4
9
845
3
4
3
5
4
3
42 1 1 1
Technical domain
Security
Web/internet
Electrical EngineeringInfrastructure
Middleware
Embedded electronicsMedical
Multimedia
Accouting (ERP...)
eGovernment
eLearning
Banking / financeKnowledge management
Home appliance
Energy generation and distributionIndustry Automation
Environment
Software for hardware (OEM)
Expertise
Customer size
Main activities - identity● Information technology consulting – service
company● Hosting of resources (hardware, software,
informations, ...)● Hardware seller● Proprietary software editor● Open source software editor● Distribution editor (software integration)● Communication agency● Law and business consulting activities● Media company
Revenue sources
● Service● Hardware● Delay● OSS for a price● Hosting● Branding ● Advertising● Sponsoring
Revenue sources
● Insurance / warranty ● Toll● Subventions● Dual-licensing● Proprietary software
Revenue sources
Consulting
OSS for a price
Infinite support
Hosting
Dev. - customisation
Support
Training
Subventions
Proprietary extensions / software
Proprietary ext.
Tax credit
JEI
Branding
Hardware
Certification
Provide OSS software with delay
Dual licensing
Publications
Advertising
Sponsoring
Other services
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Revenue sources
Linbox
Europe-B
Europe-AEurope-C
Mandriva
Red HatEBM Websourcing
Europe-D
DhoogesLogilab
percentage
Features
Problem : the lever effect
€
t
service €
t
Software
revenuescosts
Lever effect for open source software edition ?
Support
Maintenance
margin
margin
Dev
elop
men
t
margin S
Trainingmargin
margin M
margin T
?
The key to development fi nancing
margin
Support
Maintenance
margin
margin
Dev
elop
men
t
margin S
Trainingmargin
margin M
margin T
?
Insurancial dimension
?
And the remaining
Investments
Subventions
Insurancemargin
Support
Maintenance
margin
marginD
evel
opm
ent
margin S
Trainingmargin
margin M
margin T
?
PWB : Payed web based
Activity, source code and communities
Source and community
Cre
ato
r
Contributor [1,10%]
Contributor < 1%
DocumentationBug report
Use
CommunityAnimation
Editor
Service company
Embedded
HostingCommunication
Agency
Conclusion● The future of Open Source funding is
insurancial in the professional market● The future of Open Source is advertisement,
branding and “toll” for the consumer market● To reach 2 billions of computers new markets
must be opened => cost diminution● Open source is a viable economical model
that may become pre-eminent on other economical models for software
MANDRIVA 2010 inclura le
TASK ORIENTED DESKTOPVous VOULEZ le tester
Thanks
www.qualipso.org and the deliverable D2.1.3
April, for its white paper about free software business modelsSyntec for its synthesis 2007 about IT market
Mandriva LinuxOpen Simple Innovative
Annexes
What does sella service
company ?
What does sellan open source
service company ?
Not concentrated ?
Resource provider ?
Hardware seller ?
Proprietary software editor ?
Open source software editor ?
Distribution editor ?
Traditional Operating System editor
Software editor
CustomerTraditional OS editor
Linux distribution editor
Software editor
CustomerLinux distribution editor
Communication agency ?
IP specialist ?
Free softwarebusiness models
Arnaud Laprévote – research project directorarnaud.laprevote@mandriva.com
MANDRIVA 2010 inclura le
TASK ORIENTED DESKTOPVous VOULEZ le tester
Summary
● Why?● Who are you for talking to me like that ?● Market● Analysis grid● Activities● Revenues sources● Domains● Conclusion
WHY ?
Normally, everybody should be supporting itBut what are we earning money with?
Key point to reassure potential usersKey point for setting up new activities in new or existing companies
Linbox FAS – funded December 1996 – bought out May 2007
WHO ARE YOU TO
SPEAK TO MELIKE THAT ?
OSS business models:
not a choice, but ...
Engineer (ENSMM 1988 and ENSERG 1989)specialized in digital micro-electronics Research assistant at Institut für Datentechnik,
Darmstadt (1990)Manager of digital electronics laboratory in the
signal processing department at TDF-C2R (1991-1994)
« Advanced TV and multimedia » Team director at the R&D center, THOMSON multimedia (1995-1996)
Created Free&ALter Soft (12/1996)Linbox buy out in 2001 => Linbox FASProduct refocusing (LRS)Buy out of Linbox FAS in 2007 by Mandriva
Market
● Economic and Social Impact of Software & Software-Based Services - Smart 2009/0041 (Pierre Audoin Consultants)
● Software and Software Based Services market in Europe : ● 2008 : 228.6 billion Euros in 2008 ● 3.7% CAGR by 2012● 2012 : 264.8 billion Euros.
Yes, size matters
Information systems market
GDP : gross domestic product proportions hold
Revenues for France
● Software revenue growth● 2005 – 7%● 2006 – 6%
● Software and hardware service revenues growth● 2005 – 7%● 2006 – 6,5%
But small actors
● 1st european editor: SAP ● 2nd european editor: SAGE
SAP : – 8 billion € turnover in 2007 (it's pretty few)
– 1 billion € turnover(Truffle 100 study)But benefits of France Telecom in 2007
was 8 billion €
Pcs in the world
● Nber of PCs sold in 2007 : 271 millions● 1 billion of PCs in the world● 2 billions of PCs planned in 2012 ?
3% of energy expenses
3% energy = air transport energy expenses !!!!!
And linux ?
Normally, everybody should be supporting itBut what are we earning money with?
Key point to reassure potential usersKey point for setting up new activities in new or existing companies
Linbox FAS – funded December 1996 – bought out May 2007
1,2 %30%
FranceDesktopbetween 20 et 30 millions of Pcs1,1% (AT Institute) of PCs under linux : between 220 000 et 330 000Server ?Majority of web servers are under linux
World~ 1 billion pcs~ 11 millions of pcs under linux
What isopen source ?
Open Source implies that everyone can share the software, and that leads the software to be free (in price), even if it's not imposed or needed by the licenceBut how to create an economical activity with something free of charge?
Free to ...
download/distributionusemodificationdistribution of modification
Open Source implies that everyone can share the software, and that leads the software to be free (in price), even if it's not imposed or needed by the licenceBut how to create an economical activity with something free of charge?
Free of charge:=(
€€€€€€€€€€
Free of charge=
Free of any business ?
Metro newspaperMuseumsWeb sitesEducation (not everywhere)Wifi in some townsNon paying televisionsSkype callsLocal phone communications...Free and business are common
Mandriva One of the five main Linux solutions editors in the
world The only european one Quoted at Euronext stock exchange 80 people 500 contributors Sold in 150 countries Available in 80 languages More than 3 million users Offices in France and Brazil
Value chain
Hardware
Linux OS
Service companies
Proprietary Applications
Open Source Applications
Cap GeminiAtos, Eds, IBM Global Services
OpenWide, IdealX, Linagora
Oracle, SAP,BEA, IBM
PostgreSQL, Jonas ObjectWeb, Nexedi, Nuxeo
Mandriva, Redhat, Novell/Suse
HP, IBM, Dell
Level 1: Hardware platform
Level 2: Software platform
Level 3: Applications
Level 4: Services
Founders
Level 0: Chips and boards
Intel, AMD, Via
● 2 millions● 90 000 ● Angola ● Nigeria 11 000● Brazil 25 000
2 million downloads of each Mandriva release90 000 computers in a big French administrationAngolaTutorials, development of Angolinux, deployment Nigeria11 000 Classmate PC using MandrivaBrazil25 000 machines with Mandriva sold each month
by Positivo
End of the interlude
What is a business model ?
A business model is a term used for a broad range of informal and formal descriptions that are used by enterprises to represent various aspects of its business, including its purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.
A lot of dimensions in the universal sample space:CustomersSizeField of activityActivityRevenue sourceCloseness to source codeRepartition between technical and commercial staffR&D proportion...
One company = one combination of factorsOur goal is to identify and show some winning combinations
Dimensions
Taille (de l'entreprise, des clients, du CA, du bénéfi ce, des effectifs)
Domaine d'activité et spécialisation (ou pas) Métier principal Sources de revenues Proximité au code source Proportion de R&D Organisation
QualiPSo Survey
7
13
4
9
845
3
4
3
5
4
3
42 1 1 1
Technical domain
SecurityWeb/internet
Electrical EngineeringInfrastructureMiddlewareEmbedded electronics
MedicalMultimediaAccouting (ERP...)
eGovernmenteLearning
Banking / financeKnowledge managementHome applianceEnergy generation and distribution
Industry AutomationEnvironmentSoftware for hardware (OEM)
The main ones for open source software are :securityinternetinfrastructurenetworkFile, mail, communication or ... server, Office automationGameMultimediaAccounting, ERPsMany fieldsAll fields
Expertise
Customer size
Rules of thumb : * you do business with entity of with the same size order than you, * if not (you are a small company selling to a big) you must have a very specialised expertise to appeal to big companies, * if you sell to small companies, you will sell a very wide expertise (« I take care of your computers ») but obviously not as deep.The figure above represent that.
Main activities - identity● Information technology consulting – service
company● Hosting of resources (hardware, software,
informations, ...)● Hardware seller● Proprietary software editor● Open source software editor● Distribution editor (software integration)● Communication agency● Law and business consulting activities● Media company
A software service company sells time and knowledge/expertiseexpertise on proprietary softwareExpertise on open source softwareNO DIFFERENCE !!!!!!?????Added value ++In the detail :●Consulting●Training●Set up●Support●Outsourcing●Integration ●Customisation●Development●Certification, ●Migration process ●certification / quality
Revenue sources
● Service● Hardware● Delay● OSS for a price● Hosting● Branding ● Advertising● Sponsoring
● Service (selling of time and expertise)● Hardware● Publicly publish with a delay (immediate access
for a price)● Open source software distribution for a price● Hosting● Sources linked to gratuity and image● Branding (teeshirt, teapot, club Mandriva, trade
licence sell, ? Franchise ?, ...)● Advertising● Sponsoring (Google => Mozilla, Intel, HP, club
Mandriva, ...)
Revenue sources
● Insurance / warranty ● Toll● Subventions● Dual-licensing● Proprietary software
Insurance / warranty « Toll » if a financial exchange is doneIf a financial exchange is done from the OS
(buying of music, of video, of a game, of a software, ...) => the distribution editor allows this financial exchange => he should get some money for this service (Amarok).
Subventions (for creating an open source software)Creation of a good which is to the disposal of
everybody => giving subvention is fairly logical as it may benefit to all.
Dual-licensing :Imposes a copyright transfer for contributors =>
slows down the dynamic around the projectProprietary software (extension)Requires a structure or a licence adapted (Apache,
BSD style, Mozilla)
Revenue sources
Consulting
OSS for a price
Infinite support
Hosting
Dev. - customisation
Support
Training
Subventions
Proprietary extensions / software
Proprietary ext.
Tax credit
JEI
Branding
Hardware
Certification
Provide OSS software with delay
Dual licensing
Publications
Advertising
Sponsoring
Other services
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Revenue sources
LinboxEurope-BEurope-AEurope-C
MandrivaRed HatEBM WebsourcingEurope-D
DhoogesLogilab
percentage
Features
Problem : the lever effect
€
t
service €
t
Software
revenuescosts
Lever effect for open source software edition ?
Support
Maintenance
margin
margin
Dev
elop
men
t
margin S
Trainingmargin
margin M
margin T
?
Revenues without lever effect !!!!
The key to development fi nancing
margin
Support
Maintenance
margin
margin
Dev
elop
men
t
margin S
Trainingmargin
margin M
margin T
?
Unlimited Support = In case of problem, all means will be taken for this
problem to never occur again => insurancial dimension of support = lever effect.
Insurancial dimension
?
Only advantages ...For the customer●Cost control on a function●It's better for the editor to minimize the support, and that means developing a great quality product → virtuous circle●Adding functions for developing the installed basisFor the editor●Recurrent and continuous revenues, corresponding to the production economic reality●Capacity to foresee revenues
And the remaining
Investments
Subventions
Insurancemargin
Support
Maintenance
margin
margin
Dev
elop
men
t
margin S
Trainingmargin
margin M
margin T
?
PWB : Payed web based
Activity, source code and communities
Source and community
Cre
ato
r
Contributor [1,10%]
Contributor < 1%
DocumentationBug report
Use
CommunityAnimation
Editor
Service company
Embedded
HostingCommunication
Agency
Conclusion● The future of Open Source funding is
insurancial in the professional market● The future of Open Source is advertisement,
branding and “toll” for the consumer market● To reach 2 billions of computers new markets
must be opened => cost diminution● Open source is a viable economical model
that may become pre-eminent on other economical models for software
MANDRIVA 2010 inclura le
TASK ORIENTED DESKTOPVous VOULEZ le tester
Thanks
www.qualipso.org and the deliverable D2.1.3
April, for its white paper about free software business modelsSyntec for its synthesis 2007 about IT market
Mandriva LinuxOpen Simple Innovative
Annexes
A software service company sells time and knowledge/expertiseexpertise on proprietary software
What does sella service
company ?
A software service company sells time and knowledge/expertiseexpertise on proprietary software
What does sellan open source
service company ?
Expertise on open source softwareNO DIFFERENCE !!!!!!?????Added value ++In the detail :●Consulting●Training●Set up●Support●Outsourcing●Integration ●Customisation●Development●Certification, ●Migration process ●certification / quality
Not concentrated ?
Steria, On-XApitux, Librenberry, Free Electrons, Silecs, Cliss XXI, Pragmatic Source, Ars Aperta, Merethis, LDD, Nereides, Siloh, Bearstech, Netaktiv, Easter Eggs, AlcôveLibreboot, Alca Torda, Sfwan, Open Via, Pi-Lyon, Zefyris, Exemole, Eitics, Alter Way, Code Lutin, Ambika, Infoclip, Itaapy, Atreal....
Today : development of many small local actors and market structuration through big and/or specialized actors (AlterWay, Linagora, Mandriva, ...)
Resource provider ?
Pure hosting :●Put machine and bandwidth to disposal●Physical access (power on / off / BIOS / reparation)●Simplified remote command line access●Automatisation of set up (Dedibox, Gandi, ...)●With a SLA (time to replace a machine, guarantee on power supply, bandwidth, ...)Added value hosting●monitoring●backup●maintenance/system updates●supportApplication hosting●groupware, mail server, ERP, web site, ecommerce, ...High Performance ComputingInformation provider (web sites)
Hardware seller ?
DivX playerTivoTomTomSome wifi / ADSL router / modemArchosTooling machinesHPC vendors (sun, SGI, Bull, Nec, ...)Embedded linux●++●Any people who need a standard software stack (network, hard disk, audio or video stack, http streaming, http, ssh, ...)
Proprietary software editor ?
All models around double licensing :Open version – proprietary version => Mysql, Trolltech, ...
Editor using open source basisVery common in the java world. Proprietary product including java, struts, tomcat, apache, ...
IBM, tomcat, websphereIBM, Eclipse, => Rational offerZend (php)Linbox FAS (Linbox Rescue Server)
Open source software editor ?
Distribution editor ?
RedHat, Suse Novell, Ubuntu, Mandriva, Centos, ...An economic activityThat do not work without the remaining of the open source ecosystem
Traditional Operating System editor
Software editor
CustomerTraditional OS editor
Linux distribution editor
Software editor
CustomerLinux distribution editor
Communication agency ?
Communication around a projectAnimate the communityEclipse fondation EclipseApache fondationMozilla fondation
IP specialist ?
Provide service and warranty for the legal aspect of OSno proprietary « contamination » => Open source or Open source => proprietary (black duck)Warranty against patent attack or any other legal attack
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