sustainable open source business models
DESCRIPTION
Dirk RhieleTRANSCRIPT
Sustainable Open SourceBusiness Models
Prof. Dr. Dirk Riehle, M.B.A.
Friedrich Alexander-University Erlangen-Nürnberg
OGD 2012 – 2012-06-26
ETAS GmbH - 2012-05-31
© 2012 Dirk Riehle - All Rights Reserved 2
Open Source Definition
Legal● Open source license [1]
● Free use allowed
● Source code available
● Modification of code allowed
● Distribution of modifications OK
● Open source initiative● Approves open source licenses
● Permissive vs reciprocal licenses
● Permissive code growing [3]
Process“Open source is a development method for software that har-nesses the power of distributed peer review and transparency of process. The promise of open source is better quality, higher reliability, more flexibility, lower cost, and an end to predatory vendor lock-in.” [2]
[1] See http://www.opensource.org/osd.html [2] See http://www.opensource.org/ [3] See http://bit.ly/xbYEYP
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Economic Significance and Growth
● Open source is in wide use in enterprises
● In a large 2009 survey, Forrester Research found that 46% of all responding enterprises were using or implementing open source software [4]
● Most software firms use open source in products
● In 2009 Gartner Group estimated that by 2012, at least 80% of all software product firms will use open source software in their products [5]
[4] Jeffrey S. Hammond. “Open Source Software Goes Mainstream.” Forrester Research: 2009.
[5] Mark Driver. “Key Issues for Open Source Software, 2010.” Gartner Research: 2010.
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Who Wrote Linux 2.6.20?
“At least 65% of the code which went into 2.6.20 was created by people working for companies.” [6]
[6] See http://lwn.net/Articles/222773/
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Sustainable Open Source Business Models
For Profit (“Commercial”)1. Single-Vendor Open Source Firms
2. Open Source Distributors
Not-for-Profit (Subsidized)3. Developer Foundations
4. User Foundations
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1. Single-Vendor Open Source Firms
“Single-vendor commercial open source software projects are open source software projects that are owned by a single firm that derives a direct and significant revenue stream from the software.” [8]
“By 2012, at least 50% of direct commercial revenue attributed to open-source products or services will come from projects under a single vendor's patronage.” [5]
[8] Dirk Riehle. “The Single-Vendor Commercial Open Source Business Model.”Information Systems and e-Business Management. Springer Verlag, 2010.
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Why Pay for Open Source Products?
[9] Marten Mickos. “Open for Business.” Talk at PARC Forum, 2010.Abstracted: http://bit.ly/bmSUga
“Some people spend time to save money, some spend money to save time.” [9]
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Commercial Open Source Products [10]
UTIL
INC
UPD
LIC
DOC documentation
incident-basedsupport
utilities
TRN
24x7
training
24x7 hotline
commerciallicense
updateservice
...
Op
en
So
urc
eC
om
mu
nit
yE
nte
rpri
se
Cu
sto
me
rsIS
V/O
EM
Web Store Direct Sales
LIC
TRN
UPD UTIL
DOC 24x7
LIC
TRN
UTIL
DOC 24x7
UTILINCDOC
[10] Florian Weikert. Product Features in Commercial Open Source Software. Bachelor Thesis, Friedrich Alexander-University of Erlangen-Nürnberg: 2012.
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Community vs. Commercial Edition
Community Edition● Core product
● Open source license
● No warranties, no indemnification
● Whole product● Enterprise features missing
● Operational comfort● None or limited
● Consulting services● None or limited
Commercial Edition● Core product
● Commercial license
● “Dual-license” strategy
● Whole product● Enterprise features
● “Open core” model
● Operational comfort● Subscription, updates
● Various support contracts
● Consulting services● Various consulting services
● Second-level support
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Sales Best Practice: Create Champions
MarketProduct Win Sale!Engage in
Comp. Sales
ProvideOpen Source
Connect Usersof Organization
Track Users
Make SalesCall / Visit
IdentifyChampion
Generate LeadsFrom Behavior
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2. Open Source Distributors [12]
new features
10.04EOL
10.04
10.10 10.10EOL
bugfix
new
feat.
bugfix
new
feat.
bugfix
bugfix
new
feat.
backpo rt
backpo rt
backpo rt
backpo rt
commercialfeatures
commercialfeatures
[12] Dirk Riehle. “The Economic Motivation of Open Source.” IEEE Computer vol. 40, no 4 (April 2007). Page 25-32.
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3. Open Source Developer Foundations
Definition1. A developer foundation is
a non-profit organization(foundation, consortium)
2. with the purpose of
managing and performing
3. the development of
(non-differentiating)open source software
made available tofoundation members(and the general public).
Purpose● Lower development costs● Increase share of wallet● Reach more customers● Grow addressable market● Reduce strategic lock-in
Downsides● Higher engagement
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Examples of Developer Foundations
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Increase Share of Wallet [15]
without open source
closed-sourceoperating system
businessapplication
$$$$
$$$$
open-sourceoperating system
businessapplication
$$$$$
$$
customer cost savings
mon
ey s
pent
on
bund
led
solu
tion
with open source
[15] Dirk Riehle. “The Economic Case for Open Source Foundations.” IEEE Computer vol. 43, no. 1 (January 2010). Page 86-90.
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Reach More Price-Sensitive Customers
potential profits forbusiness application vendor
cost of providingopen source operating system
cost of providingbusiness application
mon
ey s
pent
on
bund
led
solu
tion
number of customers sold to
customer demand curve$$
$$
$$$$$
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Grow Addressable Market
two competing platformswith equal total market size
tota
l ma r
ket
siz e
dominant open source platformwith larger total market size
closed-sourceplatform open-source
platform
applications
applications
market 2market 1
closed-sourceplatform open-source
platform
applicationsapplications
market 2
market 1
customercost savings
$$$$
$$$$
$$
$$
$$$$$$
$$
$$$$$$$
$$$$
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4. User Foundations
Definition1. A user foundation is
a non-profit organization(foundation, consortium)
2. with the purpose of
sponsoring(financing and managing)
3. the development of
(non-differentiating)open source software
made available tofoundation members(and the general public).
Purpose● Lower TCO● More flexibility● More predictability● Reduced vendor lock-in
Downsides● Higher engagement
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Ecosystem of User Foundations 1/2
UF: User FoundationAM: Alliance ManagementSD: Software Developer
owns
UF selects + pays S
D
AM manages SV
developscontro
lsUF
empl
oys
AM
UF
SD
OSS
AM
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Ecosystem of User Foundations 2/2
SU: Software UserSV: Software VendorCF: Consulting Firm
uses
SU
pays for CP custom
.
collaborate
customizesdevelops
SU
pay
s fo
r CP
licen
se
SU
CF
(OSS)
CP
SV
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Conclusions
1. Open source is here to stay
2. Four sustainable business models
3. Open source simplifies consortia
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Thank you! Questions?
[email protected] – http://osr.cs.fau.de
[email protected] – http://dirkriehle.com – @dirkriehle
DR