Open Source is a Business Strategy not a Business Model

Fol­low­ing up on related dis­cus­sions, another com­mon con­fu­sion in my opin­ion is to think that “open source” is a busi­ness model. It is not. Open source is a busi­ness strat­egy, in sup­port of a busi­ness model. You still need to know how to make money, and it doesn’t hap­pen by giv­ing soft­ware away for free. That is to say, you need a busi­ness model like sell­ing sub­scrip­tion or imple­men­ta­tion ser­vices.

The most com­mon com­mer­cial open source busi­ness strat­egy is the “dual-license strat­egy” as demon­strated by MySQL, Alfresco, etc. This par­tic­u­lar busi­ness strat­egy is mostly a go-to-market strat­egy, a way by which the com­mer­cial open source com­pany pen­e­trates cus­tomers and fos­ters the sale. I’ve blogged about this before here and here.

There is more to say, obvi­ously, and I’m work­ing on it. Any thoughts would be appre­ci­ated!

6 thoughts on “Open Source is a Business Strategy not a Business Model

  1. Neeraj Gaur

    Ini­tially around 9 years back when we started work­ing on open source we def­i­nitely think “Open Source” is just a busi­ness strat­egy to work upon but now I strongly feel it con­verge into a full fledge “Busi­ness Model”.
    As far an organ­i­sa­tion is con­cern when we approach ear­lier we can just intro­duce it either on server side or rarely on desk­top, thus the man­age­ment def­i­nitely think twice to adopt Open Source in their strat­egy but now we present it as a Com­plete solu­tion on every domain and some of the fea­tures are even unique, thus man­age­ment adapt it as a Busi­ness Model for bet­ter results, growth, effi­ciency, secu­rity and scal­a­bil­ity.

    This all I am refer­ing from my expe­ri­ence only, I may be bit bias due to my incli­na­tion toward open source but I tried to be very straight always.

  2. Dirk Riehle Post author

    Hi Neeraj, my point is that using open source for “bet­ter results, growth, effi­ciency, secu­rity, scal­a­bil­ity” as you write are all impor­tant points, but they are not a busi­ness model. Maybe I have a too nar­row view of what a busi­ness model is—Wikipedia’s recep­tion of the lit­er­a­ture defines it quite broadly.

    Maybe it is too much of a Sil­i­con Val­ley star­tup per­spec­tive (always wor­ried about money), but a core aspect that should not be miss­ing is how to cre­ate rev­enue, i.e. how to make money. And open source itself doesn’t tell you how to do that. It is a means of cre­at­ing rev­enue, but not an end.

  3. Brian J. Fox

    Hi Dirk — open source is not a means of cre­at­ing rev­enue, any more than closed source is a means of cre­at­ing rev­enue. I agree with your open­ing state­ment, and most likely with your sen­ti­ments, both of which cen­ter around the point that I just made.

    A “busi­ness model” in this con­text is “what do you sell, and what are your mar­gins?” You can sell soft­ware (open source or not), and/or you can sell ser­vices.

    If you sell soft­ware, you can either cre­ate it in-house, or obtain it from an exter­nal source. Once again, this is true whether the soft­ware is open source or not.

    My good friend Gumby cre­ated Cygnus, where the motto was “We make Free Soft­ware afford­able.” In all my years work­ing with open source soft­ware, I have never heard a bet­ter state­ment revolv­ing around FOSS busi­ness strat­egy.

  4. James Dixon

    To me the ques­tion is does not make sense.

    Open source is not a busi­ness strat­egy or a busi­ness model. It is a col­lec­tion of prin­ci­ples which, when applied well, are effec­tive for cre­at­ing robust soft­ware quickly.

    The com­mer­cial open source busi­ness model is a busi­ness model that com­bi­nes open source soft­ware with a go-to-market pro­gram.


  5. Dirk Riehle Post author

    Hi James, my orig­i­nal blog post, and that’s how I read Brian’s com­ment too, is focussed on open source in a busi­ness con­text. In that con­text, it is not a busi­ness model, but rather a strat­egy.

    Beyond the busi­ness con­text, open source of course is much more: a vol­un­teer com­mu­nity, a way to change the world, a new approach to soft­ware devel­op­ment, etc. as I think you are point­ing out too.

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