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.

    Reply
  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.

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  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.

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  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.

    James

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  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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