This is probably the most debated and inquired question I have faced till date. Is business model built on top of Open Source softwares viable? Newcomers to this concept find it difficult to digest that a company can survive by opening up the source code of its product. There are also many learned people who still disagree with this fact. This discussion springs up in many forums, IRC channels and mailing list which sometimes turn into a flamewar.
Normally when we say Open Source and Free, the thing we visualize is “free of cost software”. Free always means Free as in sense of Freedom, otherwise stated. None of the FOSS licenses say that you can’t make money out of your software. There are many companies making highly popular Open Source softwares and are always in the forefront like Red Hat, Novell and Mozilla.
Where is the Money?
Now the question comes, where do you make money? One way is to sell the software(intellectual property), other way is to sell the support. A person can download the source code, strip off the Trademark stuffs like name, logos etc and use it without paying a dime. In this scenario, the second way becomes more viable. The reality is that second way is the most famous source of income of these companies(say XYZ). If you have a reputed company(say ABC), you won’t hesitate to pay extra fees for support to keep your business running on the track. You may even consider extending the support if the first support period expires. Sensible companies like ABC care more for support rather than cost of the software they buy. Even if the software is awesome and support turns out to be crap, you are in a quicksand, more you try to come out, more you go in. If the support is excellent, then you would always be assisted by the tech support even if the product is not upto the mark.
People quote that who would anyone give away their hard work for free? I ask, why reinventing the wheel? No body forces you to open the source code, its all upto you to act on their recommendations. If one opens up the source code, people may be able to read the code, find new bugs, performance glitches and even make available the patches. This is how FOSS world works. You can even sell the patches version of your software. It all about sharing and caring.
Let’s have a look how Mozilla makes profit. It gives away its product for free, AFAIK all its products are free. What is its source of income? Check out the search bar of firefox, you would find that the default search engine is set to Google. This is a major traffic source for Google because who cares to change to default search engine? At aleast not me! Google pays a hefty amount for just setting the default search engine, what a trick! Mozilla is all submerged with $$$ these days and its revenue is increasing day by day.
Many companies give away their products for free and charge for support. One of the best example is MySQL AB which was acquired by Sun rcently. MySQL is dual licensed. If anyone wants to use it, they can download the community server and even use it for commercial purposes. No technical support is attached with it. The other is the Enterprise Server which comes with full technical support and even extra propriotery tools if you wish to buy.
This is the time of global recession. Companies are handing pink slips to many of its regular employees since they don’t have enough money to sustain. A big amount of their budget goes in buying licenses and updates to already highly priced softwares. The money saved by moving to Free (as in Beer and Freedom) softwares can be enormous. The initial cost can be even more due to training the employees, but its the long run which matters the most. Such transition can be taken during merrier times which makes a firm ready for the bad days.
If one wants to start a new business, then highly charged proprietary softwares can be a main hurdle in the beginning itself. Investing a heavy capital can be a deterrent factor for smaller players into the field. If such new firms use Free Software then the initial capital is greatly reduced. More the number of players in market means more competition and its always the customers who benefit from it.
I think six paragraphs of explanation is enough to explain this concept, if one still can’t understand, the best place is a flamewar on IRC or mailing lists.