Speaker trung huynh opensource business model

Business models

of open source software and free software

Trung HuynhSenior Product Manager at Project LANA

By 2011, 80% of all commercial software will contain open source code.

Open source impossible to avoid, Gartner says, Network World

Executive Summary• “Free software” means software that respects users' freedom

and community.• “Open source” refers to a program in which the source code

is available to the general public for use and/or modification from its original design free of charge

• Open Source business model:– The service model– The distribution with value added model– The double license model– The mutualization model

• These business models are profitable and sustainable over time

Who Am I ?

• Fontys Universities of Applied Sciences• Lead Developer @ Minus3 Amsterdam• Founder @ VNSolutions• CTO @ Purple Asia Digital• Sr.Product Manager @ Project LANA

The Free Software• Free Software Foundation

(FSF) by Richard Stallmand 1985

• Must respect four freedoms:– The freedom to launch

software for any use– The freedom to study the

way software works and thus to freely access its source code

– The freedom to redistribute and sell copies

– The freedom to enhance software and publish the results

Open Source Software

• Free Distribution

• Source Code

• Integrity of Author’s Code

• No Discrimination

• Distribution of License

• Not specific to a product

• Not restrict other

software

• Technology Neutral

What’s the difference between free software and open source software?• Who’s freedom?• What freedom?

Tim-Oreilly and Richard-Stallman

FREE SOFTWARE• Freedom of the code• Source code will ALWAYS be

available and can never be restricted.

OPEN SOURCE• Freedom of the developer• Code CAN be included in

proprietary works under certain conditions.

Why could this matter to you?

• Many developers don’t read licenses.• Open source developers need to be aware of

the licenses they use.• The right license depends on the code and the

community.• Licenses encourage certain behaviors,

discourage others.

OSI Approved licenses

• 68 Approved Licenses• To name the few :– Apache License, BSD, MIT– LGPL, Mozilla (MPL), Eclipse (EPL/CPL)– GPL …

3 kinds of LicensesThey require that any modified software and any program including this software in a derived product must be placed under the same licenseExamples:

• General Public License (GPL)• Mozilla Public License (MPL)

They contain a clause allowing users to mix the software with proprietary software and place it under a proprietary software and place it under a proprietary license, on the condition that the free module remains under a free licenseExamples

• Lesser General Public License (LGPL)• Berkeley Software Distribution (BSD)• License MIT

Anyone can transform a source code under this license without acknowledging its original developerExamples:

• Xfree86• X Consortium• License Apache

The service model• Simple service model:

– commercialization of services that have no link to a specific product

– A variant of this model : Application Service Provider model

Growth levers :–Extending the number of services offered–Specializing the services offered to develop a competitive advantage

The service model• Indirect monetization model:

– commercialization of services associated to software developed or packaged internally

Growth levers :•Increase market size•Maximum number of users

Examples

– Zend is the leading provider of software and services for developing, deploying and managing business-critical applications in PHP.

– Zend Offered : • Zend PHP Server – Zend Framework =>

Enterprise version• Zend Training and Certification

The value added distribution

Software distributer: packages the different source codes

CustomersCommunity of programmers

Subscription to the more advanced version

• Selling a standard version of an existing product.

• The “sale” is generally made as a yearly subscription to the product and a set of attached services

Free distribution of the community versionObjective-expanding the community

Programmers

Programmers

Programmers

Bugs singaling, patch development, proposal for improvement

Example

Revenue $909.3 million (increase 22%) in 2011Red Hat offers two versions:•The Enterprise version which is tested and whose interoperability is warranted

– Red Hat Enterprise Linux, or RHEL, which allows only two users to have RHEL simultaneousl

– RHEL Advanced Platform, which allows an unlimited number of user to have it at the same time

• The “community” version (Fedora)• Even though Fedora does not provide any revenue, Red Hat

is careful not to neglect its community version and participates actively in its animation

The double license model

– An open source license for the standard product

– A license that is more protected, which comes with a guarantee and is generally linked to a product that offers more functionalities

The double license model• The open source license has to be proliferate copylefted.

• The commercial version must be under proprietary license

• This solution allows the combination of the free licenses’ advantages => Community

Example

• Magento offers 2 versions :– The community version, which contains

85% of the commercial version => Open Software License (OSL 3.0)

– The commercial version:» Enterprise : $14,420 / year» Enterprise Premium : $49,990 / year

=> Magento Enterprise Edition License

• Also offered–Consulting–Training

It is best for open source companies to work on an already established market

• Working on an established market ensures:– That consumers are educated. Potential customers have precisely identified their

needs, which makes the monetization of the serivce sold by the open source company easier

– That a benchmark exists. Open source companies are plagued by confidence issues from users, which tend to decrease if one or more proprietary software have already proven their efficiency. The existence of a benchmark also highlights the pros of an open source product (price, quality of service, etc.)

• Open source’s main successes emerged on a market that was under the sway of a proprietary software seller:

1. Database: MySQL et PostgreSQL vs. Oracle, IBM and Microsoft• ERP: Compiere vs. Oracle and SAP• CRM: SugarCRM et Compiere, vs. Siebel o Oracle• OS: Red Hat vs. Microsoft

The mutualization model• The mutualization model consists in the development of a relatively

simple version of the product and the subsequent development of modules on demand

Example • Concrete5 entered the CMS scene in 2008, and since then has been

making solid headway to becoming one of the premier go-to web publishing platforms available today.

• C5 offers :– Free version of CMS– Addition feautures are developed upon request– Certain features will be sold on Marketplace

Thank you