Open source is always perceived as the distribution of the free software and its source code (so that the receiving party will be able to improve or modify it). The report includes the concept of various Revenue models used by open source vendors and identify challenge and issues they are facing. In this report I have tried to answer to few questions like: Indentifying the current revenue channels, and factor which differentiate different open source vendors; Analysis of trends in open source revenue models; Identifying the critical success factors for choosing an open source business strategy; Why a company might adopt an open-source model; How open-source licensing works; What business models might be usable for commercial open-source products and what special considerations apply to commercial products released as open source.
1. A STUDY ON REVENUE
MODEL OF
OPEN SOURCE
By
07030244004
Kshitiz Goel
SDM – 07-09
2. AGENDA
Objective
Methodology
Introduction
Open source License
Revenue Models
Key Elements of Revenue Model
Model vs Factor Matrix
Findings, Recommendations & Conclusion
3. OBJECTIVE
To
identify various revenue streams for
commercial open source products.
To identify the various critical success factors
for choosing an open source business model.
5. INTRODUCTION
Software Software Software Free
Projects Publishing Subscription software
Product Customer Product Family Parameterize Core
Focus Project d Product Product
Copyright Licensed or Licensed with Licensed with Licensed
Transferred Restriction Restriction with Open
source
License
Income One time License Fee Service Fee Indirect
project fee and from
Application Services
Rent etc.
8. NON GPL
Microsoft, the world's largest software maker, has used source code
from a leading open-source operating system [Berkeley System
Distribution or BSD] in its Windows 2000 and XP product.
10. DUAL LICENSING
One Product two License
one for free distribution and free use
another for proprietary use.
Copyright and control of the core product development is
held in one hand, the original developer.
When to use: You are a market leader
Why client adopt: The client really likes the open-source
product and needs it for commercial use.
11. CASE: MYSQL
Product SQL Database
Free License GPL
Users Approx. 4 Million Users
Customers Around 0.1 % of Users
Main Income License (>50%), brand, Services
Development Inhouse
Marketing Direct
Technology Standardized (SQL)
“Our software is 100% GPL, and if yours too is 100% GPL (or OSI compliant),
then you never have to pay us for the licences. In all other instances, you are
better served by our commercial licence.” (MySQL, 2003)
12. DISTRIBUTION AND SERVICE MODEL
Sell support/customization and other Professional
services.
Training
Consulting
Custom Development
Post sales Support
Strategy requires a large base of clients that want
to use the product.
Controlled by Value Driven Pricing & competition
13. CASE: RED HAT LINUX
Providing the product on CD rather as an online
download.
One survey of 113,794 Linux users indicated that 37% of
respondents preferred to obtain LINUX in CD.
Providing support services to enterprise customers -
Enterprises are willing to pay for accountability.
Support for installation, answering technical questions
and training employees to use the product.
Upgrade Services - Enterprises can now enter into long-
term agreements with distributors to ensure that they get
the latest upgrade.
Provide onsite assistance
14. THE ECOSYSTEM STRATEGY
Company creates a network of partners or
preferred independent software vendors (ISVs).
Software Franchising
Brand Licensing
Support Sellers
Red Hat & Oracle is one of their major partners.
15. DUAL PRODUCT MODEL
Penetrate the market by releasing an open-source
product & sell a different product .
Example: Eclipse and its non open source plug-ins
16. THE WEB-BASED ADVERTISING MODEL
Software generate revenue through
advertisements.
Firefox has a Google search bar built into the web
browser.
Mozilla Foundation raked in a whopping $75 million
in revenues in 2007 & 85 % of from google.
18. MODEL VS. FACTOR MATRIX
Model Product Distribution Services and Community and
Development Model Implementati Partners
on
Dual Licensing Uniform Core Republisher / Complete set Does not Interfere
Product OEM Model of services
Service Base Various Services Reseller or Agent User required Help a Lot
Model services like
support &
integration
Web-based Online Services Direct Contact Deployment Play important
Advertising model and Product with Customer service Role
Dual product Product Family Distributor / Deployment & Not Much
model Dealer Model integration
service
19. HYBRID MODEL
Change the availability of source code
Right to view (i.e., to see the code in the first place and possess a copy
of it)
Right to use (i.e., to compile the source into executable form and run the
resulting application)
Right to modify (i.e., to make changes to the source code)
Right to redistribute (i.e., to give the source code to a third party,
potentially in either modified or unmodified form)
Change the treatment of different users
License with Different term for Commercial & Non Commercial Users
Change the treatment of different types of use
Source license could allow personal use or internal use within an
organization at low cost or no cost.
Prohibit or require higher license fees for use of the software to provide a
service to other users.
20. FINDING
Most of the open source vendors are there to do
business and earn profits.
The majority of open source vendors utilize some form of
commercial licensing to distribute, or generate revenue
from, open source software.
Most vendors depend on direct sales staff to bring in the
largest proportion of revenue.
Ad hoc support services are used by nearly 70% of the
vendors assessed, but represent the primary revenue
stream for fewer than 8% of open-source-related
vendors.
The license used for an open source project (GPL or Non
GPL) has a strong influence on development, vendor
licensing and revenue-generation strategies.
21. RECOMMENDATIONS
Hybrid revenue model which combines a number of
different revenue streams, can be used effectively
to generate maximum profits.
Vendors must choose complementary
development, licensing and revenue strategies in
order to maximize revenue-generation
opportunities.
He does not want to breach the open-source license and is willing to pay for a proprietary license.
Product must not be simple to use or else users will not need any professional services.
What this means is that the two companies work closely to insure that their software plays well together.Together, Sun and SAP are going to drive business solutions across the entirety of our SPARC and x86/Opteron platform customers. This is really the final brick in the wall for us with partners - Oracle, Veritas, BEA, CA, EMC, Sybase, Siebel and now SAP. That’s a fantastic list (and there are hundreds of others who’ve also signed on). It takes an ecosystem to raise an OS, and volume to attract partners.