Open Source IS a business model

From the “cool titles bring $$’s” files:

Analyst group 451 Group has a non-public report out titled, “Open Source is Not a Business Model.” To put my views front and center – this report title is clearly an attempt to generate interest with what some might think of as a controversial view. I have somewhat different views than 451.

In a blog post by 451 Group analyst Matt Asslett he wrote that:

Open source is a business tactic, not a business model.
Open source is not a market in and of itself, nor is it a vertical
segment of the market. Open source is a software development and/or
distribution model that is enabled by a licensing tactic.
There is very little money being made out of open source software that
doesn’t involve proprietary software and services.

Bottom line in my view is that open source IS a licensing approach and it IS a development methodology. It’s also used as a marketing strategy sometimes too. That said many millions have been made from open source technologies – like Linux. Mozilla’s Firefox open source browser generates more than $50 million a year for Mozilla. I could go on, but you get the point.

There is also a move by some (governments and others) to specify open source software as part of the procurement process. I’d say that qualifies as a category.

Saying that open source is not a business model is sort of like saying that search is not a business model. Search itself (Google or otherwise) is of course a vehicle on which a business model can be built (in Google’s case a very good one). The same is true for open source – it is the medium/methodology – on top of which money is made.

The fact that many open source vendors have a dual-licensing model should not be seen as a failure of open source to be a business model in and of itself which is kinda/sorta what 451 Group is implying. Every time I’ve ever spoken to any open source vendor with a dual license strategy the reason why they have one always has to do with choice and policies at the end user enterprises. Open source can co-habitate with proprietary solutions and the fact that the two can co-exist is a sign of strength not weakness and doesn’t mean that open source is not the basis for a business model.

Understanding how to make money from open source software is an important thing and that’s what I see as the key issue that needs to be understood. Understanding that it’s a balance of open/closed and free/paid is critical to success. But that’s nothing new is it? Hasn’t Red Hat been grappling with that issue since its creation? Isn’t Red Hat an Open Source vendor?

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