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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