Where the Value Lies in Open Source Code

ZDNet’s Dana Blakehorn posted an interesting article in ZDNet where he talks about ways companies can monetize open source code.

In a recent Slashdot article he cited, an executive of an open source company wonders if a business model around open source is an essentially flawed model as other open source projects produce free versions of the same extensions and utilities that they offer around their code.

In a recent blog post by Open Source software executive Steve Goodman of PacketTrap Networks, he states that model, essentially a “Freemium” or premium addons on top of free software, is essentially flawed, as “the interest of a commercial vendor is opposite to that of an open source project.” It is better he states, that project management and development be left to the open source community and to have his firm just concentrate on developing a commercial platform that works with the code that community delivers.

Now this was refuted by Acquia’s and Drupal founder Dries Butaert in a post, he says that his own experience points to the fact that the Freemium model works. He admits that “getting free users to convert to paying customers is hard.” Conversion rates of less than 1% are not uncommon. Free for many people is often “good enough” and only a few people choose to pay for additional features and services.

But MySQL’s Marten Mickos states that while there will always be people willing to spend time and save on money to learn and deploy open source applications themselves, there is still a market out there for companies where money costs less than time or immediate need–and will gladly pay for premium features or services.

Tim O’Reilly has a refreshing take as maybe companies should not be focused so much on monetizing the code itself–but identifying and monetizing the value it delivers. Going back to Dana Blakehorn, it seems he agrees as he outlines other ways open source companies can make money. They can provide:

  1. A regular update service and security check.
  2. Integration services, tieing your software into larger systems.
  3. Selling what the software does as a service.
  4. Teaching people how to use, or extend the software.
  5. Putting your software into a piece of hardware and selling it.

At ComUnion ERP, we are looking at these perspectives with interest as we get ready to launch. While ComUnion is released and will continue to be released as open source code, we are upfront in our desire to be able to monetize somehow the effort put into the project. In this regard we are open and have no plans as of yet. I wonder if anyone reading has any comments or suggestions?

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