In 2004 I noted that Spikesource looked like a viable business model for open source development. The company now has a certified solutions program for 13 different open source applications. “We have a few dozen paying customers today, which is in line with our business plan,” Halsey [VP] said. “It’s all about getting mass penetration… Read more »
Search results for “open source business model”
A while back, on my previous blog, I said that: I believe the next great business model for an elearning entrepreneur is to provide high quality installation and support services for a select group of open source learning systems. Your customers will soon realize that you are not trying to sell them the next upgrade to get more cash, because the software is free. You will be selling your knowledge, experience, and customer service. Many IT departments would be more apt to use open source if they knew that it was strongly supported. Also, there is a lot less conflict of interest when you remove the vendor from the ongoing support.
I just came across a new business venture that has been 16 months in development, Spike Source. This company is positioned to be the Underwriter Laboratories (UL) of Open Source.
If you want more details on the business model, download the one hour interview on the Gillmor Gang with CEO Kim Polese. It’s worth your time. I knew that this model would soon be taken by someone, but what I found interesting in the interview is that there is room for many more of these companies. I would also wager that there is room for companies using this business model in the learning market. So if you’re looking for a new business model, check this one out.
In preparation for the MOST Workshop in Moncton tomorrow, I thought I’d provide some links to business models that are being used with open source software (OSS).
At the KMDI conference this Summer, Matt Asay described three business models for OSS (Commodity, Brand & Service, Pragmatic) .
John Koenig, in the IT Manager’s Journal discusses seven business strategies for OSS:
- The Optimization Strategy (where one layer of a software stack is "modular and conformable," allowing adjacent software layers to be "optimized.")
- The Dual License Strategy (offering free use of software with some limitations, or alternatively offering for a fee commercial distribution rights and a larger set of features.)
- The Consulting Strategy (reduce or remove licensing costs and sell services)
- The Subscription Strategy (selling OSS maintenance on a yearly basis)
- The Patronage Strategy (where original equipment manufacturers support OSS in order to create an environment for other products and services)
- The Hosted Strategy (using OSS to provide your services, e.g. Google)
- The Embedded Strategy (using OSS in hardware to increase market acceptance)
The Open Source Initiative states that there are "at least four known business models for making money with open source":
- Support Sellers (otherwise known as "Give Away the Recipe, Open A Restaurant"): In this model, you (effectively) give away the software product, but sell distribution, branding, and after-sale service.
- Loss Leader: In this model, you give away open-source as a loss-leader and market positioner for closed software.
- Widget Frosting: In this model, a hardware company (for which software is a necessary adjunct but strictly a cost rather than profit center) goes open-source in order to get better drivers and interface tools cheaper.
- Accessorizing: Selling accessories ?ï¿½ï¿½Ç¨ï¿½ï¿½ï¿½ books, compatible hardware, complete systems with open-source software pre-installed.
Frank Hecker, has added to these four models with:
- "Brand Licensing," in which a company charges other companies for the right to use its brand names and trademarks in creating derivative products.
- "Sell It, Free It," where a company’s software products start out their product life cycle as traditional commercial products and then are continually converted to open-source products when appropriate.
- "Software Franchising," a combination of several of the preceding models (in particular "Brand Licensing" and "Support Sellers") in which a company authorizes others to use its brand names and trademarks in creating associated organizations doing custom software development in particular geographic areas or vertical markets, and supplies franchises with training and related services in exchange for franchise fees of some sort.
Much of what is written about OSS is from the perspective of those who develop and support the software. I think that a greater potential, especially for small businesses, is to use OSS in order to significantly reduce costs. With Mancomm, we reduced costs for a pilot project by using open source. The client saved about $1M over previous estimates. The same approach is used by another of my partners, PSI, to keep costs down and focus on developing the right models before investing in any new technology. In each case, the client does not incur license fees and can even decide not to implement after a pilot project and not worry about getting a return on the license fees. OSS is lower risk, especially for test and pilot projects, thereby encouraging innovation.
From Scott Leslie; Dokeos is a private Belgian company using the open source Claroline LMS. This company offers training, services and hosting, based on an open source system. I will be interested to see if this business and its model survive. I think that open source in a commercial education venture is not only viable, but that it’s a stronger model. With open source, the vendor can’t hide the system’s weaknesses, but will work with clients to improve the system.
I had previously written about one of my projects last year and discussed this kind of business model.
Oct 2003: I was evaluating LCMS’s for a client and it had been a few years since I’d done this. I saw how much the market had changed. I had conducted some evaluations in 1999 and 2000 for Industry Canada, while I was at Mount Allison University’s Centre for Learning Technologies. The Centre no longer exists, but one of our reports is still available on theTeleEducationNewBrunswick site. We also helped the Centre for Curriculum and Technology Transfer develop the "landonline" LMS evaluation site, which has since become Edutools.
Three years ago there were many choices, or so it seemed. Now the commercial vendors are fewer, and there are even less in the academic market. There are a lot of Open Source systems available, but my clients were uneasy about these, and I understand why. It’s hard to sell your board of directors on technology that has been "cooked-up" by a worldwide network of part-timers. They wanted some kind of insurance.
I believe the next great business model for an elearning entrepreneur is to provide high quality installation and support services for a select group of open source learning systems. Your customers will soon realize that you are not trying to sell them the next upgrade to get more cash, because the software is free. You will be selling your knowledge, experience, and customer service. Many IT departments would be more apt to use open source if they knew that it was strongly supported. Also, there is a lot less conflict of interest when you remove the vendor from the ongoing support.
Having lived through the dot com era, I believe that the marketplace is ready for this new business model.
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