Here is an outline of a business model (with only minor ranting):
Software is written by professionals working at a company and it is
totally free. If it is good and it fills a need, one can hope for it to get
picked up for inclusion in the various distributions.
Then manuals are written and if somebody wants a shrink wrapped copy with a CD
and manual, they can purchase it from a store, catalog, website, or whatever
means they like, just like they do with distros.
The company sells service plans to any end users that want it. Some
businesses require the availability of the service support contract as
a requirement to approving the usage of the software.
The company has to get books written and published to coincide with the
releases of the software. This in itself could be lucrative for the company if
the software is long lived and it goes through several major releases, revisions
and updates over the years.
The company also writes course-ware for the various training companies to
use in their classes. Training and certification is also something that can be
lucrative for the company. The same can be said for running their own training
seminars and giving lectures.
If the company can leverage its sales and marketing organization to best
take advantage of these different opportunities, then they should have the
revenue required to retain the services of the engineers to maintain the
code-base and perform whatever fixes are required, as well as fulfilling
customer demand for new features and capabilities. If they are successful they
could continually add new projects to their schedule. If the company that
originates the products produces quality software and is responsive to their
customer base, it should be successful and retain the position as the definitive
authority on whatever projects it puts forth.
There are companies that are taking advantage of these and other revenue
opportunities all the time: Microsoft, IBM, Oracle, Apple, and Sun just to name
a few. Any company that is going to try to just be a software development house
developing free software needs to explore every revenue opportunity that the
market presents. A key point that everybody seems to understand is that it is
imperative that a company that creates free software has to achieve customer
satisfaction and profitability or else the marketplace will eject them. We just
need to see more success stories about companies that are using free software
solutions internally, and offering free software solutions to their customers
not for idealistic reasons, but because it makes the most appropriate business
sense.
Hey, it could happen
-Phil
On Tue, 29 May 2001, Brad Maxwell wrote:
> Jeffry Smith said:
>
>
> Repeat after me:
> Open Source is a Software Development Model, not a Business Model
> Open Source is a Software Development Model, not a Business Model
> Open Source is a Software Development Model, not a Business Model
> . ..
>
>
> This is the crux of the matter. Jeffry is correct. Do not mistake the SDM
> with the BM. It is a proven fact that there is an abundant of volunteer
> coders out there who will freely provide between 50% and 90% of any software
> solution that a company needs. That leaves between 10% and 50% of the work
> available for the rest of us money-hungry business driven PHB's to squabble
> over. The major difference between making money solely on proprietary
> software vs soley Open source or a combination Open Source / Free Software
> is the fact that proprietary solutions do not leverage this large
> development resource to lower their costs of delivery. The vast majority of
> software that business depend upon do facilitate their business are
> internally developed single use monolithic systems. These systems were
> developed for use not for sale. The enterprises that developed them could
> care less about their saleability and are solely focused on their costs and
> thier usability. Enterprises often spend months deploying and tuning an
> application that will run for years. They don't care too much about the
> difficulty of configuring the system as long as it is robust and reliable
> after deployment. They are much more concerned about the functionality than
> the user experience also. If the rank & file can be taught how to open a
> support case / account / trouble ticket / sales request / ... in the
> in-house system and the item will be tracked and routed correctly and result
> in efficiencys in the operation of the business then that is that. If the
> rank & file don't like the interface because it has a command-line feel and
> requires obscure key combinations to invoke behavior then they will be given
> a cheat sheet to paste to their terminal. If that doesn't suffice then they
> will be invited to work elsewhere.
>
> The business of business is getting something done. If you have a business
> model that facilitates this for other organizations then you have a service
> business. If you have a business model that sells something that you got
> done then you are in a product business. The only product based business
> model in the software industry is closed source because by definition if you
> give away your product then you don't make money on it. So that leaves the
> Service business model. The service business model for software depends
> upon delivering a business solution to the customer not an inert piece of
> code (compiled or not).
>
> The service business model makes it's money by charging a satisfied customer
> for an increase in the efficiency of that customers business as a result of
> the service provided. If I service your car and it runs better then you pay
> me. If I serviced it with oil and parts that I got for free then my margin
> is higher. The fact that I did or didn't pay for the oil and parts that I
> used to service your car is irrelivent to you and your car's performance.
> (provided I obtained them legally)
>
> From the customers stand point the service required is or can be defined in
> terms of expected/desired performance improvement. The service technician
> can source thier parts and oil wherever makes for a better margin. This
> reasoning makes a strong argument for the Free Software / Open Source
> software base. Will there come a time when this volunteer army stops
> producing? Perhaps. So-What. If you have built a service business on
> these solutions and they are no-longer being improved by those communities
> you will be faced with two options. Increase your costs to your customers
> to include the outrageous lisencing of the proprietary solutions. Or
> increase you costs to your customers to include staffing up sufficiently to
> support and improve the open solutions. If you haven't been eating all of
> your wider margin in the mean time you should be able to stay open on both
> fronts. The point is focus on providing the value the customer wants to
> buy. The business solution to the business problem. People don't want
> email they want to send messages to each other asynchronously with store &
> forward capability with rich multi-media content. If that happens to be
> something that email can do - great. If not then please write something or
> find something that will and you will be handsomely paid. If that need were
> provided by some genetically engineered Speed-of-light pigeon with a
> holographic printer strapped to it's back that would be just fine. The work
> is then up to the sales persons.
>
>
>
> -----Original Message-----
> From: Jeffry Smith [mailto:[EMAIL PROTECTED]]
> Sent: Saturday, May 26, 2001 10:11 AM
> To: [EMAIL PROTECTED]
> Subject: Re: Business Plans
>
>
> Repeat after me:
> Open Source is a Software Development Model, not a Business Model
> Open Source is a Software Development Model, not a Business Model
> Open Source is a Software Development Model, not a Business Model
> . ..
>
> Business models include selling products and services. Software
> Development Models (SDMS) are about how you build SW. While the
> development model may change how you can apply the business model, it is
> NOT a business model. Structured Development is NOT a business model.
> Code Review is NOT a business model. Extreme Programming is NOT a
> business model. Open Source is NOT a business model.
>
> This is getting to be a hot button with me, because I continue to see
> these "Open Source Businesses are failing, Open Source doesn't work"
> stories. Guess what - 80% of ALL new businesses fail! Numerous
> proprietary SW companies have also recently failed. Service companies
> have failed. HW manufacturers have failed. Does that mean the assembly
> line is a failed business model?
>
> Companies that figure out how to build businesses in the service and
> product industries USING Open Source Development will succeed. Because
> they will recognize that the ultimate in business is MEETING YOUR
> CUSTOMER'S NEEDS. And they will meet their customer needs
> faster/better/cheaper with Open Source. Period.
>
>
> jeff
> "Kenneth E. Lussier" opined:
> >All,
> >
> >I was just reading this article on Kero5hin:
> >http://www.kuro5hin.org/?op=displaystory;sid=2001/5/17/63515/2438 . It
> >is just someone thinking about open sourse(Linux, specifically) based
> >business models and why they cannot work. It isn't the typical rant
> >about OSS not being mature/stable/secure enough. The comments that
> >follow the article are fairly insightful, too.
> >
>
>
>
> ----------------------------------------------------------------------------
> --
> thought for the day: Happiness isn't having what you want, it's wanting
> what you have.
>
>
>
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