Business Models of

Open Source Software

Nov. 2017

Prof. Kim, Jong Bae(Ph.D.)

Professor

Name: Kim Jong Bae

Department: Graduate School of Software, Soongsil University

E-mail: kjb123@ssu.ac.kr

<Books>

- Open Source 2.0(2010)- Open Source Software: A Survey from 10,000 Feet(2013, Translation Book)- The Definitive ANTLR4 Reference(2014, Translation Book)- Agile Technologies in Open Source Development(2015, Translation Book)- Software Development: An Open Source Approach(2016, Translation Book)- An Introduction to R for Spatial Analsis & Mapping(2016, Translation Book)- The Business Model for Open Source Software(2017)

Value? Use Vs. Mystical

Use Value: "The utility of a thing makes it a use value.... Use-values become a reality only by use or consumption."

Use Value Vs. Exchange(Sale) Value

Exchange Value: a relation, "as the proportion in which values in use of one sort are exchanged for those of another sort," an equation of commensurability... and then some.

Value ≠ Price

profit

manufacturer

consumer

extra value

A product in the eyes of the manufacturer

A product in the eyes of the consumer

cost

s

price

price

valu

e

Value & Price

"Price is what you pay. Value is what you get." -Warren Buffett

Market share for top Web servers across all domains according to Netcraft (http://www.netcraft.com)

Evolution of Open Source Software

Linux

OS & Web Server

• OS: FreeBSDLinux – RedHat,

SuSE• WS: Apache

Linux Linux

MySQL

Tomcat Servlet EngineJboss J2EE Container

Apache HTTP Server

MySQL/PostgreSQL

Tomcat Servlet EngineJboss J2EE Container

SASH

Apache HTTP ServerSta

ck M

anagem

ent

Secu

rity T

ool

Linux

MySQL/PostgreSQL

Tomcat Servlet EngineJboss J2EE Container

SASH

Apache HTTP Server

Sta

ck M

anagem

ent

Secu

rity T

ool

XenSecure

BI

BPM

CM

S

CRM

LD

AP

Middleware

• WAS: JBOSS, Jonas, Geronimo• DB: MySQL, PostGres, Cloudscape, Ingres,

SAPdb, BerkeleyDB• Development Tool: Eclipse• Stack Mgmt Tools: OpenPKG, Integration• SASH: Spring, Axis, Struts, Hibernate

Applications

• BI: Pentaho• BPM: JBPM• CMS: Alfresco• LDAP: OpenLDAP• ERP: Compiere• CRM: SugarCRM, Compiere• Healthcare: MedSphere• Management: Nagio, OpenNMS

User base and community

Market placement and competition

Revenue stream and financials

• User base development

• Information about market

• Innovation dissemination

• Productivity increase• Access to customer

needs• External developers

use• Access to new skills

and Practices

• Approach restricted markets

• Increase reputation• Attack competitors• Preempt

development of closed standards

• Embrace underdog • mentality• Escape from vendor

lock-in

• Enable new services• Increase demand for

complementary services

• Reduce development costs

• Lower break-even points

• Introduce new revenue Streams

Business and Strategic Advantages of Moving into OSS

Actors of OSS Project Communities

Typical OSS Business Models & OSS Ecosystem Players by Stephanos Androutsellis-Theotokis

Business Opportunities with Software(1/2)

requirements

gathering

purchas

e & acq

uisition

develop

ment

installati

on

integrati

ontest training

mainten

ance

migratio

n

design

"Process of technology adoption"

identification of solutions

Business Opportunities with Software(2/2)

SW1 SW2 SW3 … SWn

Development X X

(Sales &) Installation X X

Integration X X

Certification X X

Training X X

Maintenance & support X X

Migration X X

SW1 SW2 SW3 … SWn

Development

(Sales &) Installation

Integration

Certification

Training X X X … X

Maintenance & support X X X … X

Migration

"Vertical specialisationor

Horizontal specialisation"

Business Models of Open Source Software

OSS biz.

Models

Development

Pure Product Models

Use Value AcquisitionCost Sharing

Risk Sharing

Distributed Sale

Mixed Models

Dual Licensing

OSS-Proprietary

Accessories

Provision of Services

Platform Distribution

Consulting/SI

Training/Support &

Maintenance

Development-Service

Hybrid

OSS-Specialist

OSS-SaaS

Ancillary Markets

(H/W)

Other Ancillary

Markets

Community & De

velopment

Legal Certification

Sale of Books

Merchandising

Advertising

- Apach

- Cisco

Funambol, MySQL, Sleepycat DB, TrollTech

Sendmail, Hyperic, Sourcefire, Zimbra

SourceLabs, Spikesource, Red Hat

IBM , Ayamon, Enomaly, Navica

Easter-eggs

Alfresco, Compiere, vTiger, Openbravo

Collabnet, SugarCRM, SocialText, JasperSoft

SourceForge, CollabNet

Black Duck, Palamida

O'Reilly

ThinkGeek

Mozila, Digium

IBM, Digium, Avanzada7, Chumby

Prerequisites, Deciding Factors and Concerns

Evaluate the Market for the Target Product

Determine Development Community Interest

Decide what Parts of the Product to Open-Source

Balance Short Term Switching Costs

Consider New Processes, Infrastructure and Environment

Ensure the Correct Mentality is Present

Sanitize Code

Select Appropriate Business Model

Select Appropriate License

Decide on Marketing Approach

Conclusions

Q & A

THANK YOU!