Tuesday, February 16, 2010

Open Source Business Model - Part I

Open Source Software is the most disruptive business model in tech industry in the last decade. Still there are lot of myths, confusion, skepticism around it among developers,enterprises, software companies, channel partners etc. That includes me too. This is true especially when we see an Open source company clocking double digit growth in recession (Redhat) whereas another behemoth opensource company fails(Sun).So in an attempt to better understand opensource I am planning a series of blogs profiling opensource business model, its strategies, weaknesses, commercial open source companies, community opensource projects in the coming days. This blog is part 1 of the series. Here I introduce what is publicly understood agreed definition of Closed Source and OpenSource business model

Any computer software that is available with its source code in public is termed Open Source software. Where as proprietary or closed source software doesnt come with its code and the developer/company who came up with the software usually retains the source code and doesnot share it with the public.

The closed source model has been greatly successful for decades and is still the by and large the main business model in software industry. The general practice is, any company which creates the software, charges a premium for buying/using it. This doesnot include support,training, upgrades. It might charge for the additional services but the software as such comes with a price tag and without source code. Any patch or bug fixes will be done by the company that created the software because the source code is not shared.

Whereas a typical Open Source company doesnt usually charge for the product and it gives it free. So what is the revenue source for the company...? It charges for the documentation, bug fixes, and other attached services like system integration.

In the upcoming blog posts I will further deep dive into the OpenSource Business model which covers the licenses, community based development, revenue stream, Opensource Enterprises, etc.

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