Transcript presentation

Open Source Software
Business Models
-Michael Brittingham
-Dan McMillan
-Kevin Haselwander
Open Source Software
“Software that is freely available to anyone
in a form that can be easily modified”
-Stair and Reynolds
Some examples are
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Linux (OSS operating system; compare with
Windows)
Mozilla (OSS Web browser; compare with
Internet Explorer)
R (OSS statistical computing and graphics
program; compare with Statgraphics)
Issues
Reasons to Switch to Open Source Software
How are companies making money off software
that is free?
Will these models last?
How do these models interact with proprietary
software companies such as Microsoft?
Why Switch to OSS?
Easier to avoid “vendor churn”
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This happens when companies are forced to
buy the newer versions of proprietary
software (Windows ’98 to 2000 to XP)
Open source is continually improving on the
open market; any new program that is written
can be downloaded and added to your current
programs
Example: Sabre Holdings currently making a
switch to MySQL
Why Switch to OSS?
The switch is not only made because of low
cost.
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Companies are not willing to sacrifice low cost for an
inferior product.
"Cost savings weren't really a factor in our decision to
go open source, what got us into it was that it was
simply the best technology open to us."
-John Novak, CIO La Quinta Inns
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"[While] cost is a huge driver for our decision-making
process, we cannot risk choosing an inferior solution
to save money. We couldn't even consider open
source if it weren't at par with—or in some cases
better than—commercial alternatives."
-John Alberg, co-founder of Employease
Open Source Business Models
Traditional
 Support Sellers
 Loss Leaders
 Widget Frosting
 Accessorizing
New
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Service Enabler
Brand Licensing
Software Franchising
Sell it, Free it
Traditional: Support Sellers
Companies that package together open
source software, and make their money
from either selling the software, and/or
charging to service the software
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Red Hat is the leader in this industry
Traditional: Loss Leaders
Company that generally gives away
software for free and makes money from
selling additional software
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Example: Adobe
Example: Fedora
Traditional: Widget Frosting
Company that sells hardware and
packages it together with open source
software
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Silicone Graphics: Supports and ships Samba
VA Linux
Traditional: Accessorizing
Company that sells books, compatible
hardware, t-shirts, bumper stickers, coffee
mugs, dolls, etc.
Example: O’Reilly sells more of the
compatible hardware, manuals, software
Open Source Business Models
Traditional
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Support Sellers
Loss Leaders
Widget Frosting
Accessorizing
New
 Service Enabler
 Brand
Licensing
 Software
Franchising
 Sell it, Free it
New: Service Enabler
Company that distributes open source
software primarily for generating revenue
through on-line services
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i.e. On-line gaming
New: Brand Licensing
Company that charges other companies to
use their brand name or trademarks
New: Software Franchising
This model uses a combination of the
preceding models; brand licensing and
support sellers in particular. Once a
company has established a competitive
advantage, they use their established
brand name to sell off franchises as their
way of accumulating revenue.
New: Sell it, Free it
Company that starts out selling proprietary
software, and converts the product over to
open source software at an opportune
time.
Current status in the market,
and a look at future trends…
VA Linux stock price
Red Hat stock
Microsoft stock
Red Hat vs. Microsoft
Is Open Source here to stay?
Red Hat has shown that an open source
company can produce stable numbers in a
fluctuating market.
Businesses are continually considering the
switch to open source software, not only
because of cost, but because of its reliability and
economic value.
A company can modify a program according to
their own specific needs.
Technical support no longer comes from one pre
determined source.
Is Open Source here to stay?
Business models are too young to
determine
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They are only 6-8 years old
New Models are being developed
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Open Source Software Development Lab in
Beaverton