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"FOSS Business Model Broken" — Former OSDL CEO 412

Posted by kdawson
from the who-needs-support-anyway dept.
liraz writes "Stuart Cohen, former CEO of Open Source Development Labs, has written an op-ed on BusinessWeek claiming that the traditional open source business model, which relies solely on support and service revenue streams, is failing to meet the expectations of investors. He discusses the 'great paradox' of the FOSS business model, saying: 'For anyone who hasn't been paying attention to the software industry lately, I have some bad news. The open source business model is broken. Open source code is generally great code, not requiring much support. So open source companies that rely on support and service alone are not long for this world.' Cohen goes on to outline the beginnings of a business model that can work for FOSS going forward."
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"FOSS Business Model Broken" — Former OSDL CEO

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  • by QuantumG (50515) * <qg@biodome.org> on Tuesday December 02, 2008 @09:30PM (#25969609) Homepage Journal

    how supposed "experts" can be so dumb.

    support != hand holding.

    All software has bugs. If your customer finds a bug in the software they can report it upstream and wait around for the bug to get fixed or they can report it to you and pay you to fix it now. That's support. Same goes for features. Maybe they want to use the software for something that upstream thinks is worthless. They could beg upstream to add the feature. Or they could hire developers to add the feature. Or they could outsource that to you. That's support.

  • by RLiegh (247921) on Tuesday December 02, 2008 @10:50PM (#25970379) Homepage Journal

    In fact, a great real-world example of this is CentOS. Redhat charges for their binaries, but since all of their code is FOSS CentOS was able to snag it, re-brand and re-distribute it.

  • by abigor (540274) on Tuesday December 02, 2008 @11:03PM (#25970493)

    No, you can charge as much as you want for distribution, and you only have to give source to those to whom you, personally, have distributed binaries:

    http://www.gnu.org/philosophy/selling.html [gnu.org]

    However, as you noted, all it takes is for one customer to put the source up for download, and you're screwed.

  • by deraj123 (1225722) on Tuesday December 02, 2008 @11:25PM (#25970707)

    There are plenty of ways for programmers to make a living that don't involve boxing and selling a piece of software. Off the top of my head:

    • Customize software for businesses that need something slightly specialized.
    • Provide on demand bug fix support for a crucial piece of software.
    • Provide integration expertise.

    I'm sure there are even more that I haven't thought of yet. The market spawns some incredible creativity. The catch however, is that the only programmers who are going to make money are the good ones. The rest are going to have to find another line of work. And I don't see the problem with that at all. And I'll add, as I've mentioned before, I am currently making quite a decent living writing nothing but open source software.

  • You do it like Apple does, free version is Darwin, commercial version is Mac OSX.

    The free version is the core, skeleton, just the basics needed. The Commercial version is the skeleton with meat added on it for bells and whistles and features.

    The BSD model works great for Apple.

    Red Hat uses the GPL model, the free version is Fedora and the commercial version is Red Hat Enterprise. Novell free version is OpenSuSE, Commercial version is Suse.

    There there are custom versions that fit a certain client's need like a glove. One size does not always fit all, and sometimes you have to custom tailor a version for each client.

    Also you sell bundles as solutions and the client pays you to set it up for them.

  • A bio is useful here (Score:5, Informative)

    by symbolset (646467) on Wednesday December 03, 2008 @01:00AM (#25971691) Journal

    Stuart Cohen today is chief executive officer of the Open Source Development Labs. With more than 22 years of international sales and marketing experience, he is a seasoned technology industry executive and has served in a variety of executive roles. Most recently, Cohen was vice president and corporate officer at RadiSys Corporation where his responsibilities included strategic partnership development with other industry leaders including IBM, HP and Dell. Prior to RadiSys, Stuart was vice president of worldwide marketing and a corporate officer at InFocus Corporation. Stuart spent 17 years with IBM, where he held senior positions in the US sales & marketing division, and the IBM Personal Computer Company and Networking Division, with international business development responsibilities in Europe, Southeast Asia and China. Stuart holds a B.S. in Quantitative Business Analysis from Arizona State University.

    LinuxWorld [linuxworldexpo.com]

    So... a corporate marketdroid that never invented anything, never built a business, who coattailed himself into executive positions with minor players based on prior employment relationships with major players who has a B.S. in Quantitative Business Analysis. Who, coincidentally is trying to bridge free software and services in a for-pay model that's starving for attention [csinitiative.com]?

    I'm gonna go with... um... so they couldn't get an Enderle quote? Was Maureen O'Gara busy that day? How did this guy talk his way into OSDL? It's interesting that their Wikipedia page [wikipedia.org] mentions him not at all.

  • Hole (Score:3, Informative)

    by onescomplement (998675) on Wednesday December 03, 2008 @01:03AM (#25971717)
    Stuart Cohen is a hole. I don't say this lightly because he "laid me off." After building OSDL in his addled image that didn't get it, does not get it, and is entirely involved in being involved with himself; not to mention Daniel Frye's relentless preening and internal positioning.

    It wasn't a hard thing for me to adopt OSS. It was a marketing idea that brought Cohen and Frye to this. They are both relentless fools.

  • Re:Not a Factory (Score:3, Informative)

    by Registered Coward v2 (447531) on Wednesday December 03, 2008 @08:53AM (#25973905)

    Don't sell "software", sell "a solution to the customer's problem." This sounds cliched, but it's amazing how many people and companies work around actually doing so.

    In my business, anyway, the open source support I sell is really business support. Companies want to know how improve their business with software, and I can help them figure that out, and open source is most often the best answer. I usually save them a bunch of money, deliver a robust solution, and pay some bills by doing so.

    Granted, that's not what most 'investors' are looking to do - they want to mass-produce support scripts for that 800 number and charge $40/call. But in my case, what people are really buying is my ~20 years of IT experience and knowledge and its application to cutting-edge technology, which can't get mass produced by the end of next quarter.

    Actually, what they want is rapid revenue growth. An open source solution lacks the ability to scale - i.e. you can't just churn out and sell more copies to go from 1 to 10 to 100 dollars in revenue at very little marginal cost. Such a company has a high multiple. Revenue growth comes from support / consulting which requires staff and is much harder to scale. Such companies have small multiples, generally around 1. Since investors like rapid revenue growth and high multiples they prefer to invest in the first type of comapny I mentioned.

  • Re:FOSS movie (Score:3, Informative)

    by thtrgremlin (1158085) on Wednesday December 03, 2008 @04:01PM (#25979211) Homepage Journal
    I couldn't agree with you more, and I hope your comment was not meant as a counter argument. You do emphasize an important point though, that beyond the intrinsic value of the software, the team of developers is what people hoping to make money off of FOSS need to be capitalizing on, not necessarily what they produce. That is where real scarcity lies, experts that understand the product and have the ability to 1) quickly and efficiently make further developments to the project, and 2) teach others to become potential experts. It would sadden me to see just the "I pay for support" thing become dominant expect for small businesses that don't want full time experts, but where companies like Red Hat are more in the business of being teachers, enables of the spread of knowledge and wisdom. The possibilities in that respect are endless, just all new in some respects.

    Seperately,

    let's not just share the cost; let's make it together so we get it just right and know what we're getting.

    I think conflicts / contradicts

    Unless open-source providers find new ways to add value for their customers, especially in this economic environment, the growth of their companies is at serious risk.

    because you are talking about two totally different groups of people. The first totally makes sense. By its nature it drives out middle men and those that only want to profit from making the software, people that are not principle invested in the product being any good. This is a VERY GOOD THING for businesses as investors in open source software. The second is in a way exactly the type of scum FOSS enables people to easily eliminate when such entities conflict with the value that was already identified in the first quote.

    The author makes some really great examples, but I am very confused with how he seems, to me, clearly express just how FOSS works, but then tries to say that this inability to merge the good with the bad is somehow a flaw. HUH?

    This is where his description of the FOSS business model as fundamentally flawed is insulting, and makes me feel like he doesn't get it, but on the other hand he does differentiate in an important way the differences between users and developers. All I hear in this is that people that can't make a quality contribution are burned in the FOSS world for doing business in that way. How about "DUH! That's what we been trying to do!". This is also where I find the statement "don't use FOSS because it isn't profitable" is laughable.

    A commonality I see between FOSS and Free Culture is an elimination of that line we put between producer and consumer. Each see an idealism in them being the same group.

  • by Trepidity (597) <.delirium-slashdot. .at. .hackish.org.> on Wednesday December 03, 2008 @09:13PM (#25983491)

    It's getting increasingly common for companies and especially universities to object to vendor lock-in for some of the data formats, even if they don't care about the openness of the source. It can *store* its data in a proprietary format, but if it can't at least export to some sort of interoperable format, that can raise objections.

    My own (large) university is in the midst of a huge mess trying to migrate off of Exchange, and is not likely to make the same mistake in the near future. The new integrated email/calendaring/webmail solution replacing Exchange (just about done being rolled out) is actually open source as it turns out, Zimbra, though that wasn't a large factor in the decision.

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