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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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  • Well, duh (Score:5, Insightful)

    by David Gerard (12369) <slashdot@NospAm.davidgerard.co.uk> on Tuesday December 02, 2008 @09:29PM (#25969599) Homepage

    Do IBM sell software? No, they sell you a solution. They'll sell you Linux, AIX, Solaris (IBM is Sun's second-biggest seller after Sun themselves) or Windows.

    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.

    • Re: (Score:3, Interesting)

      by rolfwind (528248)

      Many companies don't want to sell a solution. They'll sell a package (software) that others can make part of their overall solution. I could not imagine many software companies that want to get into the solution business.

      • Re:Well, duh (Score:5, Insightful)

        by David Gerard (12369) <slashdot@NospAm.davidgerard.co.uk> on Tuesday December 02, 2008 @10:11PM (#25970017) Homepage
        Then the article's saying "too bad for them." Proprietary boxware is on the way out. Proprietary vertical market stuff gets toward "solution" selling. (Certainly at the prices they charge. Honestly, the more it costs, the worse it appears to be in quality ...)
        • Re:Well, duh (Score:5, Insightful)

          by LWATCDR (28044) on Tuesday December 02, 2008 @11:27PM (#25970723) Homepage Journal

          "Honestly, the more it costs, the worse it appears to be in quality ...)"
          Not really. Your looking at the per seat price.
          Let's take two examples. One is a program for managing say a U-Storage location vs Office.
          The U-Storage vendor might charge $2000 for their program while Office costs say $295.
          The U-Storage software vendor might sell 200 a year. Microsoft will sell what? Make it a million so the Math is easy.
          So the total cost of Office to the Planet is $295,000,000 while "expensive" vertical cost only $400,000. That might seem like a lot but then you have to think about marketing, paying the Programming staff, and support costs which will be much higher per customer for the vertical.
          That expensive is software is actually very cheap when you look at the that way.
          That is the advantage of boxware. Buy charging for every copy you can spread out the cost of development.

          • Re: (Score:3, Insightful)

            by Anonymous Coward

            While logically correct, your point is totally nonsensical.

            I personally DON'T CARE what the package costs across the entire planet.

            I care what the software costs my business.

      • Re: (Score:3, Interesting)

        by flnca (1022891)
        Writing custom software solutions is what MOST of the software industry was doing for decades. That goes all the way down to selling custom computer models (until the 1980ies). Software solution companies sell the customer computers and/or any software they need, be it off the shelf or custom. And that's where FOSS can shine: It can help to reduce the price tag for the customer. Most businesses require custom software that is only relevant to them, and that's where profit can be made. FOSS operating systems
        • Re: (Score:3, Interesting)

          by tepples (727027)

          Writing custom software solutions is what MOST of the software industry was doing for decades.

          But how would a business model based on custom software solutions work for interactive entertainment? With the exception of advergaming, I don't see how the bespoke model fits video games any more than it does movies.

          • Re: (Score:3, Insightful)

            by flnca (1022891)
            You simply target the appropriate markets: Video game makers and movie makers. You can sell solutions that make their work easier. If you want to make money from the end customer: Making money from a FOSS video game could be achieved by making network games and charging the players with low monthly fees. Making money from a FOSS movie is achieved by licensing it out to cinemas and publishing it on DVDs, just as with regular movies. Both of the latter solutions have been successful in the past.
    • Re:Well, duh (Score:5, Insightful)

      by lgw (121541) on Tuesday December 02, 2008 @10:43PM (#25970295) Journal

      Don't sell "software", sell "a solution to the customer's problem."

      I think that's key. The point in TFA was "open-source code is typically of such high quality that you can't make money selling support". While I htink that's a bit self-serving, as there's *planty* of crap open-source code out there, it's almost universially true that open-source code that lots of people use converges on "so high quality you can't sell support" over time. (This as opposed to commercial software that sometimes gets it exactly right, but then goes on to break everything in the next release because you *have* to have a next release.)

      IBM does very well selling consulting services. "Open source" is a nice way of saying "we're going to take the code you pay us to write and use it to solve the next guys problem too". And of course that works out well for everyone, since this customer benefits from all the previous companies. Cunsulting firms do that *anyway*, of course, but calling it "open source" gets it all above board *and* lets unrelated people benefit.

      • Re: (Score:3, Insightful)

        by Phreakiture (547094)

        People often forget what business they are in.

        The passenger railroads thought they were in the train business. They weren't. They were in the transit business. Failing to recognize this led to their demise and the ultimate formation of Amtrak to try (poorly) to fill the void.

        The telcos thought, for a long time, that they were in the telephone business. Again, they weren't. They were in the telecommunications business. After fouling up the deployment of ISDN and later DSL here on the East Coast, it see

    • Re:Well, duh (Score:5, Insightful)

      by Phemur (448472) on Wednesday December 03, 2008 @12:12AM (#25971345)

      Do IBM sell software? No, they sell you a solution.

      Actually, they do. $19B dollars' worth. That's a lot of software, or about 20% of their total revenue (for 2007, at least). Services (or solutions) revenue is tracked separately.

      Granted, the software IBM sells is a solution to a problem. But to say that IBM doesn't sell software is like saying Gap doesn't sell clothes; they sell a solution to the nakedness problem.

    • Re: (Score:3, Insightful)

      by jhol13 (1087781)

      Last I checked Notes, Rose, etc. were not free.

      You cannot argue closed source software does have some advantages: you can have bigger price on it.

      Open source has its own advantages, it is cheaper to the customer, and the "customer is the king".

    • Re: (Score:3, Interesting)

      by jadedoto (1242580)
      I had a presentation in one of my classes today where an exec from the local IBM outpost was talking about that very thing, claiming the switch Big Blue made in the 90's to selling a solution is the only reason it's still around today.

      Creepy stuff.
    • Not a Factory (Score:5, Insightful)

      by bill_mcgonigle (4333) * on Wednesday December 03, 2008 @01:14AM (#25971777) Homepage Journal

      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.

      Yeah, this guy seems to think the the 'support' model equates with the kind of technical support he might get on the phone at an 800-number.

      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.

      The broken business model is applying factory thinking to knowledge work.

      • Re: (Score:3, Informative)

        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 th

  • 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.

    • Re: (Score:3, Insightful)

      by OzPeter (195038)
      And every bug fixed means one less support call in the future. So in the process of supplying a support service to your customers you are actually doing yourself out of business.
      • Re: (Score:3, Insightful)

        by QuantumG (50515) *

        Hehe, yes, because at some point the software will be bug free.. bwahaha..

        That's not how it works.

      • by MightyYar (622222) on Tuesday December 02, 2008 @10:31PM (#25970181)

        As long as features are being added, bugs will occur. In a sense they are an infinite resource, since I can't think of much in the way of commonly-used software with no feature development. Hell, Windows XP has been "feature frozen" for years now, and yet I still get updates. Or - to use a non-MS example - Python 2.3 went final in the summer of 2003, and yet there was an update this year - almost 5 years after it was "feature frozen". (For reference, Python is up to 2.6 - and their 3rd RC for 3.0)

        • by OzPeter (195038)
          However businesses (who have the money to pay for support) like to have stable software, and are less likely to be continually upgrading just for the sake of it. If they can get away with it they are more likely to avoid paying money if they can route around a problem.

          In industry I have seen lots of machines who are not connected to the internet and have not been updated for a very long time. As long as they do their job then there is no need to update them.

          • by MightyYar (622222) on Tuesday December 02, 2008 @11:08PM (#25970535)

            As long as they do their job then there is no need to update them.

            No question, but the world changes around these machines. In an industrial setting I've seen a couple examples of this...

            One example is a computer that controlled a visual inspection machine that ran Win 3.11. Worked great until Y2K! In addition, the newer hardware doesn't always run that version of Windows and it was becoming a problem. Additionally, the company was changing to a new file server that Win 3.11 didn't like. Eventually, the whole big thing had to be replaced because the stupid little Win 3.11 machine didn't cut it anymore. Had Win 3.11 been open source and a consultant was able to change it, the machine would probably still be operating.

            Another example is at a plant where all of the flow control was done through old DOS programs hooked into serial-based equipment. These days, you simply can't buy the serial-based stuff any more... everything has ethernet. Additionally, it has become very hard to find modern PCs that will talk to the old hardware at all. As a result, all of that old DOS stuff is obsolete and being replaced. If the old DOS software was open source, it could just have been hacked to add ethernet support.

            Anyway, my point was just that the tech world changes pretty fast, and a business may THINK it wants stable, unchanging software... but I bet that isn't the case. After all, when's the last time you saw a text-based ATM?

      • Like QuantumG pointed out, it will never be completely bug-free (although the number of show-stopper bugs will drop exponentially (does 'exponentially' apply to a declining graph?).

        Also, it is probably safe to assume they don't want to stay on Firefox 2/OpenOffice 2/Ubuntu 8.04 for the rest of eternity.

        • by OzPeter (195038)
          In Business/Industry, if it does the job, then why change it? Especially when changing it will cost money. Thats why I still see windows 98 based machines running VB6 Apps.

          So once your list of bugs has dropped below a tolerable level there is no need to go looking for support.

    • Re: (Score:3, Interesting)

      FOSS is fantastic compared to the government.
      Here is Fred Thompson laying it out for you:
      http://www.youtube.com/watch?v=7IrR3o7x1ps [youtube.com]
    • Re: (Score:3, Interesting)

      by Sentry21 (8183)

      The problem with that is that you end up with tons of disjointed features that only one customer wanted, and you end up like Microsoft Word - a cluttered interface with tons of toolbars, tooltips, palettes, windows, menus, icons, shortcuts, and everything you can cram into the app, 99% of which no one ever uses, and all of which makes the program harder to use, support, maintain, or update.

    • Re: (Score:2, Insightful)

      by Xerolooper (1247258)
      He's only appears dumb from down here.
      We look at open source as, free as in beer, free software. Because it makes us more efficient and productive worker bees.
      It has a lot to do with point of view. He looks at it as how can I make money as in Micro$oft off this. Because that is his purpose in life.
      His attitude isn't surprising or "news"
      There are two ways to make money. Since printing your own is illegal there is only one. When you trade your time for money you are not making money you are making a trade
      • by QuantumG (50515) *

        creating wealth

        I don't think that means what you think it does.

        • by fractoid (1076465)
          Actually I think it kind of does, if I'm interpreting him correctly. Wealth isn't just "having money", it's "getting more money by using your current money instead of by working". If you make an investment (of time or money) and get a fixed return from it, that is a trade - it may be favourable if you get a good wage / price but it's still a trade. Making an investment which gives an ongoing revenue stream is, as I understand it, increasing your wealth.
          • by QuantumG (50515) *

            I know there's this mainstream idea of "wealth" as something to do with money, but that's really not the case. If I have $400 today and a loaf of bread costs $2, but tomorrow the cost of bread goes up to $4, I am not as wealthy today as I was yesterday, however, if the same number of loaves of bread exist today as they did yesterday then the wealth of the nation (at least the bread part it) is still the same. Wealth is about stuff, not about value.

    • by ChatHuant (801522)
      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.

      And this creates a powerful economic incentive to provide buggy software: if your software is perfect out of the box, the customer will not pay you. As an open source software writer, you depend on the *bugs* in your software for your income. That creates a paradox, and makes your life difficult: you
      • by QuantumG (50515) *

        The separation of upstream and downstream and competition takes care of that.

        You seem to think I'm talking about something new here. This is exactly what every open source solution company does. Hell, I used to do it freelance, until I found the corporate teet.

  • by Gavin Scott (15916) * on Tuesday December 02, 2008 @09:32PM (#25969633)

    Open Source development is an absolutely amazing and powerful tool... ...for everyone in the world whose livelihood comes from something *other* than selling software.

    Bankers need to run their banks more efficiently so they get together to cooperatively develop some banking application software that makes them all work more effectively and efficiently. This is the magic of co-op software development. There are other people who have the same problems you do, and if you get together you can produce really useful software for vanishingly small cost, and the result can be replicated without limit or expense.

    Bankers don't, on the other hand, create free, zero-income banks.

    Commerceial software companies making free software is, and always has been, a really dumb idea.

    If you find yourself in this position, my suggestion is to move up the food chain towards applications of the software you've developed. Eventually you'll find a level where people have problems they're willing to pay to have solved because they're not common enough to make an open source / co-op solution viable.

    If your business plan reads:

    1) Invent really cool new product.
    2) Give it away for free.
    3) Enable the community to do all their own support and enhancements.
    4) ????
    5) Profit!

    let me save you some time and point out that there is nothing you can put in step 4 that leads to step 5.

    Open source development is not a segment of the software indusrty, it's a segment of the every-other-industry.

    G.

    • let me save you some time and point out that there is nothing you can put in step 4 that leads to step 5.

      adverts? didnt that work for opera for ~9 versions.

      Bankers don't, on the other hand, create free, zero-income banks.

      Id like to see a banker code, all this work gets outsources and id bet if you have a big name in foss your name will come up sooner than others.

    • Re: (Score:2, Interesting)

      by mevets (322601)

      An old joke goes something like this:
      A customer goes to radio shack to get his printer repaired. The repair guy says it will be $300, and be done in two days. Customer balks, repair guy explains the problem, and points out that the parts needed can be bought in the store for $5. Customer is thankful, but is concerned repair guy will get in trouble for turning away business. Repair guy says.... we find we make more money if you try to fix it yourself.

      Other than its use as bait, FOSS enables a cottage in

    • by ancientt (569920) <ancientt@yahoo.com> on Tuesday December 02, 2008 @11:08PM (#25970533) Homepage Journal

      Odd, I can think how people are making your equation work with varying choices for step 4.

      4) Make it do a complex task that requires skilled labor you provide cheaper than training staff to handle it internally

      This works for several companies, a couple of which we pay where I work. The task of consolidating threat profiles, keeping them current, providing solid feedback and rapid response as well as managing secure channels with a variety of companies is something our company could hire a couple full time employees to manage. Rather than be out the cost of staff, we hire an outside vendor who does it very well at a fraction of the expense.

      4) Build a small closed source application that utilizes the open source software. We use software built to work with a MySQL database system. The tasks done by the configuration, maintenance and integration are within the reach of a moderately talented programmer, but they are able to do it for hundreds of clients who all benefit from solid testing, research and experience of a few experienced and skilled developers who also contribute back to the open source system. This improves MySQL for anyone who cares to use it, but at the same time benefits the company who own the closed source application utilizing it. (For this example the model has to change step 1 to "Promote and contribute to a really cool product.") This is similar to the business model for Crossover Office where you pay for the expertise that has gone into the development of a product that does nothing you couldn't manage by hiring talented developers but for a price that makes sense for small business.

      4) Make your staff the source for training required to manage a complex system. Zabbix is an example of this type of product. You can download and work on Zabbix for free, but it is complex enough that for significant implementation, you really need to get solid training, and that will cost you.

      Our core transactional system in fact, would be a great example except that it is a closed source system. The software is good, but there is plenty of similar software that we could use. What we really pay for is the ongoing development, support and integration they offer. They protect themselves from competition by keeping it closed, allowing them to charge a higher fee, but if they were to manage a transition to open source they could potentially drop their development costs significantly, increase market penetration and undercut their competitors while still maintaining the same profits. They would have to face the risk that another company could do a better job pricing or servicing their current customers with the same software, however, and I honestly don't believe they have enough talent in programming, support and management to make it worth the gamble.

    • Re: (Score:3, Insightful)

      by zotz (3951)

      "Bankers need to run their banks more efficiently so they get together to cooperatively develop some banking application software that makes them all work more effectively and efficiently."

      Bingo!

      "Open source development is not a segment of the software indusrty, it's a segment of the every-other-industry."

      Unless your software industry group does it for pay from the every-other-industry folks!

      all the best,

      drew

  • by WillRobinson (159226) on Tuesday December 02, 2008 @09:33PM (#25969641) Journal

    The model of investor expecting to make a quick buck off FOSS is broken. Not FOSS.

    • by lorenlal (164133) on Tuesday December 02, 2008 @10:30PM (#25970175)

      Finally! I'm so sad that I had to go halfway down the page to get at this one...

      Working with FOSS isn't going to lead you into a business hole. Businesses still need someone who can monitor, upkeep, fix, and add to the machines that power their business. If you happen to write FOSS to do those things, you can make money by still doing work for said customer. If you merely use tools that are out there done by other coders, then you are still providing a service for the business/customer.

      The break in this article (and many like it) happens when said supporting company goes "public." Suddenly, profit margins must be maintained, P/E ratio enters the equation... Quarterly performance is the measurement of your business, not "am I doing a good job?" FOSS has its place in business, and in business models. You can make it your job to contribute to the community, or to utilize it, to help generate cash for the business that runs on it... Just don't expect your stock to split anytime soon.

      Something that I've learned: The business always has needs. They might not know what they are, and they will be different in 6-12 months. The needs will always exist, they will always require someone to implement them, and then maintain them... FOSS often provides a solution to those needs... Even if the code could be perfect, and you could, theoretically, never have to maintain that FOSS solution, you'll be needed to implement someone else that the business now needs.

      • but FOSS is not "a business model". It is a paradigm -- a principle -- that can encompass many business models. Sun and RedHat are a part of the FOSS spectrum, as is Ubuntu, and a great many companies that supply software other than OSes.

        A company has to find the right formula for its needs. The failure of some companies to make a profit does NOT mean that no company can make a profit. In just the last 5or 6 years I have read that Windows was dead, that Linux was dead, that Apple was dead, that Ruby on R
    • by jrumney (197329)
      My thoughts exactly. Investors expect to make significant multiples in return for taking fairly large risks on startups. The business model of selling support and custom development to customers is a low margin, stable business model with no real startup costs that would justify investors getting involved.
  • by LostCluster (625375) * on Tuesday December 02, 2008 @09:38PM (#25969691)

    Software is in a race towards zero, as all IP does when there's no copyright-holding monopoly to pay. Support is becoming increasingly less needed.

    Hardware always has value, especially hardware designed to go with the open software. See Asterisk. Services, even just a steady data stream, has value, see TiVo.

    • That's great (Score:4, Insightful)

      by Sycraft-fu (314770) on Tuesday December 02, 2008 @10:29PM (#25970155)

      So long as you are content to have a number of kinds of programs never be open source. If your solution is "Bundle with hardware if you want OSS and need money," ok then don't be surprised when people who's market doesn't deal with hardware chose money over OSS. I'm talking about things like games, or, say, video editing software. Things where you neither want or need additional hardware. Things where the idea is to use the hardware of a general purpose computer to do what you want.

      This accounts for most software out there. While there's certainly things like, say, a firewall app/OS or something that it is perfectly valid to bundle with hardware, there's plenty of things that are just programs to run on a normal computer, no other hardware needed or wanted.

      For programs like these, the response from many OSS advocates has been "Sell support!" However that doesn't work in a lot of cases. If you program is well written and easy to use, people won't need support by and large. Some of my favourite software packages, OSS and commercial, are ones where I don't need support of any kind. They do their jobs and are easy enough to use I need to additional help beyond what's included.

      So what then? What do you do if your software is both a good product, and not one that uses hardware? Currently, the options seem to be "Open source it and give it away for free," or "Close source it and make money." In some cases, people can afford to do the former but not all. The "Just give it away for free," sounds like a nice idea when you are a broke student who would be receiving said free software. It sounds like less of a good idea when you are a programmer with a family to feed who would be getting no paycheck if you do.

      So you run in to a large category of programs where you don't have a viable model. Support isn't a viable model since people don't need it. Bundling isn't a viable model since that isn't what your software is for.

      • So what if there is a segment that won't fit that business model? Sell to the segment that does fit it.

        For businesses that do need hardware, sell them a pre-loaded, pre-configured system with a support contract that includes REAL support. Instead of having 100 client companies with 100 sysadmins all duplicating of the basics, sell your service of 10 sysadmins all monitoring and reporting to those 100 client companies.

        Take the profit and put it into programmers who continually improve the software running on

      • Re: (Score:3, Interesting)

        by Canberra Bob (763479)

        Thank you for commenting on something I have been puzzling over for quite some time. I keep hearing how FOSS is the way all software is heading. However the problem is it does not address niche markets.

        To keep the discussion simple, let's say I develop a new graphics application that is perfect for graphics designers and much better than anything on the market at the moment in terms of speed, usability and features.

        The problems I run into if I open source are:
        1) If usability is great, who is going to want

        • Re:That's great (Score:4, Insightful)

          by Anonymous Brave Guy (457657) on Wednesday December 03, 2008 @01:02AM (#25971705)

          I keep hearing how FOSS is the way all software is heading. However the problem is it does not address niche markets.

          I disagree. I would argue that substantial, high quality FOSS — good enough to rival traditional commercial software — has only developed in certain niche markets.

          It's not hard to see why: lots of geeks want programming tools and media players and basic office software and communications tools and an OS to run it all on. You can build up a critical mass of skilled volunteers to get such projects up to a decent level in a reasonable period of time.

          However, in either markets that aren't really geek niches (such as the boring business software that companies rely on for their administration) or markets that require substantial resources other than just geeks hacking away (such as game development), there is neither a significant body of useful FOSS at present, nor any indication that such will appear any time before the sun runs out of power. In the first case, there is no particular incentive for geeks to give up their time to build boring stuff if they're not being paid to do it, and in the latter case most geeks don't have either the time or the skills required to do a good job without collaborating with other professionals (who will expect to be paid for their own contribution).

          So, since FOSS doesn't look like being a particularly useful model for commercial development in these areas, and in the geek niches software is already being given away for free by others so there isn't much scope for making money developing competing FOSS products, I tend to agree with the article's premise: FOSS just isn't particularly useful as a basis for building a business.

        • If you really are that good as to achieve point #1 you have an assured career writing software, so licensing issues would become the least of your worries. If you aren't really that good, well, you will get paid to fix your mistakes or to provide improvements to your product.

          Notice that you are not entitled to that. You have to show commitment, financial prudence and good marketing skills.

          In other words you need good business acumen, this is something people going into business have always known, geeks som

          • Re: (Score:3, Interesting)

            by Canberra Bob (763479)

            Hypothetical - someone writes a fantastic graphics application, lets call it BetterThanPhotoshop and open sources it. Having bumped into quite a few graphics artists I can say with confidence that the vast majority of them don't care diddly squat about discussing the innards of the project or who the authority is on the technical aspects of graphics software development. If the product was sold at $100 and someone grabbed a copy of the source and sold it at $50 - the exact same product - guess who gets th

  • by MSTCrow5429 (642744) on Tuesday December 02, 2008 @09:47PM (#25969805)

    Open source code is generally great code, not requiring much support.

    The code itself might be great, but generally, the front-end (which I'm distinguishing as separate from the back-end nuts and bolts "code") is a mess. Installation and use difficulties are generally greater in randompackageX off of SourceForge than, say, MS Word or FoxIt. There are some OSS programs that are near hitchless, like Pidgin or Firefox (had noticeable problems with crashing on exit in Vista, though), but if you go beyond the star players, you'll quickly find this argument doesn't hold up to empirical scrutiny.

    • by bit01 (644603) on Tuesday December 02, 2008 @11:22PM (#25970667)

      but if you go beyond the star players, you'll quickly find this argument doesn't hold up to empirical scrutiny.

      Nonsense. My linux installation has more than 1500 packages installed and more than 26,000 packages available, most of them a 2 click install, covering stable, user recommended releases of the vast majority of decent open and free source available. I have never been short of documentation either, though sometimes it is not as well organized as I would like.

      Sourceforge and freshmeat have a lot dead, unfinished and bleeding edge projects. So what? That's what open source is, the development process is out in the open. If you want to download a development build then go right ahead but don't pretend you're not a developer.

      Closed source vendors love to pretend that their software and their development process is all sweetness and light. They're lying; they have every bit as much crap but because it's closed source it's often hidden.

      ---

      Beware deceptive astroturfers [wikipedia.org].

  • by unitron (5733) on Tuesday December 02, 2008 @09:47PM (#25969807) Homepage Journal

    ...the traditional open source business model...

    It's been around long enough to be "traditional"?

  • by MarkusQ (450076) on Tuesday December 02, 2008 @10:03PM (#25969949) Journal

    The open source business model is broken.

    It isn't a broken business model. It isn't a business model.

    Saying the open source business model is broken is like saying open source doesn't work as a cheese sauce. It also isn't a very effective screw driver. On the other hand, I have yet to hear a business model you can dance to.

    --MarkusQ

  • The CEO of a company that promotes collaboration and community between companies says that the traditional model of OSS is broken.

    Instead, he says, successful companies will work with each other to form communities and collaborate with one another to make money.

    Film at 11. /vertisement.

  • by Eravnrekaree (467752) on Tuesday December 02, 2008 @10:05PM (#25969973)

    As far as FOSS being something that has serious business problems in regarding to sustaining the developers who work on it, this is indeed a serious problem. It generally can be very hard to raise revenue with FOSS, projects can ask for donations and sell packaged versions, but you often end up with just a trickle with these sorts of things. Programmers should obviously be able to work full time developing software. With FOSS directly competing with commercial software an eroding those markets, could it be that programmers will end up waiting tables during the day just to support the time they spend writing code? fOSS does indeed wipe out commercial software markets and it can actuall

    I am supportive of the freedom aspect of FOSS. For far too long commercial software has shut down innovation and stifled the development of improvements through cooperative development with its closed model. FOSS is on the other extreme, its an open model but it leaves programmers in a situation where they cant afford to live. Perhaps a solution for some projects lies in the middle, with a commercial source tiered licence system, where the source code is provided with all licences, the developers are receptive to improvements from customers, and the cost of software is set according to the ability of the customer to pay, a hobbyist who is using the software for fun would pay far less than someone using it in a high revenue business. This assures that the software does have a high degree of openness and accessibility to all, but also assures revenue can be raised to develop the software.

    • 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.

      • Re: (Score:3, Interesting)

        by Ash-Fox (726320)

        I could in theory, sell a highly scalable multi user chat system that can be deployed in corporations, community sites etc. Capable of handling 50000 concurrent users on a single machine with meshed networking technologies for running local chat server nodes around the world with user authentication over ldap, ASCII SQL (includes support for all the major SQL servers). Additionally, the chat protocol would offer a lot of features from high compression, secure, speedy webbased interfaces among other nifty id

    • Hogwash! (Score:3, Interesting)

      by Xtifr (1323)

      As far as FOSS being something that has serious business problems in regarding to sustaining the developers who work on it, this is indeed a serious problem.

      Hogwash!

      The software industry is competitive and margins are always thin. Full stop. It has nothing to do with FLOSS, except insofar as FLOSS is an extreme example of how thin the margins can get! :)

      Some examples from my own career:

      1. I started out of school writing a quicksort for a company that needed one. It came in on time, under budget, and was very well done, and got me a full-time offer from the company. Nowadays, quicksort is a standard part of the standard C library, and nobody wants to hire so

  • How about a financial model of bidding to develop software, functional modules, or related services such as security upgrades and support by 'selling shares'? The developers would specify what they propose to develop or offer and describe how much time and other resources would be involved--and thereby set a value on the project. People who wanted the proposed software would buy shares in the development project, and when they get enough people, then they commit, collect the money, and start doing the work.

  • I think it is completely reasonable for these companies to go under when the code base becomes stable enough to undercut their business model. They're getting paid for providing a software in which they didn't pay for a large portion of the development costs.

    If they want to stay afloat, they will need to stay on top of developments in the open source community to provide consulting for multiple products.
  • Loser.

    I'm trying to be objective here.

    Appliances produced by Tumbleweed [tumbleweed.com], Allot [allot.com] and Radware [radware.com] are all heavily adopting FOSS. They can secure their VC investment, their brand and their business; their staff contribute back to FOSS community and keep it growing. They wouldn't whine, do they?

    we all know it's nonsense, when he said no FOSS software giant exists. What he actually meant was 'No FOSS Software Giant that can cash in big profit for small group of people'. If it can't take huge profit, it's then
  • I really fail to see how FOSS is supposedly falling down as a business model. There are tons of businesses that make money as outsourced service providers sitting on little or no IP. Strap the existing service delivery model on top of FOSS, you could build your support business, offer a package, but with a sole benefit you can wave in front of the client: no licensing costs or restrictions.

    Any problems arise from it not being done properly.
  • by timmarhy (659436) on Tuesday December 02, 2008 @10:20PM (#25970081)
    One thing i think we will see FOSS project's movng away from is giving away the software. if you GPL something, it doesn't mean you have to give it away, it just means who ever you sell it to gets the source code along with the program.I could for example write some software, sell it to others and then give them access to the source where only paid customers could make commits and see the source. source is only required if you distribute something....
  • ...or maybe, (Score:3, Insightful)

    by belg4mit (152620) on Tuesday December 02, 2008 @10:25PM (#25970131) Homepage

    the investors expectations are flawed?

    You do not have a right to profit, and you certainly don't have a right to irrationally high profit.

  • The most important thing people capitalizing on OSS can do is offer something that no one else will offer -- an ear for listening to the customer. With customer requests being priced, customers can contribute to the progress of OSS development and in return, get EXACTLY what they want from the software tools they use. This is something that Microsoft will not do -- listen to the customer and deliver on their requests. (After all, their business model is all about keeping the customer unhappy and wanting

  • I agree (Score:3, Interesting)

    by dskoll (99328) on Tuesday December 02, 2008 @10:46PM (#25970345)

    FOSS is a poor business model. (It's a great software development model, though.)

    My company produces both FOSS (GPL) and proprietary software. We happily sell support and service contracts for our free stuff. I estimate that the revenue from support+service of FOSS adds up to about 1% of the revenue from selling the proprietary software. (We include source with the proprietary software; you just aren't allowed to redistribute it.)

    Making money from service and support is hard and labour-intensive. Making money from selling proprietary software is much easier, because once the thing is written, you can sell it over and over again, amortizing your labour costs enormously.

    Sorry... much as I love, use and contribute to free software, I just don't think it's easy to build a good business around it.

  • Yes. There is a paradox for sure.
    Make your open source, simple, flexible,
    with good, interoperating default configuration,
    and you're out of a support job.

    I've always been suspicious of the model
    because it seems to promote the foisting
    of sub-par, and particularly, excessively
    complex and undocumented software on the
    software consumer.

    Don't worry. We have a crack team of the gurus
    who made this spaghetti, and they can grate
    some cheese on it to make it palatable, for
    a fee. Hmmmm.

    What about just operating, for a fe

  • 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.

    • by pkphilip (6861)

      Why attack the man personally? Discuss the comments based on its merits rather than attacking the person who voiced it no matter what their background or accomplishments.

  • 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.

  • by Swordfish (86310) on Wednesday December 03, 2008 @01:27AM (#25971853) Homepage

    So often I download software for free, and it's so excellent that I want to send money. Sometimes I send a cheque directly to the author. If only the free software download sites actually asked for money, I'm sure that a large proportion of people would pay a nominal amount.

    But then there's the example of slashdot. I tried to send money recently, but the form to accept my money only offered a paypal option. So you can forget that! I wanted something where I could just enter credit card details and send money.

    Just as in the case of music downloads, I'm sure that free software would make good money by just asking in a simple form: (1) Do you want to pay the standard X dollars for that? (2) Or would you like to pay an amount which you nominate? (3) Or would you like it for free? I'm sure that lot's of people would send money.

    Paypal was supposed to facilitate micro-payments on the net. But it's more nuisance than it's worth. So what's really needed is either a better implementation of the micropayment idea, or just plain credit card payments. At least the FOSS distribution sites which want money should ASK! I guess maybe it's just too much cost and bother to set up the e-commerce facility on one's own site. But a centralized site could collect the money and hold it in a bank account.

  • Aaaaaaww... (Score:4, Insightful)

    by KlausBreuer (105581) on Wednesday December 03, 2008 @03:37AM (#25972569) Homepage

    A CEO in BusinessWeek is talking about a concept "failing to meet the expectations of investors."

    I've heard that a *lot*. Usually means "I don't understand this, but I like to babble".
    So you think you cannot make as much profit on FOSS? Isn't that sad? Perhaps you could make more money selling home loans - something your reality-dysfunct cow-orkers all seemed to agree on, some time ago.

    Usually it's not worth listening to managers talk.

  • by miffo.swe (547642) <daniel,hedblom&gmail,com> on Wednesday December 03, 2008 @04:46AM (#25972853) Homepage Journal

    Free Software is not a great money printer for business in the traditional sense. Instead of earning money they save loads of money and thats something many PHBs have problems wrapping their head around. The software cashcow where you could write an application and then sit back and reap the rewards are dead.

    I think the focus in mainstream media is very wrong since they only look at the earning bit and not at how much money can be saved. In their mind Linux isnt successfull if it dont bring in lots of money even if it saves boatloads of money for the people using it.

  • by Qbertino (265505) on Wednesday December 03, 2008 @05:50AM (#25973091)

    People don't usually pay for software. They pay for one of the following:

    1) a pure conscience
    2) a zero fuss installation process
    3) not having to go through the effort of finding a copy of said software and ripping it
        [if 2 is broken and outweighs 3 in effort and hassle, people ripp software - one of the reasons I haven't bought any copies of flash anymore since MX 2004 Pro - the installation and registration process is an insult to any paying customer]
    4) cool looking UIs and neat workflows
    5) automated processes (software + hardware + the people to understand the problem and set it all up to actually save work and money + a number to call when things go south)
    6) access to a professionally maintained gameserver

    In fact, in the web developement industry, that a piece of software is open source is mostly a given. Wether a company succeeds or failes is rather independant of wether it offers its code as OSS or not.

  • by jabjoe (1042100) on Wednesday December 03, 2008 @06:09AM (#25973153)
    I don't think this guy understands why the GPL is so important. It's sticky. You can't lock away your improvements/fixes. All the increments get added to the whole. Without GPL critical mass is much harder for a project to reach. Don't wish to start a fight, but I think this is why the number of GNU/Linux users/drivers/work is significately greater then that of BSD. Irritating though Stallman is, he has come up with a set of rules that logically lead to open source critical mass. As programmers we should be able to take a set of rules and see the out come.

Life would be so much easier if we could just look at the source code. -- Dave Olson

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