Study: Pure Open Source Is Not a Business Model

According to a recent study by the 451 Group — an independent technology industry analyst company — the pure, non-hybrid open source is, apparently, not a viable business model.

Addressing the ever-so-popular question of how to make money from something that’s in its foundation free, the analyst company assessed the development, licensing and revenue-generation strategies used by open source.

At the same time, we’ve noticed that software giants like Microsoft started playing friendly in the open
source space. In addition, CMS vendors like eZ and Alfresco report that open source can be profitable.

Official Take on the Report

The group attempted to assess the impact that open source license choice, development model, vendor licensing strategy, revenue triggers and sales models have on each other to determine the overall open source business.

With adoption of the open source development and distribution model by many vendors, some of the assumptions about open source software have taken a back seat to commercial reality.

For example, the idea of a community of individuals sharing the code around an open source platform “for the greater good” has been superseded by the image of a community of vendor employees sharing the code to increase code quality and lower production costs.

Another outdated idea is the one that the only way of generating revenue from open source software is through specialist vendors that generate revenue through providing support services.

Apparently, this is not the only way to make money from open source software.

Blog Take on the Report

The 451 Group blog mentions Matt Asay, one of the proponents of open source software, as to how he changed his position on the use of proprietary extensions in an effort to attract paying customers to open source software.

Asay, who previously advocated a 100% open source approach, says that “If adding a hint of proprietary software to a solution is done in such a way to encourage a purchase but not compel long-term lock-in, I’m no longer convinced that this is wrong. If it puts food on the table without putting anyone out, where is the harm?”

So, is the use of proprietary add-ons and plug-ins is the way to survive in the land of the free —a.k.a the open source land?

The 451 Group’s latest report is based on the analysis of business strategies of 114 open source-related vendors, including Red Hat and Alfresco. In addition to that the group considered such vendors as IBM and Oracle, under the pretences of them being mostly proprietary vendors. The researchers say they realize that including the latter might disproportionately influence the results, “so we also filtered the findings to include only those vendors that could be considered “open source specialists”.

As for the overall conclusions, the blog says that:

• Open source is a business tactic, not a business model.
• Open source is not a market in itself, nor is it a vertical segment of the market.
• Open source is a software development and/or distribution model.
• “The cat is already out of the bag,” when it comes to open source-related business models.
• There is very little money being made out of open source software, of there’s no additional support from proprietary code and services.

Open Source Industry Revelations

According to the gospel of the 451 Group, these are some of the most interesting findings:

• The majority of open source vendors utilize some form of commercial licensing to distribute or generate revenue from open source software.
• Half the vendors assessed are using hybrid development models of free and commercially licensed software.
• Vendors using hybrid development and licensing models are balancing higher development and marketing costs with the ability to increase revenue.
• The license used for an open source project (reciprocal or permissive) has a strong influence on development, vendor licensing and revenue-generation strategies.

The Tale of Open Source Licensing

The researchers looked at different business strategies and business models used by open source vendors. The vendors were assessed based on the licensing approach (reciprocal or permissive), development model, vendor licensing strategy (e.g. dual licensing, open-core licensing) and revenue generation triggers (e.g. commercial licensing, subscription, support services, other products).

Study: Pure Open Source Is Not a Business Model

According to a recent study by the 451 Group -- an independent technology industry analyst company -- the pure, non-hybrid open source is, apparently, not a viable business model.\n\nAddressing the ever-so-popular question of how to make money from something that’s in its foundation free, the analyst company assessed the development, licensing and revenue-generation strategies used by open source.\n\nAt the same time, we’ve noticed that software giants like Microsoft started playing friendly in the open \nsource space. In addition, CMS vendors like eZ and Alfresco report that open source can be profitable.

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