Open source secrets to making money Part 1 of 2

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In the beginning, open source software looked like a saintly gift to the commonweal. Programmers would work hard, then give away the fruits of their labor to anyone who wanted it. Everyone would benefit from this act of pure charity.

Over time, however, companies realized they could make money and give away the software at the same time. They could do well by doing good. This wasn’t a shock to some of the original open source advocates – it was how some intended it to be. Richard Stallman, for one, always said that “free speech” was more important to him than “free beer.” He embraced the idea that companies could charge anything they like – as long as the user could fiddle with the code and distribute the result.

Many companies took this as a blessing to make money and serve their destiny. The smartest figured out how to use open source to strengthen their business, spread their brand, and bolster their power. Open source was not so much a charity as a different kind of marketing, a way to squeeze into the marketplace.

The savviest open source devotees embrace this self-interest. Everyone along the chain, they note, must be motivated to contribute for a reason. The genius of open source, they explain, is that it helps coordinate our selfishness and turn it into something that benefits everyone. The contributors become equals, and there’s little squabbling about rights to blocks of code. The sharing lets everyone concentrate on the quality of the software, not on licensing issues.

Nine ways to use open source for profit

code profit

While these approaches may offend the na├»ve, most fall under the heading “Before you do good you must do well.” A project backed by a flourishing business is much better than a pile of code that may or may not be fixed in the future. Freedom without stability isn’t worth very much.

 

 

Open source profiteering strategy No. 1: Open source as low-cost marketing

Advertising costs money. Trade shows are expensive. Marketing budgets are never adequate. Many companies see open source as a cheaper alternative. Releasing all or part of the product as an open source package can attract users who will use the product and discover what it does. The product speaks for itself and brings in the users, then the sales force steps in when it’s time to upsell.

Some open source companies such as MySQL have said it’s a mistake to focus too much on how many are getting the product for free. It’s not usual for companies to cite figures where 90 percent or more are not paying. They usually don’t cost the company very much because the open source packages cost little to distribute.

The trick is to make sure that the moneymaking features are compelling enough to support the rest of the product. They should be a small part of the product but crucial for the folks who will pay. Sometimes the extra may be a feature that increases stability for enterprise clients that want their software to run smoothly 24/7. Others offer privacy and force users of the open source version to broadcast their work to the world. These small features are supporting hundreds if not thousands of companies today.

Open source profiteering strategy No. 2: Open-sourcing code to reduce support costs

Have a problem? Here’s a stack of code. Figure it out for yourself.

While it sounds callous, many open source companies rely on pointers to the source code when dishing out support. The proprietary companies need to write a complex description of what the API does, but the open source companies just point to the API gateway that does the decoding. Anyone can read the source — and many do. It’s now common for companies to run a support forum next to the code with open debate about the software. It’s just faster.

Good, well-documented open source software can be a gift for everyone involved. The able customers can answer their own questions without waiting for a support technician to dig up the code. The support team can save themselves the hassle of trying to translate the code into English. Done well with a vibrant community, everyone can benefit with access to the open source.

Open source profiteering strategy No. 3: Open-source to reduce development costs

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Your company needs a tool or library or component. Developing it in-house would cost big bucks. Now imagine there’s an open source version that does half of what you need already. Paying for someone to add the necessary features may look foolish or generous or both because the open source license will mean all the additions must be shared with everyone. But it will also cut the development bill in half. If the software isn’t a critical part of the business, this can be a smart way to slice development costs while appearing to be magnanimous and devoted to the community.

Some companies solve these problems by paying the developers they know and trust. Others advertise for people who are already contributing to the project. A number of crowd funding sites like BountySource let users pool their money to sponsor programmers to deliver the code. They come and go, but the idea lives on.

In some situations, a group of companies can rally around an open source code base, with each contributing a fraction of the development costs. They all save money while building a crucial tool they use together. The savings can be significant. Even if there’s only one other partner, the costs might be cut in half. If there are 10, the costs could be cut by 90 percent.

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