Open Source is a Business Strategy not a Business Model

Following up on related discussions, another common confusion in my opinion is to think that “open source” is a business model. It is not. Open source is a business strategy, in support of a business model. You still need to know how to make money, and it doesn’t happen by giving software away for free. That is to say, you need a business model like selling subscription or implementation services.

The most common commercial open source business strategy is the “dual-license strategy” as demonstrated by MySQL, Alfresco, etc. This particular business strategy is mostly a go-to-market strategy, a way by which the commercial open source company penetrates customers and fosters the sale. I’ve blogged about this before here and here.

There is more to say, obviously, and I’m working on it. Any thoughts would be appreciated!

6 thoughts on “Open Source is a Business Strategy not a Business Model

  1. Neeraj Gaur

    Initially around 9 years back when we started working on open source we definitely think “Open Source” is just a business strategy to work upon but now I strongly feel it converge into a full fledge “Business Model”.
    As far an organisation is concern when we approach earlier we can just introduce it either on server side or rarely on desktop, thus the management definitely think twice to adopt Open Source in their strategy but now we present it as a Complete solution on every domain and some of the features are even unique, thus management adapt it as a Business Model for better results, growth, efficiency, security and scalability.

    This all I am refering from my experience only, I may be bit bias due to my inclination toward open source but I tried to be very straight always.

    Reply
  2. Dirk Riehle Post author

    Hi Neeraj, my point is that using open source for “better results, growth, efficiency, security, scalability” as you write are all important points, but they are not a business model. Maybe I have a too narrow view of what a business model is—Wikipedia’s reception of the literature defines it quite broadly.

    Maybe it is too much of a Silicon Valley startup perspective (always worried about money), but a core aspect that should not be missing is how to create revenue, i.e. how to make money. And open source itself doesn’t tell you how to do that. It is a means of creating revenue, but not an end.

    Reply
  3. Brian J. Fox

    Hi Dirk – open source is not a means of creating revenue, any more than closed source is a means of creating revenue. I agree with your opening statement, and most likely with your sentiments, both of which center around the point that I just made.

    A “business model” in this context is “what do you sell, and what are your margins?” You can sell software (open source or not), and/or you can sell services.

    If you sell software, you can either create it in-house, or obtain it from an external source. Once again, this is true whether the software is open source or not.

    My good friend Gumby created Cygnus, where the motto was “We make Free Software affordable.” In all my years working with open source software, I have never heard a better statement revolving around FOSS business strategy.

    Reply
  4. James Dixon

    To me the question is does not make sense.

    Open source is not a business strategy or a business model. It is a collection of principles which, when applied well, are effective for creating robust software quickly.

    The commercial open source business model is a business model that combines open source software with a go-to-market program.

    James

    Reply
  5. Dirk Riehle Post author

    Hi James, my original blog post, and that’s how I read Brian’s comment too, is focussed on open source in a business context. In that context, it is not a business model, but rather a strategy.

    Beyond the business context, open source of course is much more: a volunteer community, a way to change the world, a new approach to software development, etc. as I think you are pointing out too.

    Reply
  6. Pingback: Conference: Leveraging the OS community for business « Spartakan

Leave a Reply