We still have a way to go before establishing an Open Source business model which works for smaller product categories (the largest categories – operating systems, databases etc – clearly have the scale to allow the IBM, Oracle, Sun, Red Hat et al to make money). Furthermore, the current "free ride" taken by some enterprise users of Open Source Software is unlikely to be sustainable outside of the largest projects or projects supported by the largest vendors as smaller OSS vendors must either find a way to make money or eventually disappear.
The problem is pretty straight forward: Many enterprises are not contributing enough back to the projects, expect the business that is promoting the OSS project to take on most or all of the risk associated with implementation just like a traditional software vendor and are unwilling to pay the OSS business for maintenance and support (the only way the vendor can make money). While this chimes with my own knowledge and experience, these conclusions aren't just mine...
That enterprises aren’t contributing back to OS projects may seem to be heresy but is the reality that people involved enterprise OSS will probably recognize. Jim Whitehurst, CEO Red Hat recognized the problem back in June 2008 when he pointed out:
"Ultimately, for open source to provide value to all of our customers worldwide, we need to get our customers not only as users of open source products but truly engaged in open source and taking part in the development community."
This perception is also reflected in a Forrester report covered in this article:
“ Most businesses that embrace open source are content to consume products rather than giving code back to the community, according to Forrester Research.”
If the OSS vendors/project promoters are taking on the bulk of the development cost, they must be able to recover that cost somehow. Which brings us to the next problem as outlined by Matt Asay (on his CNET blog on OSS business who also refers to above quotes) who points out the problem that OSS vendors face when dealing with enterprises:
“Howlett [discussing maintenance charges in general ] suggests that software vendors are right to charge a big upfront license fee as it helps to defray the high initial cost of supporting a customer's deployment of the software. I hadn't really thought of that before, but it makes sense. Open-source vendors chop off the license fee and only charge for maintenance and support, which means they assume pretty much all of the risk/cost in the first year of a contract.”
However, it isn't necessarily easy to get the customer to buy the multi-year support agreement. Going back to Forrester, one customer is quoting as saying:
"We've been paying a third party for support, but after a year, we're not sure of the value. We'd like to avoid the costs of self-support, but we also don't want to throw money away."
If the enterprise isn’t that keen on the multi-year license, the OSS vendor has an even bigger problem and Matt suggests that one solution is to move back towards to commercial software licensing models though extensions to the OSS project…
“Open-source vendors get around this by pushing for multi-year agreements, which is a way of evening out risk and fairly apportioning it between vendor and buyer, but this is only one way to even out that risk. Other ways include adding commercial extensions to help compel renewals in order to make the vendor/customer relationship profitable for both parties.”
All of which brings us back to the title: If the OSS revolution is here to stay, a business model needs to emerge which rewards the OSS vendors for their work while giving the customer the benefits of OSS – and these benefits can’t simply be free software.
Ronan
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This is an interesting problem. The "support" licensing does seem like a really tough sell for small OSS vendors, with the exception of a few. It seems like for OSS in complex environments (like integration, for example), the one area where customers are very willing to open their checkbooks is around services - helping them spec out the solution that's right for their environment, and walk them through the entire process. But most OSS start-ups don't seem to like the margins of being a "services" company, and instead are trying to chase down large support contracts that solve problems that the customer doesn't necessarily perceive that they have (and OSS that's running extremely well / reliably and has great documentation actually gets in its own way by being too good, and making the customer feel too comfortable to feel the need for a throat to choke). Being a commercial OSS "services" company requires having a really good team of sales engineers, which is among the tougher hires for any start-up. And in fact it seems like many commercial OSS start-ups have such a shortage of quality sales engineers that they (too) often rely on the founder of the OSS to field almost every single sales inquiry (which pulls them away from where they would typically prefer to be spending their time: working on new features and functionality for the OSS).