Open source is not a business model
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- Alexandrina Sherman
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1 Open source is not a business model Matthew Aslett, Analyst, Enterprise Software Eclipse Open Source Executive Strategy Summit March 26, 2009 Santa Clara Convention Center Santa Clara
2 About The 451 Group Independent technology industry analyst company Focused on the business of enterprise IT innovation 700+ customers across Vendors Investors (150 VCs and 80 Investment Banks) Service-providers (SIs, consulting, etc.) End users Offices in New York (HQ), Boston, London, SF 80+ total employees w/ 35+ analysts
3 451 CAOS Research Service Commercial Adoption of Open Source The impact of open source on software vendors, end users, and investors 451 CAOS Reports = comprehensive big-idea reports 451 CAOS Analyst Access = advisory interaction with 451 open source analysts 451 CAOS Insight Update = with links to recent 451 open source research 451 CAOS Theory = a blog for the enterprise open source community 451 CAOS podcast = bi-weekly podcast with analysis of key current marketplace developments 451 CAOS Links live = latest news and
4 Open source is not a business model How do vendors generate revenue from open source software? Published: October 2008 Enquiries to: sales@the451group.com
5 Report methodology/key findings Analysis of 114 open source-related vendors Based on ongoing coverage, survey, interviews Categorized business strategies based on: license choice development model vendor licensing strategy revenue trigger Most vendors utilize some form of commercial licensing to distribute, or generate revenue from, open source software Half combine code developed via open source projects with software developed outof-sight of open source project members
6 Further key findings Vendors using hybrid development and licensing models balance higher development and marketing costs with increased revenue-generation opportunities The license used for an open source project (reciprocal or permissive) has a strong influence on development, vendor licensing and revenue-generation strategies. The line between closed and open source has blurred as FOSS is embedded in proprietary products and commercial extensions have been added to FOSS
7 Categorizing open source Software license choice Development model Vendor licensing strategy Revenue triggers
8 Software license choice
9 Development model Community open source Vendor open source Mixed open source Hybrid Hybrid vendor Hybrid community Hybrid mixed
10 Development model research findings
11 Vendor licensing strategy Single Open Source Assembled Open Source Dual licensing Open-Core Licensing Open-and-Closed Closed
12 Vendor licensing research findings
13 Revenue triggers Service/Support Subscriptions Commercial License Software-as-a-Service Advertising Custom Development Embedded Hardware Embedded Software Other Products and Services Any combination of the above
14 Revenue triggers research findings
15 The evolution of vendor-led revenue strategies Embedded Community Customers Support Open source core Open Closed Subscription Support Open source core Value-add Subscription Support Open source core Extensions Value-add Subscription Support Open source core Extensions Value-add Subscription Support Open source core
16 Symbiotic relationships The license used for an open source project (reciprocal or permissive) has a strong influence on development, vendor licensing and revenue-generation strategies. Development strategy also influences vendor licensing strategy. Vendor licensing strategy also influence revenuegeneration strategy. What came first?
17 Impact of license choice
18 Impact of development model
19 Further research More in the report: How these strategies are being used by which vendors Relative strengths and weaknesses of each strategy category How third parties generate revenue from open source The commercial implications of permissive and reciprocal licenses Future revenue generation strategy trends; sales strategy trends
20 Report conclusions There is no single business model that defines open source vendors Most vendors are taking a hybrid approach to development and/or licensing Vendors use both open source and proprietary development and licensing models to maximize opportunities for revenue and profit Open source is a business tactic, not a business model
21 Beyond open source is not a business model Four stages of open source development Five stages of open source community engagement Managing community engagement Why is this important?
22 Four stages of open source development Enterpriselevel code development/ contribution Software developed by communities of individuals Vendors begin to engage with the existing developer communities. 3.0 Vendor-dominated open source development/distribution projects. 4.0 Vendor-dominated development communities Time 2009
23 Five stages of open source community engagement 5 VALUE CO-CREATION Source: Eclipse Foundation/Carleton University and Nortel 2 USE 3 CONTRIBUTE 4 CHAMPION VALUE APPROPRIATION COUPLING MANAGEMENT 1 DENIAL ENGINEERING DRIVEN BUSINESS DRIVEN SINGLE PROJECT SCOPE MULTIPLE PROJECT
24 Managing community engagement Hire a community manager Don t try to manage the community Understand community needs Respond to community needs Contribute Be transparent
25 The importance of transparency Red Hat: Transparency builds trust Participation solves problems Open source provides an answer Open source provides an answer Participation solves problems Transparency builds trust
26 Why is this important? This classification effort reflects my own desire for transparency this classification is geared to help users find themselves in this constantly changing market. It also helps precisely evaluate the open source market as compared to traditional technologies. Bertrand Diard, Talend FLOSSmetrics taxonomy Carlo Daffara, Conecta
27 Towards an agreed taxonomy Formulate an agreed set of definitions Provide a common vocabulary Enable a better understanding
28 Q&A Matthew Aslett Analyst, Enterprise Software Phone: AIM/Skype: matthewaslett Twitter: Web: Blog: 18 September 2008 The 2009 Mirage by The 451 Hotel Group. Las All rights Vegas, reserved Nevada
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