Best Practice in Innovation, Entrepreneurship & Design Open-source business models: Creating value from free stuff' 31 March 2010-18.00 to 19.30 Panellists: Prof. Bart Clarysse - Chair in Entrepreneurship, Imperial College Business School Ryan Ozimek - President, Open Source Matters and Co-Founder, CEO, PICnet Inc. Robert Ackland Technology Manager, The Symbian Foundation Prof. John Mullins - The David and Elaine Potter Foundation Term Chair in Entrepreneurship and Marketing, London Business School
Prof. Bart Clarysse Chair in Entrepreneurship b.clarysse@imperial.ac.uk Open Source
Agenda What is Open Source? History of Open Source Open Source Licenses Business Models of Open Source Conclusion
What is Open Source? Open source is a development method for software that harnesses the power of distributed peer review and transparency of process. (Open Source Initiative, OSI: www.opensource.org) Source code is available (different from shareware for instance) Everyone can contribute to development Usage, modification and redistribution of source code are permitted under the corresponding license conditions OS software: Better quality, higher reliability, low cost
History of Open Source (1/2) Early 1960s to early 1980s: Operating systems were being developed in academic settings like Berkeley & MIT, operating code was being shared. Co-operative software development was being undertaken for UNIX Early 1980s: AT &T began enforcing its IP rights related to UNIX 1983: Free Software Foundation was setup by Richard Stallman, and GNU project is launched 1989: General Public License (GPL) was written as part of GNU project Simple Economics of Open Source, Lerner & Tirole, Journal of Industrial Economics, June 2002, Vol. L(2)
History of Open Source (2/2) 1991: Linus Trovalds makes his Unix Kernel, LINUX, available. Early 1990s: Rise in internet access leads to acceleration of OS activity. Interactions between commercial companies and OS community rise. New Open Source projects emerged. 1998: The term Open Source is announced by Eric Raymond, Open Source Initiative (OSI) established. Today: Nearly 222,000 Open Source projects listed on SourceForge.net Simple Economics of Open Source, Lerner & Tirole, Journal of Industrial Economics, June 2002, Vol. L(2)
Open Source Licenses (1/3) 66 OS licenses listed on OSI (Open Source Initiative) GNU GPL, GNU LGPL, BSD, Apache License, MIT are listed as popular and widely used licenses by strong communities Copyleft: the right to distribute copies and modified versions of a work and requiring that the same rights be preserved in modified versions of the work Restrictive Permissive Strong-Copyleft Weak-Copyleft No-Copyleft -GNU GPL -GNU LGPL -BSD license -Mozilla -MIT license
Open Source Licenses (2/3) Strong-copyleft: Derivative work based on the original must be licensed similarly Weak-copyleft: Derivative work based on the original must be licensed similarly However, derivative software can be released under a different license under certain conditions Large works incorporating such software can be kept proprietary No copyleft: Developers are not obliged to inherit the license of the original software for any derivative software Determinants of the choice of OS license, Sen et al.,journal of Management Information Systems, 2008, Vol 25 (3) Choosing an Open Source License, Engelfriet, A. IEEE Software, Jan/ Feb 2010
Open Source Licenses (3/3) On 25 th March 2010, SourceForge.net hosted 221979 Open Source Projects Open Source License distribution on SourceForge.net 28.21% 49.67% GNU GPL : 49.7% GNU LGPL: 8.5% BSD License: 5.5% Apache License: 3.1% 2.17% 3.15% 2.84% 5.48% Public Domain License: 3% MIT License: 2.2 % Rest: 28.2 % 8.49% GNU GPL GNU LGPL BSD Public Domain License Apache License MIT Rest
Business Models of Open Source Company that owns OSS» Dual License» Consulting and support services» Loss leader for traditional commercial software» Custom development» Merchandise/ Accessorising» Reducing development costs Third-parties using non-corporate/ community OSS» Developing derivative products and extensions» Consulting and support services
Who makes money with OSS OSS Corporate owned Community owned Corporate owner Community Thirdparties
Ways of making revenues with Open Source 1) Corporate Owner A. Reduce development costs B. Generate revenues» Dual License/ Loss leader for traditional commercial software (e.g. Alfresco Software, DotNetNuke)» Consulting and support services (e.g. Acquia, ez Systems)» Custom development (e.g. Automattic Inc, Silverstripe)» Developing Extensions (e.g. Alkacon Software)
Case: Alfresco Software, Inc CMS: Alfresco Dual Licensing for Alfresco Open Source CMS» Subscriptions for Enterprise Edition» Training & Consulting Founded in 2005 (UK) License: GNU GPL VC funding: $19.45 million # employees: 37 Sales: 7.8 million
Case: DotNetNuke Corporation CMS: DotNetNuke Dual licensing and commercial services Founded in 2002 (USA) License: MIT License VC funding: $ 8 million (+) # employees: 16
Case: Acquia CMS: Drupal Commercial support services for Drupal Founded by Drupal creator Dries Buytaert in 2007 (USA) License: GNU GPL VC funding: $ 15 million # employees: 25 Sales: $ 1.9 million
Case: ez Systems CMS: ez Publish Training and Consultation Services Founded in 1999 (Norway) License: GNU GPL, BSD, Own licenses VC funding: $ 5 million (+) # employees: 85 Sales: 3.3 million Profits:.15 million
Case: Automattic Inc. CMS: WordPress Custom development, hire-out consultants Founded in 2005 (USA) License: GNU GPL VC funding: $ 29.5 million (+) # employees: 3 Sales: $ 0.19 milion
Case: SilverStripe, Ltd. CMS: SilverStripe Custom Website Development Founded in 2005 (New Zealand) License: BSD License VC funding: No SilverStripe recorded 190% revenue growth between 2007 and 2009, ranking SilverStripe the 37th fastest growing business in New Zealand as calculated by Deloitte for their 2009 New Zealand Fast 50 awards
Case: Alkacon Software CMS: OpenCMS Developing Extensions Founded in 2000 (Germany) License: LGPL VC funding: No # employees: 10 Sales: 1 million
Who makes money with OSS OSS Corporate owned Community owned Corporate owner Community Thirdparties
Ways of making revenues with Open Source 2) Community Pay off the server and hosting expenses» Merchandise/ Accessorising (e.g. Joomla!, DokuWiki)» Donations (e.g. e107, MediaWiki, Impress CMS)» Advertising (e.g. ModX) 3) Third-parties Generate revenues» Developing derivative products and extensions» Consulting and support services
Third Parties-Joomla Extensions and Service Providers ~300 micro and small companies, none have VC investment Statistics* Employees: 3 (900) # 2006- Revenues: 51,197 ( 15.4 million) 2007- Revenues: 115,706 ( 34.7 million) 2008- Revenues: 124,237 ( 37.2 million) 2006- Net Income: 12,786 ( 3.9 million) 2007- Net Income: 11,892 ( 3.6 million) 2008- Net Income: 13,576 ( 4.1 million) *MEDIAN values based on financial data for EU companies available in Amadeus database # Extrapolated for 300 companies
Conclusion Open Source is indeed changing how software is built and how money is made!
Biz meets open source CMS A short, practical example of business success in a free stuff marketplace Ryan Ozimek Imperial College Business School March 31, 2010
Who am I? Ryan Ozimek Chief Executive Officer, PICnet President, Open Source Matters Evangelist, open source software Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 25
Overview Joomla!: an open source success story Business ecology around the Joomla software Micro-level implementation and success Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 26
The key market opportunity Open source freedom means free as in free kittens An ecology of businesses blossom around providing services and extended the value of open source software Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 27
The key market opportunity deliverables Infrastructure tools and services Productised add-on functionalities Implementation services Customisation services Education and training Support services Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 28
A short story of open source success Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 29
Joomla s success story Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 30
Joomla s success story Content management system (Web framework) Created by a corporation in Australia Open sourced to the community Community involvement skyrockets, development boom Small businesses begin selling add-ons Consulting firms provide implementation services Cloud computing firms virtualise services The results Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 31
Joomla s success story 15,605,591 downloads of Joomla 1,992,970 posts on the Joomla forums 365,883 registered community members 201,200+ registered developers 2,000,000+ estimated live sites 4,565 registered extensions (add-ons), all GPL licensed Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 32
Possible business models? Products Services Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 33
Product models Design templates Development extensions Packaged suite offerings Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 34
Design templates Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 35
Develop productised extensions Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 36
Service models Custom design/development services Retained support services Product delivery models Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 37
Success is in servicing the niche markets www.nonprofitsoapbox.com Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 38
Success is also in the long tail Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 39
A short story of an OSS + biz relationship Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 40
PICnet s short history 1999 an NGO trip to Kosovo Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 41
PICnet s short history 2001 a political Web portal Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 42
PICnet s short history 2003 open source Web development firm Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 43
PICnet s short history 2007 software as a service provider platform Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 44
Integrate, don t reinvent Open source tools can provide the pivot point It s 2010, there s TONS of great software and Web services out there. Add value by delivering the niche solutions to the marketplace. Use the right tools for the problem Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 45
Be a bridge builder Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 46
How to build bridges Build it yourself Build it together with the community Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 47
Relationships are greater than the tools > Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 48
What to look for in your OSS community Active communities with strong diversity (engineers, businesses, users, views and values) Strong local language community Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 49
What to look for in your OSS community Lots and lots of users, leverage the crowds Joomla has more than 300k registered and active users, with more than 15.6 million downloads Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 50
Nurture relationships with the community Free support! Easier access to thought leaders and experts your business might need for future solutions Opportunity to reach large community of potential users Cultivate relationships, don t just use tools Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 51
Impact of Joomla s success More than 2 million easy to manage sites published Code valued at more than US$2,000,000 Provisioning of powerful and affordable software to those who normally couldn t afford it Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 52
Thanks! Ryan Ozimek CEO, PICnet www.picnet.net President, Open Source Matters www.joomla.org Twitter: @cozimek cozimek@picnet.net Imperial College Business School Ryan Ozimek @cozimek March 31, 2010 53
Symbian Ltd was founded 100 million phones shipped 2006 250 million phones shipped 250 different phone models 2008 2009 Initial code contribution Nokia acquires Symbian Ltd 1998 Copyright 2009 Symbian Foundation. Public