OK, you’ve released your open source product and built a huge userbase. Now your shareholders/investors are pressing you to monetize that userbase. How do you do it? There are many ways to monetize open source. For simplicity, let’s segment the revenue sources according to who is paying:

Users :
Your users probably downloaded your product for free. Some are willing to pay for certified/approved distributions, maintenance, updates, support and more. Because open source turns your product and services into commodities, you will need to leverage your brand, and the expertise that it embodies, to maintain premium pricing.

Another good revenue source is certified education. If you’ve built a large userbase, businesses clearly see value in your product. As a result, employees and job-seekers will enhance their personal value and marketability if they are certified experts with your product. Assemble copyrighted educational …

In a prior blog post , I explained how the "open source + paid support " business model only works for software products that address extremely large markets. However, even those large market products rely upon a rich collection of niche market products that combine to deliver solutions.

As the book Crossing the Chasm explains, every technology product must make the move from its early adopter or hobbyist roots to a mainstream application. The hobbyists are willing to accept tinkering with the product to make it work, but the much larger mainstream market wants to buy proven solutions .

As John Donne once said, "no man is an island." Similarly, no software application is an island; each one relies on an orchestra of tools, applications and services necessary to …

In a prior blog post , I explained how the "open source + paid support " business model only works for software products that address extremely large markets. However, even those large market products rely upon a rich collection of niche market products that combine to deliver solutions.

As the book Crossing the Chasm explains, every technology product must make the move from its early adopter or hobbyist roots to a mainstream application. The hobbyists are willing to accept tinkering with the product to make it work, but the much larger mainstream market wants to buy proven solutions .

As John Donne once said, "no man is an island." Similarly, no software application is an island; each one relies on an orchestra of tools, applications and services necessary to …

We know that the open source + paid support business model works for software products that have extremely large numbers of users, but does it scale to products with medium or small numbers of users?

Software is often described as a stack (see the simplified version below).

Vertical Applications [Installed base = small]
————————–
Middleware (e.g. Database) [Installed base of MySQL = 12 Million]
————————–
Operating System [Installed base of Windows = 1Billion+]

Companies in the operating system layer typically have large numbers of users with a small license fee per user. This dynamic makes it relatively painless for a company to forgo a small license fee in exchange for a larger userbase, and then make money on support. For example, an open source company might forgo the $100 license fee, but charge $15 a seat for support. With large numbers of users, the …

"The support model doesn’t scale well." - Matthew Aslett, The 451 Group

How do you make money with open source? I’ve written about open source business models previously, but I thought it might be valuable to quantify the impact of open source on your business model. The following analyzes the differences between a closed source model and an open source + paid support business model, using an apples-to-apples comparison based on a $100 license fee for the closed source product.

Option 1: Closed source
License Fee: $100
Annual Maintenance & Support: $18 (18%)
5-Year Present Value of License + Support: $175 (1)
Conversion Rate: 100%
Userbase: 1X
Relative Revenue: $175

Option 2: Open source
License Fee: $0
Annual Maintenance & Support: $18 (2)
5-Year …

How does IBM’s open source strategy compare to Sun’s? Or Microsoft’s? What’s the difference between MySQL’s strategy and JasperSoft’s? Are some strategies better suited to engaging with organic open source communities, rather than inorganic? What on earth is the Open Core model?

These are some the questions we hoped to try and address with our Open Source is Not a Business Model report, published in October last year. As I mentioned yesterday, however, without an agreed set of definitions and a common vocabulary it is difficult for a broader understanding the implications of the various models to develop.

One of the ways we might be able to do that is to map the categories we used in our …

I received an email from Tarus Balog, CEO of OpenNMS Group, on Friday, taking issue with the language I had used to describe two open source vendors (and I use that term deliberately).

Essentially Tarus objected to me using the term “open source vendor” to describe two companies with Open Core licensing strategies. His email raises a valid point about how we determine which companies are considered “open source vendors” and I wanted to use the opportunity to outline the rules I use to make that decision.

As a technical snafu at our end had prevented Tarus from leaving a comment on the blog I hope he won’t mind me using his words to explain the issue he raised.

He wrote:

“You …

I’ve been thinking about the business of what’s variously come to be called commercial open-source and enterprise open-source. I’m interested in the gestalt — the product, development processes, marketing, licensing and so on.

MySQL has tried many different ways to earn money. These include dual licensing, support subscriptions, a knowledgebase, consulting, an Enterprise/Community split, [...]

There have been plenty of blog entries and writings about the MySQL Query Analyzer, for what I think are good reasons. Labeling it a potential Killer App, causing many MySQL users to become paying Sun customers, may be a daring thing. However, the Query Analyzer might very well have what it takes. The key benefit of it is that it identifies the source of performance bottlenecks. In that sense, one could perhaps instead call it a profiler, as it analyses the set of all queries going on, as opposed to an individual one. One person to whom I described it said “ah, so …

Simon Phipps yesterday blogged about the emerging Sun Model for Open Source business:

As time has gone by, a clear “Sun Model” for open source business has been emerging, at least to my eyes. The summary of it is:

1. remove barriers to software adoption between download and deploy;
2. encourage a large and cohesive community of software deployers;
3. deliver, for a fee, the means to create value between deploy and scale, for those who need it.

Each software team at Sun interprets this model in a slightly different way, but the model holds pretty much everywhere and works regardless of the license for the code. As a business model, it …