Welcome!

Open Source Cloud Authors: Elizabeth White, Derek Weeks, Stackify Blog, Liz McMillan, Dynatrace Blog

Related Topics: Open Source Cloud, CRM

Open Source Cloud: Blog Feed Post

Online Music and Open Source Business Models

Let’s take a look at our friends in the online music space and see what we can learn from them

In this part of our series on An Open Source Business, let’s take a look at our friends in the online music space and see what we can learn from them.

The Deal recently had an article about online music startups which should strike a chord with anybody who’s thinking about or trying to make a business out of open source.  Look at what they had to say:

“huge numbers, lots of hype, a surfeit of hope and a major chance of failure… some of the business models are inherently economically unfeasible… It’s completely unsettled and more and more fragmented…The rules of the industry and the economics of the industry have completely changed…Technological advances offer more and more delivery mechanisms, user options and wizardly new features…However, just who can make money off all this is almost as uncertain now as it was five years back…Everyone is gambling there will be a way to monetize distribution of recorded music, But no one has come up with the solution…Last year’s great hopes are this year’s busts.”

Sound familiar?  It should.  In a nutshell, open source business models share the same strategic problem that these online music startups have: how do you make any money when most of what you provide is available for free? Let’s look at the ways:

Free the Software, Sell the Services
Just about every commercialized open source project follows this business model.  The software is free, but the developers charge for services such as support, training, customization, and software development.  Sometimes the services are “productized” into manuals, seminars, installation CD’s, and packaged support, but the idea is the same.

This model works well…to an extent.  For example, we’re the main developers of opentaps Open Source ERP + CRM, and we’ve found that users are indeed willing to engage us for opentaps-related services because of our experience and knowledge with the system.  However, we’ve also found that users are willing to hire us mostly for customizations which are unique to their needs.  We’re still responsible for the architecture and user interface of opentaps ourselves, and that’s why since the release of opentaps 1.0 we’ve invested in everything from integrating Spring, Hibernate, and the Google Web Toolkit to building a Domain Driven Architecture.

Like the Free Version?  Please Pay Us for Even More!
Many open source software developers, and virtually all open source software companies funded by venture capitalists, engage in the “commercial/open source” model.  An open source edition is available free of charge to attract potential users, and a fancier commercial version is available for pay.

This is not an easy business model.  Let’s go back to music as an example.  I like Pink Floyd, but if you gave me The Dark Side of the Moon for free, would I pay you for Ummagumma, The Final Cut, and every other song by Pink Floyd?  No, I wouldn’t.  (Another example is travel: how many people actually pay for First Class?)

But perhaps the best evidence that this is a difficult business model comes from the commercial open source companies themselves.  Compared to a few years ago, their websites are de-emphasizing the open source version (sometimes you really have to look even to find the download page), and their “community edition” licenses are increasingly restrictive.

Nevertheless, I think this is a model which could be very successful if two conditions are met:

  1. You must have a very large open source user base.  Think MySQL.
  2. You must segment that user base carefully and identify the unique needs for your “enterprise edition” product.  The need must be fundamental — a little bit of eye candy and a few cool features alone won’t be enough.

Be careful, though: if you execute this model incorrectly, you could easily lose the goodwill of your open source users and unwittingly give away a viable commercial product for free.

The Alchemy of Open Source
There is a famous story of the Stone Soup, where many free ingredients came together to make an amazing finished product.  Lest you think it’s just a fable, Red Hat and Ubuntu do exactly that–they’ve combined major open source projects such as Linux, Gnome, Apache, Firefox, Thunderbird, OpenOffice, and MySQL and built major businesses from them.

This is the business model we’ve chosen for opentaps so far.  We’ve built opentaps from major open source projects such as Apache, Funambol, Google Web Toolkit, Jasper Reports, Pentaho, MySQL, PostgreSQL, and too many others to name here.  We’ve had to be patient at times, but over the years, we’ve grown as all those other projects have matured.  Amazingly enough, these open source projects have put us years ahead of many commercial ERP systems technically and enabled us to build opentaps sustainably, so that we now have a fully integrated ERP and CRM system with business intelligence, ecommerce, and mobility integration without any VC funding.

But this is not an easy business model to execute.  You must be willing to understand other open source projects and have the technical ability to work with them.  Most importantly, you need patience.  With this business model, you are growing with the community of open source projects.

In the End . . .  Just Make it Better
No matter what business model you choose, ultimately you’ll succeed if you make technology easier and better for your users. In the online music world, there actually has been a great success story — iTunes.  They’ve done it by making downloading music easy and fun.  So learn from them.  If you can make software easy and fun, you will be successful.  Next to a great product, the business model is just a footnote.

In the next part of An Open Source Business, we’ll take a look at marketing strategies for open source software.

Read the original blog entry...

More Stories By Si Chen

Si Chen is the founder of Open Source Strategies, Inc. and Project Manager for opentaps Open Source ERP + CRM (www.opentaps.org).

@ThingsExpo Stories
SYS-CON Events announced today that Cloudistics, an on-premises cloud computing company, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloudistics delivers a complete public cloud experience with composable on-premises infrastructures to medium and large enterprises. Its software-defined technology natively converges network, storage, compute, virtualization, and management into a ...
SYS-CON Events announced today that SD Times | BZ Media has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. BZ Media LLC is a high-tech media company that produces technical conferences and expositions, and publishes a magazine, newsletters and websites in the software development, SharePoint, mobile development and commercial UAV markets.
"I think that everyone recognizes that for IoT to really realize its full potential and value that it is about creating ecosystems and marketplaces and that no single vendor is able to support what is required," explained Esmeralda Swartz, VP, Marketing Enterprise and Cloud at Ericsson, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
My team embarked on building a data lake for our sales and marketing data to better understand customer journeys. This required building a hybrid data pipeline to connect our cloud CRM with the new Hadoop Data Lake. One challenge is that IT was not in a position to provide support until we proved value and marketing did not have the experience, so we embarked on the journey ourselves within the product marketing team for our line of business within Progress. In his session at @BigDataExpo, Sum...
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor - all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
SYS-CON Events announced today that MobiDev, a client-oriented software development company, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. MobiDev is a software company that develops and delivers turn-key mobile apps, websites, web services, and complex softw...
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
What sort of WebRTC based applications can we expect to see over the next year and beyond? One way to predict development trends is to see what sorts of applications startups are building. In his session at @ThingsExpo, Arin Sime, founder of WebRTC.ventures, will discuss the current and likely future trends in WebRTC application development based on real requests for custom applications from real customers, as well as other public sources of information,
China Unicom exhibit at the 19th International Cloud Expo, which took place at the Santa Clara Convention Center in Santa Clara, CA, in November 2016. China United Network Communications Group Co. Ltd ("China Unicom") was officially established in 2009 on the basis of the merger of former China Netcom and former China Unicom. China Unicom mainly operates a full range of telecommunications services including mobile broadband (GSM, WCDMA, LTE FDD, TD-LTE), fixed-line broadband, ICT, data communica...
SYS-CON Events announced today that Ocean9will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Ocean9 provides cloud services for Backup, Disaster Recovery (DRaaS) and instant Innovation, and redefines enterprise infrastructure with its cloud native subscription offerings for mission critical SAP workloads.
Things are changing so quickly in IoT that it would take a wizard to predict which ecosystem will gain the most traction. In order for IoT to reach its potential, smart devices must be able to work together. Today, there are a slew of interoperability standards being promoted by big names to make this happen: HomeKit, Brillo and Alljoyn. In his session at @ThingsExpo, Adam Justice, vice president and general manager of Grid Connect, will review what happens when smart devices don’t work togethe...
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
SYS-CON Events announced today that CA Technologies has been named “Platinum Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business – from apparel to energy – is being rewritten by software. From ...
SYS-CON Events announced today that Technologic Systems Inc., an embedded systems solutions company, will exhibit at SYS-CON's @ThingsExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Technologic Systems is an embedded systems company with headquarters in Fountain Hills, Arizona. They have been in business for 32 years, helping more than 8,000 OEM customers and building over a hundred COTS products that have never been discontinued. Technologic Systems’ pr...
SYS-CON Events announced today that Auditwerx will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Auditwerx specializes in SOC 1, SOC 2, and SOC 3 attestation services throughout the U.S. and Canada. As a division of Carr, Riggs & Ingram (CRI), one of the top 20 largest CPA firms nationally, you can expect the resources, skills, and experience of a much larger firm combined with the accessibility and attent...
SYS-CON Events announced today that HTBase will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. HTBase (Gartner 2016 Cool Vendor) delivers a Composable IT infrastructure solution architected for agility and increased efficiency. It turns compute, storage, and fabric into fluid pools of resources that are easily composed and re-composed to meet each application’s needs. With HTBase, companies can quickly prov...
SYS-CON Events announced today that Loom Systems will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded in 2015, Loom Systems delivers an advanced AI solution to predict and prevent problems in the digital business. Loom stands alone in the industry as an AI analysis platform requiring no prior math knowledge from operators, leveraging the existing staff to succeed in the digital era. With offices in S...
Buzzword alert: Microservices and IoT at a DevOps conference? What could possibly go wrong? In this Power Panel at DevOps Summit, moderated by Jason Bloomberg, the leading expert on architecting agility for the enterprise and president of Intellyx, panelists peeled away the buzz and discuss the important architectural principles behind implementing IoT solutions for the enterprise. As remote IoT devices and sensors become increasingly intelligent, they become part of our distributed cloud enviro...
SYS-CON Events announced today that T-Mobile will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. As America's Un-carrier, T-Mobile US, Inc., is redefining the way consumers and businesses buy wireless services through leading product and service innovation. The Company's advanced nationwide 4G LTE network delivers outstanding wireless experiences to 67.4 million customers who are unwilling to compromise on ...