Open Source finds it’s own business model

Writing on the evolution of open source software, Aztec Software’s Shirish Netke notes that “Open source is not about free software. It is really about a new business model for software services.” A 2004 InformationWeek study found that two-thirds of companies surveyed used open source products, and an additional 16% expected to implement open source software in 2005. While many companies are drawn to open source for the immediate cost savings it offers, others are attracted by the increased interoperability and larger resource pools that open source engenders.

While the proliferation of Linux is used as a benchmark for open source adoption, the real opportunity in open source is in infrastructure components such as databases, application servers and portals that form the “plumbing” of an enterprise software application. This boom in open source applications creates an additional boom in support businesses. Some companies provide their software for free, but create a revenue stream based on subscription, maintenance and support. Other vendors specialize in managing the legalities related to open source, while others specialize in providing knowledge workers with the skills they need to optimize their companies’ open source applications. “The new economics of open-source software are similar to the economics of free Internet search, TV, radio, or checking accounts,” writes Netke. “The money is not in the product; it’s in the services and value delivered around the product.” 

Sandhill 6 June 2005

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