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In the enterprise software business (and typically, the desktop software business as well), the most straightforward business model is to offer a product and ch

In the enterprise software business (and typically, the desktop software business as well), the most straightforward business model is to offer a product and charge people for it. That way, you get paid whenever people use your software (excepting for piracy). If you release your software under a free software license, users are not only free to look at the source and modify it, they are free to redistribute it to others who have not paid for it. If you can find a way to make free software work for you in a way that still allows you to earn a good living developing your software (such as by providing services), then more power to you. But for-profit software companies are not producing non-free software simply through myopia and ignorance.

aflag 18y ago
I haven't really taken the time to analyse that. Most of my work is academic and I fear I may not have enough economics background. I do have an early idea that it sounds more like a myth than a fact. Let's say a company wants to outsource the development of some software they need. They go ahead and contract your company. You develop it and sell it to them for a certain price. Even if the license is free it's not very likely that they will redistribute it for other companies, and even if they do, it probably won't fit their needs just right. OTOH, they will be able to call other companies (other than yours) to maintain your software. So they have that extra freedom. And it doesn't really hurt business because, if you do a better job maintaining your software than other people, chances are your client won't switch. There's also the case of the end desktop user. That's probably harder territory for earning money with free software. But I've never seen some company selling their software but giving the user a package with the GPL-licensed code. Sure, after a while there would be lots of other non-official sites to download the program from, but doesn't that already happen with all the proprietary softwares nowadays? And it's not like anti-piracy laws are doing any good against it. This way people may do their own derivative work, for which they might even charge just like you. Now you'll have competition, so things get more interesting and you have to make better stuff. Why can't that work? You can still charge for constant patches you deliver (though they are all GPL'd). If it's an online game, you might charge for your server, and so on. A big part of software nowadays seem to be services, anyway. Say google opens the source for their search engine. Why would you turn to a different site other than google.com? It would make great research environment, nonetheless. Even google could gain from it. So, what I'm saying is that I don't see a reason why people can't earn money while keeping their software free. Even though things might get a little different from what they are today. That's good, though, because today is far from perfect. And I think free software is a move in the right direction.
- wanorris 18y ago
  Red Hat charges for their Enterprise Linux, but releases it as open source. I forget the names, but there are now 3rd-party Linux distros that basically just redistribute RHEL freely to whoever wants them. If someone openly pirates your proprietary software, you have legal recourse. If someone openly redistributes your open source software, they are acting within their rights to do so. In fact, a third party repackager of RHEL even has the option of charging to provide service, at a discount from Red Hat's price, and they can do this perfectly legally. Short version of the economics: if you can charge for services, you can make money on open source, but only client by client -- you don't become more efficient the more services you sell, unlike with products (especially low-marginal-cost products like software). You have to add employees for each new hour of services you provide. So if you have a potentially popular product, all other things being equal, you have a higher potential for growth if you sell the product rather than the service. Of course, all other things aren't equal, which is why the desktop software market has been in decline since its heyday in the 90s. Because the marginal cost of each unit you ship is so low, when there's plenty of competition, you tend to see a race to the bottom on price (unless you can convince people to buy your product because it is the standard, as Microsoft has done). Many enterprise markets are small enough niches that (1) there are a limited number of competitors, and (2) if you give away your product, you may not easily be able to make up the revenue in any other way. On the other hand, if you have technically savvy clients, you may find it worth your while to offer them your source under a non-redistributable license. They still have to buy your product from you, but they can debug against the source, integration test, etc. This isn't free software (obviously), but it may be a happy medium for both you and your clients. And yes, when the option of selling (or monetizing in some other way) access to your server presents itself, that can be far more profitable than selling a client-side product. That's why World of Warcraft is ridiculously profitable, and it's why Google makes so much money. But it seems clear that this works better for some markets than others. I say all of this as someone who believes in free software wherever it is practical, but also as someone who makes a living writing software and wants to continue to do so. And, as Eric Raymond argued over a decade ago, for something like an operating system that is used by large numbers of people, there will be no shortage of free labor to produce an open source product. But people will probably only work on software for managing a multinational mineral extraction business if you pay them. So open source is a great idea for many, many things, but probably not for everything.

aflag 18y ago

I haven't really taken the time to analyse that. Most of my work is academic and I fear I may not have enough economics background. I do have an early idea that it sounds more like a myth than a fact. Let's say a company wants to outsource the development of some software they need. They go ahead and contract your company. You develop it and sell it to them for a certain price. Even if the license is free it's not very likely that they will redistribute it for other companies, and even if they do, it probably won't fit their needs just right. OTOH, they will be able to call other companies (other than yours) to maintain your software. So they have that extra freedom. And it doesn't really hurt business because, if you do a better job maintaining your software than other people, chances are your client won't switch. There's also the case of the end desktop user. That's probably harder territory for earning money with free software. But I've never seen some company selling their software but giving the user a package with the GPL-licensed code. Sure, after a while there would be lots of other non-official sites to download the program from, but doesn't that already happen with all the proprietary softwares nowadays? And it's not like anti-piracy laws are doing any good against it. This way people may do their own derivative work, for which they might even charge just like you. Now you'll have competition, so things get more interesting and you have to make better stuff. Why can't that work? You can still charge for constant patches you deliver (though they are all GPL'd). If it's an online game, you might charge for your server, and so on. A big part of software nowadays seem to be services, anyway. Say google opens the source for their search engine. Why would you turn to a different site other than google.com? It would make great research environment, nonetheless. Even google could gain from it. So, what I'm saying is that I don't see a reason why people can't earn money while keeping their software free. Even though things might get a little different from what they are today. That's good, though, because today is far from perfect. And I think free software is a move in the right direction.

wanorris 18y ago
Red Hat charges for their Enterprise Linux, but releases it as open source. I forget the names, but there are now 3rd-party Linux distros that basically just redistribute RHEL freely to whoever wants them. If someone openly pirates your proprietary software, you have legal recourse. If someone openly redistributes your open source software, they are acting within their rights to do so. In fact, a third party repackager of RHEL even has the option of charging to provide service, at a discount from Red Hat's price, and they can do this perfectly legally. Short version of the economics: if you can charge for services, you can make money on open source, but only client by client -- you don't become more efficient the more services you sell, unlike with products (especially low-marginal-cost products like software). You have to add employees for each new hour of services you provide. So if you have a potentially popular product, all other things being equal, you have a higher potential for growth if you sell the product rather than the service. Of course, all other things aren't equal, which is why the desktop software market has been in decline since its heyday in the 90s. Because the marginal cost of each unit you ship is so low, when there's plenty of competition, you tend to see a race to the bottom on price (unless you can convince people to buy your product because it is the standard, as Microsoft has done). Many enterprise markets are small enough niches that (1) there are a limited number of competitors, and (2) if you give away your product, you may not easily be able to make up the revenue in any other way. On the other hand, if you have technically savvy clients, you may find it worth your while to offer them your source under a non-redistributable license. They still have to buy your product from you, but they can debug against the source, integration test, etc. This isn't free software (obviously), but it may be a happy medium for both you and your clients. And yes, when the option of selling (or monetizing in some other way) access to your server presents itself, that can be far more profitable than selling a client-side product. That's why World of Warcraft is ridiculously profitable, and it's why Google makes so much money. But it seems clear that this works better for some markets than others. I say all of this as someone who believes in free software wherever it is practical, but also as someone who makes a living writing software and wants to continue to do so. And, as Eric Raymond argued over a decade ago, for something like an operating system that is used by large numbers of people, there will be no shortage of free labor to produce an open source product. But people will probably only work on software for managing a multinational mineral extraction business if you pay them. So open source is a great idea for many, many things, but probably not for everything.