A business model for open source?

A story about some more enterprise-level contributions to open-source had me thinking about just what the business model is for open-source software (OSS). I have seen people talk about business models where they say that you won't be able to sell software in the areas for which there is OSS, but that you could make money from providing support.

That misses the point, though. What is the business model in the sense of who pays for the development work? Sure, some work is done by individuals in their spare time, but a lot of OSS is being developed by large companies. Those companies are paying real money for this work, so there has to be a real business model.

Sun Microsystems is an interesting example. They recently established an open-source office, staffed by Simon Phipps (who, on my one and only evening in Dublin, took me to a sushi restaurant. But that's another story). Sun's major OSS contributions to date, at least in my mind, are StarOffice and Solaris. Java is similar, being free, if not OSS according to some purist definitions.

Sun, by revenue, is a hardware company. The software that they are open-sourcing wouldn't be a great money-spinner for them as a commercial offering, but it does help establish the credibility of Sun hardware as a platform for enterprises to deploy their software on. This is part of the same golden rule I see for most OSS - you open-source software that isn't part of your core business, that isn't part of your core revenue streams.

Why? Well, large companies often develop software tools that they don't want to purchase, either because of outright purchase cost or because they need something different to what is on offer. Having written it, they face the ongoing cost of maintaining it. However, if it isn't core business, they can open-source it, and hopefully a community of users will take over the maintenance for them. It's somewhat win-win. That is, unless you were a software company that had a commercial offering in a space that suddenly has an open-source alternative. You can be in serious trouble then. In a lot of cases, it is the OSS alternative that will win. When there is no purchase cost, individual IT developers can bring in a copy of an OSS tool, do something with it, then show their employers and tell them that it won't cost any further money in licences. Project managers with strained budgets love that story.

Now, that isn't such a bad thing, and I use a lot of OSS myself. However, if we end up in a world where most software is written and/or supported by companies for whom it isn't core business, that could introduce a serious level of operational risk. Sometimes you buy software for an enterprise because you want software from someone whose livelihood depends on that software working as advertised. When software isn't the core business, that imperative is gone.

We are a long way from this scenario yet, but it is a trend that I will be watching.