open source business models - clarysse

7/28/2019 Open Source Business Models - Clarysse

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Best Practice in Innovation, Entrepreneurship & Design

Open-source business models: Creating valuefrom free stuff'

31 March 2010 - 18.00 to 19.30

Panellists: Prof. Bart Clarysse - Chair in Entrepreneurship, Imperial College Business School Ryan Ozimek - President, Open Source Matters and Co-Founder, CEO, PICnet Inc. Robert Ackland Technology Manager, The Symbian Foundation Prof. J ohn Mullins - The David and Elaine Potter Foundation Term Chair in

Entrepreneurship and Marketing, London Business School


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Open Source

Prof. Bart ClarysseChair in [email protected]


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Agenda

What is Open Source?

History of Open Source

Open Source Licenses

Business Models of Open Source

Conclusion


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What is Open Source?

Open source is a development method for software that harnessesthe power of distributed peer review and transparency of process.

(Open Source Initiative, OSI: www.opensource.org)

Source code is available (different from shareware for instance)

Everyone can contribute to development

Usage, modification and redistribution of source code are permittedunder the corresponding license conditions

OS software: Better quality, higher reliability, low cost
http://www.opensource.org/http://www.opensource.org/


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History of Open Source (1/2)

Early 1960s to early 1980s: Operating systems were being

developed in academic settings like Berkeley & MIT, operating

code was being shared. Co-operative software development was

being undertaken for UNIX

Early 1980s: AT &T began enforcing its IP rights related to UNIX

1983: Free Software Foundation was setup by Richard Stallman,

and GNU project is launched

1989: General Public License (GPL) was written as part of GNU

project

Simple Economics of Open Source, Lerner & Tirole, J ournal of I ndustrial Economics, J une 2002, Vol. L(2)


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History of Open Source (2/2)

1991: Linus Trovalds makes his Unix Kernel, LINUX, available.

Early 1990s: Rise in internet access leads to acceleration of OS

activity. Interactions between commercial companies and OS

community rise. NewOpen Source projects emerged.

1998: The term Open Source is announced by Eric Raymond,

Open Source Initiative(OSI) established.

Today: Nearly 222,000 Open Source projects listed on

SourceForge.net

Simple Economics of Open Source, Lerner & Tirole, J ournal of Industrial E conomics, J une 2002, Vol. L(2)


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Open Source Licenses (1/3)

66 OS licenses listed on OSI (Open Source Initiative)

GNU GPL, GNU LGPL, BSD, Apache License, MIT are listed as

popular and widely used licenses by strong communities

Copyleft: the right to distribute copies and modified versions of a

work and requiring that the same rights be preserved in modified

versions of the work

Restrictive PermissiveStrong-Copyleft Weak-Copyleft No-Copyleft

-GNU GPL -GNU LGPL -BSD license-Mozilla -MIT license


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Open Source Licenses (2/3) Strong-copyleft:

Derivative work based on the original must be licensed similarly

Weak-copyleft: Derivative work based on the original must be licensed similarly

However, derivative software can be released under a differentlicense under certain conditions

Large works incorporating such software can be kept proprietary

No copyleft:

Developers are not obliged to inherit the license of the originalsoftware for any derivative software

Determinants of the choice of OS license, Sen et al.,J ournal of Management Information Systems, 2008, Vol 25 (3)Choosing an Open Source License, Engelfriet, A. I EEE Software, J an/ Feb 2010


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Open Source Licenses (3/3)

On 25th March 2010, SourceForge.net hosted 221979 Open Source Projects

49.67%

8.49%

5.48%

2.84%

3.15%

2.17%

28.21%

Open Source License distribution on SourceForge.net

GNU GPL GNU LGPL BSD Public Domain License Apache License MIT Rest

GNU GPL : 49.7%

GNU LGPL: 8.5%

BSD License: 5.5%

Apache License: 3.1%

Public Domain License: 3%

MIT License: 2.2 %

Rest: 28.2 %


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Business Models of Open Source Company that owns OSS

Dual License

Consulting and support services

Loss leader for traditional commercial software

Custom development

Merchandise/ Accessorising

Reducing development costs

Third-parties using non-corporate/ community OSS

Developing derivative products and extensions



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Who makes money with OSS

OSS

Corporate

owned

Corporate

owner

Community

owned

CommunityThird-

parties


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Ways of making revenues with Open Source

1) Corporate Owner

A. Reduce development costs

B. Generate revenues

Dual License/ Loss leader for traditional commercial software

(e.g. Alfresco Software, DotNetNuke)

Consulting and support services (e.g. Acquia, eZ Systems)

Custom development (e.g. Automattic Inc, Silverstripe)

Developing Extensions (e.g. Alkacon Software)


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Case: Alfresco Software, Inc

CMS: Alfresco

Dual Licensing for Alfresco Open Source CMS

Subscriptions for Enterprise Edition

Training & Consulting

Founded in 2005 (UK)

License: GNU GPL

VC funding: $19.45 million

#employees: 37

Sales: 7.8 million


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Case: DotNetNuke Corporation CMS: DotNetNuke

Dual licensing and commercial services

Founded in 2002 (USA)

License: MIT License

VC funding: $ 8 million (+)

#employees: 16


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Case: Acquia CMS: Drupal

Commercial support services for Drupal

Founded by Drupal creator Dries Buytaert in 2007 (USA)

License: GNU GPL

VC funding: $ 15 million

# employees: 25

Sales: $ 1.9 million


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Case: eZ Systems CMS: eZ Publish

Training and Consultation Services

Founded in 1999 (Norway)

License: GNU GPL, BSD, Own licenses

VC funding: $ 5 million (+)

# employees: 85

Sales: 3.3 million

Profits: .15 million


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Case: Automattic Inc. CMS: WordPress

Custom development, hire-out consultants

Founded in 2005 (USA)

License: GNU GPL

VC funding: $ 29.5 million (+)

# employees: 3

Sales: $ 0.19 milion


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Case: SilverStripe, Ltd. CMS: SilverStripe

Custom Website Development

Founded in 2005 (New Zealand)

License: BSD License

VC funding: No

SilverStripe recorded 190% revenue growth

between 2007 and 2009, ranking SilverStripe the

37th fastest growing business in New Zealand as

calculated by Deloitte for their 2009 New Zealand

Fast 50 awards


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Case: Alkacon Software CMS: OpenCMS

Developing Extensions

Founded in 2000 (Germany)

License: LGPL

VC funding: No

# employees: 10

Sales: 1 million


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Who makes money with OSS

OSS

Corporate

owned

Corporate

owner

Community

owned

CommunityThird-

parties


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Ways of making revenues with Open Source2) Community

Pay off the server and hosting expenses Merchandise/ Accessorising (e.g. J oomla!, DokuWiki)

Donations (e.g. e107, MediaWiki, Impress CMS)

Advertising (e.g. ModX)

3) Third-parties

Generate revenues

Developing derivative products and extensions



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Third Parties-Joomla Extensions and Service Providers

~300 micro and small companies, none have VC investment

Statistics*

Employees: 3 (900)#

2006- Revenues: 51,197 ( 15.4 million)



2006- Net Income: 12,786 ( 3.9 million)



*MEDIAN values based on financial data for EU companies available in Amadeus database

# Extrapolated for 300 companies


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Conclusion

Open Source is indeed changing how

software is built and how money is made!


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Biz meets open source CMS

A short, practical example of business success in a free stuff marketplace

Ryan Ozimek

Imperial College Business School

March 31, 2010


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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 25

Who am I?

Ryan Ozimek

Chief Executive Officer, PICnet

President, Open Source Matters Evangelist, open source software


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Overview

J oomla!: an open source success story

Business ecology around the J oomla software

Micro-level implementation and success


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The key market opportunity

Open source freedom means free as in free kittens

An ecology of businesses blossom around providing servicesand extended the value of open source software


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The key market opportunity deliverables Infrastructure tools and services

Productised add-on functionalities

Implementation services

Customisation services

Education and training

Support services


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A short story of open source success


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Joomlas success story


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Content management system (Web framework)

Created by a corporation in Australia

Open sourced to the community Community involvement skyrockets, development boom

Small businesses begin selling add-ons

Consulting firms provide implementation services

Cloud computing firms virtualise services The results


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15,605,591 downloads of J oomla

1,992,970 posts on the J oomla forums

365,883 registered community members 201,200+ registered developers

2,000,000+ estimated live sites

4,565 registered extensions (add-ons), all GPL licensed


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Possible business models?

Products

Services


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Product models

Design templates

Development extensions

Packaged suite offerings


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Design templates


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Develop productised extensions


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Service models

Custom design/development services

Retained support services

Product delivery models


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Success is in servicing the niche markets

www.nonprofitsoapbox.com


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Success is also in the long tail


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A short story of an OSS + biz relationship


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PICnets short history1999 an NGO trip to Kosovo


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PICnets short history2001 a political Web portal


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PICnets short history2003 open source Web development firm


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PICnets short history2007 software as a service provider platform


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Integrate, dont reinvent Open source tools can provide the pivot point

Its 2010, theres TONS of great software and Webservices out there. Add value by delivering the nichesolutions to the marketplace.

Use the right tools for the problem


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Be a bridge builder


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How to build bridges

Build it yourself Build it together with

the community


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Relationships are greater than the tools

>


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What to look for in your OSS community Active communities with strong diversity (engineers,

businesses, users, views and values)

Strong local language community


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What to look for in your OSS community Lots and lots of users, leverage the crowds

J oomla has more than 300k registered and active users,with more than 15.6 million downloads


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Nurture relationships with the community Free support!

Easier access to thought leaders and experts yourbusiness might need for future solutions

Opportunity to reach large community of potential users

Cultivate relationships, dont just use tools


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Impact of Joomlas success More than 2 million easy to manage sites published

Code valued at more than US$2,000,000

Provisioning of powerful and affordable software to thosewho normally couldnt afford it


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Thanks!Ryan Ozimek

CEO, PICnet

www.picnet.net

President, Open Source Matters

www.joomla.org

Twitter: @cozimek

[email protected]


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Nokia acquiresSymbian Ltd

1998

2008

Copyright 2009 Symbian Foundation. Public

Symbian Ltd wasfounded

2009

2006

100 millionphones shipped

250 different phone models250 million phones shipped

Initial codecontribution


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open source business models - clarysse

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