Waiting for the Next Generation of Open Source Business Models

One of the big debates going on in December among the open source cognoscenti is whether fee-based models are going to start to proliferate. This post contends that 2009 will see a lot more business models built around formerly free software, and this post  points to support among CTOs for charging for open source software. I tend to agree that we'll see more of this, but charging for what was formerly free has to be handled deftly. Here are some important points about monetization models.

Dana Blankenhorn argues that open source business models must be voluntary. "Proprietary models are all compulsory. You want the PC, you buy the Microsoft license." Without a doubt, the way to build a sustainable monetization model for open source is to make users want to pay for what they perceive to be valuable. Red Hat has proven that it can do well with a model where code is free, but customers choose to pay for support and services. Other open source projects offer a free, open source solution but build extra functionality into fee-based variants. This has proven to work very well in the freeware arena, and I think we'll see more of it.

There is also room for tiered Software-as-a-Service solutions. For example, Ulteo.com lets you use the OpenOffice applications online and gives you 1GB of storage for free, but you can pay moderate fees if you want more storage. The company is also doing interesting things surrounding letting people use Linux and Windows concurrently, which could blossom into a number of different fee-based services.

This post forwards an idea that I very much agree with: "Have a great freaking product, and charge a fair price for it." Very true. It goes on to propose, though, that there are three workable business models for open source projects:

   1.  Selling support, consulting and related services for the "free" software (aka the professional open source business model ) – RedHat

   2. Dual license the code and then sell traditional software licenses to enterprise customers who are scared of the GPL – MySQL AB

   3. Build a proprietary Web application powered by open source software – Google

I think there are actually many more workable models than these. In 2009, we're likely to see open source offerings challenge the pricing models for cloud services, SaaS applications, and much more, where the challenge will be for entrepeneurs to come up with creative new ways to monetize projects. Creative is the key word there, and ongoing creativity is why we haven't yet seen all workable open source business models.