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Monday, March 05, 2007

Open Source Business Model

A recent spate of posts on the challenges of running an open source business is interesting (Tosh, Siemens, Downes, Tosh 2, ). Dave Tosh laments -

Elgg is the most popular white label social networking platform in the world powering over 2000 networks. However, Elgg could power 100,000 networks and it would make no difference - there is no revenue stream as we give everything away under a GPL license.
I understand his frustration. You create something that has value and gets traction and yet you've created it in a way that the software is considered "free." Thus, you may starve working on your labor of love.

However, there are lots of companies that are making money from open source and freemium models. A friend of mine has a company that builds open source applications in spaces that are a bit less innovative than Elgg, but they do very well financially through the packaging and support models. One of his companies - Gluecode - was sold to IBM for a pretty good price.

Common revenue streams are consulting, training, support, customization, upgraded versions for corporate applications, etc. The fact that Dave says that there's "no revenue stream" and that he's getting good traction suggests he must be missing something.

One thing I would point out is that it is highly likely (and in fact happening) that open source will begin to become increasingly important in the eLearning world. Especially as things become less revolutionary and more standardized. Think Moodle as an LMS. Something I discussed briefly before: Innovators' Dilemma in Learning/eLearning, Where are open source learning applications?

The discussions on the posts are quite interesting - and heated. Luckily Harold Jarche pointed us to:

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