SXSWi: Open Source business models

Alan Shimel, Fischer, Levin, Jarrell, Cavazos.

Questions and statements from the audience.

Alan Shimel: there’s two categories of open source community members: consumers of open source. A company who wants to use open source. using linux, php, to develop their web site. Not developers. The restrictions and licensing issues are less of a hassle and not a focus. The consumers don’t care which license it is. People who use open source as components of their products are a different category. That’s where the excitement is. Is that company who uses components and sells a product a parasite on the community? It’s this category who is the focus of recent licensing changes, the people who are selling and trying to make a profit. If you’re profiting from my work, I should profit as well. It’s useful to break it down into those two camps. I’m on both sides of the table. We use the snort engine, etc. And we have a new product coming out which is open source.

Cavazos: The term open source license doesn’t give you enough information to have a meaningful discussion.

Fischer: … creating a level playing field with alliances, standards. Can you have a kind of Microsoft gigantic Office situation? The answer is no. Leveling the marketplace. Not gigantic market share. But you can do very well. That’s one way to play open source. 2nd aspect, companies who do customization more than open source. There’s Second Life, for example. Look at how much open source software is very very good. It wouldn’t succeed if it wasn’t. In-house lawyers do need to look at the licensing because it often enforces generosity.

Cavazos: Why would we do this instead of keeping it all ourselves? Models that involves customization or consulting. We’re going to bet on ourselves. We’re okay, we’re fine with allowing the core to be out there. And we’re going to take one step ahead and use our expertise. We have the smartest people and the most creative innovators and we can create a business model around that. Consulting and customization.

Levin: VP of product strategy at Socialtext. Open source has been our model from the beginning. We used an open source product called Kwiki. A lot of our developers come from the open source community and they have their own projects… Open source for us is kind of like weather. We shouldn’t fight it, we have to live with it and work with it. My personal interest is not in licensing expertise, my interest is with respect to business strategy. How does this help my company, how does this help our customers be more productive. The question from the audience was “How can I sell this to my customer base?” That goes to one of the value propositions around open source. You’re reducing your customer’s risk. If you’re a relatively small development shop, there’s no guarantee you’re going to be around in 10 or 15 years. You’re not lockkng them in. The open source community will be there in 10 years. You’re helping your customer. That’s very valuable. It’s not just the software itself. My company has a variety of models which reduce cost for the customer of maintaining the software. And we also offer an open source download.

Don Jarrell: I worked with proprietary companies. Open source offers the freedom to cooperate. … Beyond a layer of adaptation to an integrated product. Proprietary companies who make a companion product and break down the price point. So there is an open source version with a proprietary companion product. Comparable to making a “Lite” product. The open source part can be free. Can gain market share, can participate in the open source community, and have a viable model. A variety of proprietary companies are using this, for example, Compiere.

Alan Shimel: Linux as the most successful model. The core code from … 20 people. 60 companies. There’s a relatively small amount of people contributing the core code. The vast amount of users use it, find bugs and fix them, maybe 80%. In security, that’s the last thing on the budget. Open source kind of filled that vacuum very quickly. Linux and security. It’s not free though. We see a ton of companies who are commercializing that space. There’s something like 1.4 billion dollars invested in open source.

Mark Fischer: If anyone here has any of that 1.4 billion dollars I think we’d all like to have some of that… (audience laughter) The number of people writing sophisticated OSS is very small. The contrast between that and wikipedia is very sharp. Every 12 year old can write text. Not every 12 year old can write sophisticated code under a licensing model. Like Second Life and its server software, is this realy open source or is it user customization? The mix and match model is one of the ways you can make money off of open source. Add something valuable to it . Like the music indstry, in a world without DRM, making money off the addon stuff like backstage passes and tshirts. If you say everything’s open source and give it away, then it’s not going to work. You have to add some value to commercialize it and to build a base and attract investors. Not everything can be based on advertising.

Cavazos: We can look at open content models and think about that in relation to open source software business models.

Alan Shimel: Does Flickr have a right to those photographs? Does Delicious have any right to the content there?

Fischer: The free software model is fantastic but it’s not for everyone. Do you make every user a creator and they get a revenue share? The next frontier is users as creators. Open community but with revenue share for (some) users.

Adina Levin: Socialtext itself and some of our customers has…. Interestingly enough our documentation isn’t open. But we have sites with best practices information and documentaiton that we have open. We have customers using wikis for that kind of public information, especially to support best practice information. It’s less around how to share the revenue, but how do I reduce the cost of producing it while maintaining the quality of it and issues around control. A lot of people who have a traditional approach are concerned to lock it down to maintain quality. And then we try to explain to them that it’s valuable to open it up and get more contributions. And then spend more energy on the monitoring side and less on trying to prevent contributions.

Cavazos: The elements of community, what does it take to get critical mass and get the quality of development up. The communities of contributors are much smaller than you would think. It’s a small community, but the rest serves a viable part in that quality control. They’re vetting, calling it out as bad when it’s not good. And that’s what I that plays into what Adina said.

Alan Shimel: 92% of the people in the community don’t even play with the code. We have a freeware version of our code that’s not open source. People are still downloading it and using it.

Cavazos: How many people actualy read the licensing..

Adina: I’m glad to hear that Asterisk… we use Asterisk at Socialtext and we are not locked into one service provider, and as a software development company we can customize and build extensions. Basic use, basic quality deployed to a number of applications, and then the steps after that might include extensions. The ability to do that is of value to us.

Alan Shimel: I think you just described what a lot of people do. “It’s nice to know I could do it if I wanted.” But how many people actually do?

Adina: You’re paying for risk reduction and no lock-in.

Alan: I know, but how many people actually take advantage of that…

Jarrell: we started this conversation about business model. “Open Source” label but what we’re touching on is other segments like managing contributions, release, thinking very carefully about stuff other than the distribution model. We should turn our attention to some of those things.

Cavazos: …

Alan Shimel: Important to clearly, sharply define, where’s your value added. Especially if you’re combining open source with propriety. On the dual licensing, it boils down to this. If you’re using that software for your own company it’s okay, make your changes, contribute back to the communiyt. If you’re turning around and using that component and profiting and selling it as a component as a bigger package, you should be, the people who contribute that component should be compensated for that.

Audience: Why should that be a distinction? Every use is a profit motivated use. If you’re using it internally why aren’t you also obligated to give back?

Shimel: Explains the distinction with Asterisk as a model.

[Right, but why is that different, really. ]

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