Open Source Business Models

Demand and adoption of open source continues to increase and is fundamentally changing enterprise software. According to Forrester Research's report, 'Open Source Software Goes Mainstream,' open source software is a #1 priority for software development decision-makers. Another report from IDC, 'Worldwide Open Source Services Forecast 2009,' open sources services is expected to double from $4 billion in 2009 to $8 billion in 2013. Governments both here and abroad are adopting open source, too. You might have heard about the Obama Administration's Open Government Directive. Earlier this year, the United Kingdom revised it's open source action plan stating "We will require our suppliers to provide evidence of consideration of open source solutions during procurement exercises. If this evidence is not provided, bidders are likely to be disqualified from the procurement." The trend continues because open source provides tremendous benefits; cost reduction, vendor lock-in freedom, flexibility, customizability, and most importantly sets a rapid pace of innovation. But, how do you create a business around free software? How can start-ups take advantage of these opportunities and how can companies in general create value added business models where everyone continues to win? Support subscriptions have always the go to business model - it provides a solution to the top three barriers to OSS selection: unfamiliarity with open source solutions, lack of internal technical skills, and lack of formal vendor commercial vendor support. However, after close to two years of selling commercial support and services at Acquia, I've learned that there are a variety of other business models that provide value to companies who are using or adopting open source. Our experience shows that customers demand faster deployments, access to aggregated information and specialists, vertical distributions, enhanced security, easier onramps, and fully managed technology stacks. To meet these needs, today's hottest open source companies are deploying a range of business models; Platform as a Service, Infrastructure as a Service, hybrid Software Publishing, and open data portability. Although Acquia is employing a hybrid of these business models, we should also take a look at Eucalyptus Systems and SugarCRM. If you're not familiar with Acquia, we provide commercial support services for Drupal. The open source social publishing CMS powers some of today's high profile government sites such as whitehouse.gov, media destinations for companies such as Newsweek Interactive and Turner, and community portals for software companies such as Nvidia and Novell. Platform as a Service Drupal Gardens is one of Acquia's new offerings that will be a fully managed Drupal micro-site builder hosted in the cloud. The SaaS-like offering in the cloud enables consumers and the Enterprise to rapidly build and launch sites without having to worry about installation, configuration, hosting, software updates, scalability, and maintenance. Drupal Gardens makes Drupal easier, faster, and more convenient to deploy without a need to hire Drupal experts or have an internal IT staff for the application. The platform has other benefits, too. In the near future, we'll be able to deploy vertical solutions such as OpenPublish and Drupal Commons that will go head-to-head with Jive software. Together, it'll be a hybrid that fuses platform and infrastructure services. But, you may have worries about vendor lock-in. Not here. Customers can export their site and data at any time. In an open world, the value to leave is greater than the value of actually leaving. Infrastructure as a Service Eucalyptus Systems, the company that Martin Mikos just joined, is emerging as a standard for private and hybrid cloud computing. The infrastructure as a service offering is based on open source software and enables enterprise and government to launch their own cloud computing environments. Why is this important? If a government agency were to do this on their own, they'd need to add a new layer of technologies that includes virtualization management, self-service portals, cloud APIs, and other data center systems and processes. This is a lot of work. Especially, if you don't have specialists on payroll. Instead of buying all of this new hardware, investing in setup, etc., clients can instead buy a fully outsourced solution. This brings down the barriers of entry and still enables clients to realize the benefits of a private cloud, keep their data in their own data center, and allow IT staff to focus on their core business. Much like Drupal Gardens, they're providing an easier onramp, quicker deployment, reduced costs and IT needs. They also provide flexibility to move between clouds. Again, the business model is not only about supporting a set of open source software. It's about creating value through products based on several open source technologies that would normally cost more in the proprietary world or have significant costs if a company were to go it alone. Software as a Service Software as a Service is a more common model that also bring value to open source. SugarCRM, basically the equivalent of SalesForce, but open source, deploys this business model to offer their CRM in the cloud. It combines a best of both a typical proprietary SaaS and open source based models. Their SaaS-like services enables clients to launch open source Sugar on demand while enabling flexibility to customize and own or export their data. Vendor lock-in is not an issue and the story is the same. Easier to deploy open source software, managed, and reduced risks for technology adoption without expertise in-house. Software Publishing Software publishing is similar to how developers build video games that are distributed through larger companies such as Electronic Arts. We're beginning to implement this strategy, too. By establishing partnership with third party developers who build distributions, we work together to create bundled distributions of Drupal. For example, Phase2 Technology developed OpenPublish for the publishing industry. The partnership stabilizes it's road map to ensure new features and maintenance while also providing all of the fully managed back-end support, hosting, and remote administration services to run the software as if it was SaaS. The goal is not only to create additional distribution channels, but also to expedite the adoption of Drupal, community growth, and ecosystem that has created Drupal. Now imagine taking those distributions and combining them with a IaaS and PaaS model. Most of these services have trial periods if you want to check them out. Here's another idea. Try downloading Drupal, installing it on a server, and get a site up and running. You'll find it has a steep learning curve like most open source software, but drool over it's capabilities. Then try Drupal Gardens. Regardless of wether you're technical savvy or don't know what PHP stands for, you'll find you have a massive head start on Drupal Gardens. Then export the site if you desire. That's something you can't do in the proprietary world.