1. Open Source Software Business Models -Michael Brittingham -Dan McMillan -Kevin Haselwander

2. Open Source Software “Software that is freely available to anyone in a form that can be easily modified” -Stair and Reynolds Some examples are Linux (OSS operating system; compare with Windows) Linux (OSS operating system; compare with Windows) Mozilla (OSS Web browser; compare with Internet Explorer) Mozilla (OSS Web browser; compare with Internet Explorer) R (OSS statistical computing and graphics program; compare with Statgraphics) R (OSS statistical computing and graphics program; compare with Statgraphics)

3. Issues Reasons to Switch to Open Source Software How are companies making money off software that is free? Will these models last? How do these models interact with proprietary software companies such as Microsoft?

4. Why Switch to OSS? Easier to avoid “vendor churn” This happens when companies are forced to buy the newer versions of proprietary software (Windows ’98 to 2000 to XP) This happens when companies are forced to buy the newer versions of proprietary software (Windows ’98 to 2000 to XP) Open source is continually improving on the open market; any new program that is written can be downloaded and added to your current programs Open source is continually improving on the open market; any new program that is written can be downloaded and added to your current programs Example: Sabre Holdings currently making a switch to MySQL Example: Sabre Holdings currently making a switch to MySQL

5. Why Switch to OSS? The switch is not only made because of low cost. Companies are not willing to sacrifice low cost for an inferior product. Companies are not willing to sacrifice low cost for an inferior product. "Cost savings weren't really a factor in our decision to go open source, what got us into it was that it was simply the best technology open to us." "Cost savings weren't really a factor in our decision to go open source, what got us into it was that it was simply the best technology open to us." -John Novak, CIO La Quinta Inns "[While] cost is a huge driver for our decision-making process, we cannot risk choosing an inferior solution to save money. We couldn't even consider open source if it weren't at par with—or in some cases better than—commercial alternatives." "[While] cost is a huge driver for our decision-making process, we cannot risk choosing an inferior solution to save money. We couldn't even consider open source if it weren't at par with—or in some cases better than—commercial alternatives." -John Alberg, co-founder of Employease -John Alberg, co-founder of Employease

6. Open Source Business Models Traditional Support Sellers Support Sellers Loss Leaders Loss Leaders Widget Frosting Widget Frosting Accessorizing AccessorizingNew Service Enabler Brand Licensing Software Franchising Sell it, Free it

7. Traditional: Support Sellers Companies that package together open source software, and make their money from either selling the software, and/or charging to service the software Red Hat is the leader in this industry Red Hat is the leader in this industry

8. Traditional: Loss Leaders Company that generally gives away software for free and makes money from selling additional software Example: Adobe Example: Adobe Example: Fedora Example: Fedora

9. Traditional: Widget Frosting Company that sells hardware and packages it together with open source software Silicone Graphics: Supports and ships Samba Silicone Graphics: Supports and ships Samba VA Linux VA Linux

10. Traditional: Accessorizing Company that sells books, compatible hardware, t-shirts, bumper stickers, coffee mugs, dolls, etc. Example: O’Reilly sells more of the compatible hardware, manuals, software O’Reilly

12. Open Source Business Models Traditional Support Sellers Support Sellers Loss Leaders Loss Leaders Widget Frosting Widget Frosting Accessorizing AccessorizingNew Service Enabler Brand Licensing Software Franchising Sell it, Free it

13. New: Service Enabler Company that distributes open source software primarily for generating revenue through on-line services i.e. On-line gaming i.e. On-line gaming

14. New: Brand Licensing Company that charges other companies to use their brand name or trademarks

15. New: Software Franchising This model uses a combination of the preceding models; brand licensing and support sellers in particular. Once a company has established a competitive advantage, they use their established brand name to sell off franchises as their way of accumulating revenue.

16. New: Sell it, Free it Company that starts out selling proprietary software, and converts the product over to open source software at an opportune time.

17. Current status in the market, and a look at future trends…

18. VA Linux stock price

19. Red Hat stock

20. Microsoft stock

21. Red Hat vs. Microsoft

22. Is Open Source here to stay? Red HatRed Hat has shown that an open source company can produce stable numbers in a fluctuating market. Red Hat Businesses are continually considering the switch to open source software, not only because of cost, but because of its reliability and economic value. A company can modify a program according to their own specific needs. Technical support no longer comes from one pre determined source.

23. Is Open Source here to stay? Business models are too young to determine They are only 6-8 years old They are only 6-8 years old New Models are being developed Open Source Software Development Lab in Beaverton Open Source Software Development Lab in Beaverton