1. Web: www.omii.ac.uk Email: info@omii.ac.uk From Open Source to long-term sustainability: Review of Business Models and Case Studies Victor Chang, Hugo Mills, Steven Newhouse, OMII-UK 10th September 2007, AHM 2007

2. Web: www.omii.ac.uk Email: info@omii.ac.uk Content for this Presentation Motivation Introduction Software Business Models & Classifications Case Studies: Red Hat, MySQL, Apache, XandrOS, OMII-UK & Business Model Comparisons Special Case Studies Further Discussions Conclusion Questions and Answers

3. Web: www.omii.ac.uk Email: info@omii.ac.uk Motivation Study successful methods of generating money/ revenues from open source projects. Review and Classify Open Source Business Models. Achieve sustainability.

4. Web: www.omii.ac.uk Email: info@omii.ac.uk Introduction: OSS & Proprietary Software Open Source Software (OSS): - Source code is freely available under a licence or agreement. - allows users to study, change, and improve software, and to redistribute it in modified or unmodified form. Typical OSS projects criteria: (1) User Support and (2) Development Activities. Proprietary Software: - Close Source. - Requirement payment for licences, software or service. Popular models for commercial firms such as Microsoft, Adobe & MATLAB.

5. Web: www.omii.ac.uk Email: info@omii.ac.uk Introduction: OSS Licences 50 OSS Licences and list 5 popular ones: The GNU General Public Licence (GPL) The GNU Lesser General Public Licence (LGPL) Modified BSD (Berkeley Software Distribution) Licence / new BSD Apache Licence Mozilla Public Licence (MPL)

6. Web: www.omii.ac.uk Email: info@omii.ac.uk Introduction: Sustainability A lot of academic projects die off. Essential for OSS projects. Definition for the paper: - Long Term Maintenance of organisation, particularly securing funding, resources, operations and clients. How? We need to study and understand business models.

7. Web: www.omii.ac.uk Email: info@omii.ac.uk Literature Review: Open Source Models by JISC (a) Community Model: Apache. (b) Subscription Model: SAKAI & Red Hat. (c) Commercial Model: proprietary software. (d) Central Support Model: OMII-UK. - “A Central Body that provides robust releases and support for open source products that are of strategic importance to community”.

8. Web: www.omii.ac.uk Email: info@omii.ac.uk Literature Review: Commercial Models by Forta & IDC Require a subscription fee of the product. Referred as Product in the IDC Model. Sell paid-for services. Referred as Services in the IDC Model. Selling intellectual properties or licences (Split- Licencing). Referred as Resale in the IDC Model.

9. Web: www.omii.ac.uk Email: info@omii.ac.uk Literature Review: Commercial Models by Forta & IDC

10. Web: www.omii.ac.uk Email: info@omii.ac.uk Our Model Classifications Subscription & central model, can be regarded as one – Support Contracts (Red Hat) based on different business requirements. Split-Licencing (MySQL): Sale Licence. Each OSS organisation needs a Community (Apache). Valued-added Closed Source (XandrOS): proprietary. Macro R&D Infrastructure (OMII-UK): R&D based; involved in high-level complexity challenges; collaborations & partnership between local/international institutes; come from government fund initially.

11. Web: www.omii.ac.uk Email: info@omii.ac.uk Support Contracts: Red Hat 24/7 service, 3 levels of support subscriptions. Obtain revenues from - RHEL subscription per system or per server; - Subscriptions from commercial open source applications (JBoss et al) - System/Architecture management services; - Support services; - Red Hat Certification & Training.

12. Web: www.omii.ac.uk Email: info@omii.ac.uk Business Model Comparisons: Support Contracts Advantages - Ensuring long-term sales and profits. - Provides a more predictable & dependable revenue. - Provides diff level of support. Provides users more options. Disadvantages - Customers may feel no need to pay due to large amount of free info. - Needs to ensure a large number of users already available. - Easy for others to clone full architecture & services, having more competitions to deal with.

13. Web: www.omii.ac.uk Email: info@omii.ac.uk Split-Licencing: MySQL Offer both free & also commercial editions. Primarily obtain income from selling commercial licence, allowing them to use product without being restricted by GPL. Customers can include MySQL in their product for resale. Suitable for firms not wishing to release source code, or those not wishing to comply with GPL.

14. Web: www.omii.ac.uk Email: info@omii.ac.uk Business Model Comparisons: Split Licencing Disadvantages - Could be confused with boundary between commercial or GPL licence under the same product. - If users switch to GPL licence products, might reduce income. Less predictable for income. Advantages - Provides a high level of flexibility for users & organisation. - Allows clients to customise software for sales without licencing restrictions. - If software include popular enterprise ones, it could increase sales & users.

15. Web: www.omii.ac.uk Email: info@omii.ac.uk Community: Apache Software Foundation (ASF) Apache HTTP server- 1994. ASF was started in June 1999. Non-profit organisation. Decentralised community of developers. Apache Licence – similar to new BSD Licence. Largest OSS organisation along with Red Hat. 66.9 million sites using Apache web server.

16. Web: www.omii.ac.uk Email: info@omii.ac.uk Business Model Comparisons: Community Advantages - Backed up by large community effort, it can become a main stream. - Presented and appealed to a wider range of users & firms. - Become a main component in the market such as Apache HTTP, Tomcat, IBM Eclipse etc. Disadvantages - Leading developers or donators/investors may influence its development cycle and direction. - Find it difficult to sustain and often request community donations.

17. Web: www.omii.ac.uk Email: info@omii.ac.uk Value-added Close Source: XandrOS Founded in 2001, to make easy-to-use Desktop Linux. Earns income from business & educational partners. Operating like Split-Licencing at the beginning, then switching to this model in 2006. Recent partnership with Microsoft. Characteristics: (a) Pay for software; pay for service; attract investors & venture capitalists (b) Add new proprietary software & improve functionality.

18. Web: www.omii.ac.uk Email: info@omii.ac.uk Business Model Comparisons: Value-added Close Source Advantages - Can receive additional funds from share, investor’s funds, sales commission, retailers. - May generate higher revenues if targeting the right market or products (VoIP, gaming). Disadvantages - If failing to impress users, clients and investors, may fail to sustain themselves. - Certainly not OSS developers’ favourite.

19. Web: www.omii.ac.uk Email: info@omii.ac.uk Macro R&D Infrastructure R&D project. Come from government funding initially. Traditional ways of funding academic projects. Can be viewed as a commercial model, or commercial operations. Projects / organisations Customers / Users Funders Funding Products & services Positive feedback

20. Web: www.omii.ac.uk Email: info@omii.ac.uk Macro R&D Infrastructure: OMII-UK Founded in JAN 2006, partnership between Southampton, Edinburgh and Manchester. Presents engineering/Grid challenges, integrating 15 components for solution-focused projects. Offers a secure, robust & fully integrated Software Solutions for e-Research & e-Science. Involved in international partnership, community expansion, research & development.

21. Web: www.omii.ac.uk Email: info@omii.ac.uk OMII-UK e-Science Value Chain Infrastructure Provider Component Provider Solution Provider e-Science End User OMII

22. Web: www.omii.ac.uk Email: info@omii.ac.uk Business Model Comparisons: Macro R&D Infrastructure Advantages - Attract funds if meeting a specialised area with high demands. - Merge together to form a powerhouse in a specialised area to attract funding & expertise. - Create spin-offs to generate more revenues & research outcomes, particularly for bioscience or medical or e- Science R&D projects. Disadvantages - Sustainability model is under development & influenced by investors. - Seek funding at regular intervals, creating a sense of instability and insecurity at those periods. - Might be difficult to integrate academic theories and industrial perspective in some organisations.

23. Web: www.omii.ac.uk Email: info@omii.ac.uk Special Case Studies: XenSource Move between business models. Hypervisor / virtualisation software. Before JAN 2005, Macro R&D + Community at Cambridge. £23.5 M venture capital in JAN 2005. Provides Split Licencing Model: free OSS and Enterprise version. Acquired by Citrix for $500M (£250M).

24. Web: www.omii.ac.uk Email: info@omii.ac.uk Special Case Studies: National Computer Systems, Singapore Dual Business Models. Started in 1981 as Macro R&D Infrastructure. In 1996, became a close source model. Singapore Government as its main client. Partners with Singapore Telecom (£1.623 B value). Overseas offices in 8 countries. Running support-contract and valued-added close source model.

25. Web: www.omii.ac.uk Email: info@omii.ac.uk Special Case Studies: Sun and OpenJDK More commercial firms starting OSS projects. Advantages: - Consolidate a stronger community; - Build up a more robust, reliable & user- oriented software. OpenJDK in 2006, under GPL Licence. IBM too – Eclipse, IBM JDK, Apache etc.

26. Web: www.omii.ac.uk Email: info@omii.ac.uk Discussions: Merger & Acquisitions (M&A) M&A: Useful business strategy & have a direct impact on OSS organisations. SuSE: Acquired by Novell with $210M (£105 M) in NOV 2003. Partnerships with IBM, AMD, ITV & Microsoft. Novell’s Benefits: (a) Provide enterprise-class services & support for Linux; (b) expand its business territory to get revenue from open source community.

27. Web: www.omii.ac.uk Email: info@omii.ac.uk Conclusions 5 OSS business models. Long term sustainability depends on (a)adopting relevant business models; (b)securing funding or revenues; (c)reviewing the needs to move one model to another or use multiple business models. UK e-Science Programme helped setting up many e- Science organisations => Now facing long-term sustainability challenge! Worth to consider these models (esp. Macro R&D) if setting up spins offs from research projects, or setting up long-term entities from e-Science or OSS community.

28. Web: www.omii.ac.uk Email: info@omii.ac.uk Where is your organisation? MySQL Sugar CRM Red Hat customers / usersfunding / investors XandrOSOMII-UK Interface21 business partners Hyperic Canonical OpenBravo, Compiere