October 9th, 2008
Making money on open source
The market will rise this morning, writes Erik Sherman over at BNET, because IBM is reporting strong earnings.
So much for our little talk about making money on open source.
IBM has used Linux to unify its product lines, it has used open source to deliver services, and it has continued to get top dollar for the time of its people despite their using open source tools.
Along the way it has helped Eclipse become a major force in the tools business, it has helped give Linux significant server share, and it has managed to avoid the media spotlight.
This is not the only model for making money with open source. As Matt Asay notes today, Cisco’s model is to embed open source software in its hardware and then sell the hardware.
Then there’s Google, which we discussed yesterday. It makes its money from targeted advertising, which allows it to monetize free content across the Web.
Another way to make money online was described by Tom Wolfe in his book Bonfire of the Vanities. Crumbs.
That’s what the Masters of the Universe on Wall Street called the commissions they collected trading securities. But it can refer to any service that is performed many times, perhaps by software, for a nominal fee.
There are many such services. I described one such service, the comparison of health plans, at ZDNet Healthcare yesterday. You can make money from buyers, sellers or both. The success of eBay is based on crumbs. Same with that of site registrars.
No one has to know whether such services are based on proprietary or open source code. The fear that someone will copy your service is mitigated by the fact that you build your code in pieces, and don’t have to give away the whole.
All this, of course, is in addition to support contracts and paid SaaS, which is what most open source developers think about when they consider sources of cash flow.
My point today is that perhaps they should think more broadly.
Dana Blankenhorn has been a business journalist for 30 years, a tech freelancer since 1983. See his full profile and disclosure of his industry affiliations.
