Open Source Business Models: What is an Open Source Business Model?

Despite many articles talk about Open Source business models, and some papers describe also possible taxonomies of open source business models, none of them is analyzing in depth all components which describe the business logic of a specific firm.

FLOSSMETRICS has assessed a list of 120 companies – resulting in the biggest empirical analysis of the business models adopted by OS firms done so far – while QualiPSo has analyzed 7 firms’ case studies. None of them has focused yet its attention on how pieces of the business fit together, eventually describing the company’s strategy, or how a specific firm differentiates itself and deals with the competition, either proprietary or FLOSS.

not equalNot all lemons are created equal by Nan’s Pic’s

Adopting Alex Osterwalder’s definition of business model, I tried to process the information about the “Distributing copies of an OSS product for a fee” business model“, i.e. just selling free software copies, not bundling any services such as technical support, consulting, systems integration and so on.

The Value Proposition would be shrink-wrap open source products.

The Customer Segment would target business customers, likely SMEs and professionals, having low bandwidth (a missprint?) and poor knowledge of OS existence.

The Distribution Channel would definitely be a web site, too little margin for retail or worse to hire a sales team. In order to sell shrink-wrap OS products personalization it is a must, to exploit the long tail Community of Interest could play a great role.

Chesbrough and Rosenbloom suggest to consider “Position in value network” and “Competitive Strategy”, and as matter of fact the competitors are all forges and repositories, Linux Magazines and so on.

About the Competitive Strategy, Michael Porter identifies two types of advantages, the cost advantage and the differentiation advantage. Being difficult if not impossible to be cheaper than the competition, the only available option is serve customers’ idiosyncratic needs, I would say.

Once identified an appropriate Differentiation Strategy, big marketing investments are needed to reach customers who don’t know open source products. Consider that if the business would ever work, competitors could easily imitate you, without spending time and effort doing software selection.

At the end of the day, describing the business model and analyzing it helps to determine if it makes some sense, eventually ending to agree with Dana saying:

The attempts by some to shrink-wrap open source products and sell them at the cost of packaging have, on the whole, been failures.

Comparing business models could also be interesting. Reading “Do Some Business Models Perform better than Others? – A Study of the 1000 Largest US Firms” created a 16 different typologies of how firms differ in terms of two dimensions:

what a company does and how they make money from doing it.

It is worth to notice that some business models perform better than others, in particular selling the right to use assets is more profitable than selling ownership of assets.

I am looking forward to apply these considerations within the joint research I am conducting with the FLOSSMETRICS project, may be adding a dimension or two to the “main revenue generation” and “licensing model” already included in the actual taxonomy.

Technorati Tags: Open Source Strategies, business models, QualiPSo, FLOSSMETRICS

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17 thoughts on “Open Source Business Models: What is an Open Source Business Model?

  1. Hi J,

    thanks for joining the conversation. I had a look at the Open Value Networks, and I read about GenIsis Value Network tool. I tried to download it, but apparently on SourceForge version 1.0 is not available.

    Did you use the tool by any chance? I see you mentioned it over kmblog, could you tell me what do you mean by this?

    Today, major social transformations like Web 2.0 and Cisco System’s The Human Network, are building new layers onto the OSI model.

  2. Hi,

    An open source value network approach (refer again to http://www.value-networks.com ) to viewing a business model using Chesbrough and Rosenbloom that you cite can be seen at http://tinyurl.com/2whq3h

    Note the inclusion of “Standards” which has no mandated contractual relationship with the other participants in the network. Nevertheless, their inclusion is key and one way in which value networks such as that containing say Cisco is made resilient.

    Regards

    David Meggitt

  3. David,

    thank you to join the conversation. As supporter and sponsor of these initiatives could you please sort out if the GenIsis Value Network tool is or not Open Source? As I wrote before I tried to download it, but on SourceForge version 1.0 is not available at the present stage.

  4. Roberto…I have just had a look and the files are accessible to me, without any special log in.
    You can also see the number of downloads to date.
    I will check it out with the designer, however, if you are still having problems.

    David Meggitt

  5. David you’re almost right..unfortunately the composer is no longer available and it became proprietary, so apparently you can download just plugins and documentation, but not the application itself. If this is the case, I could hardly call it open source. As a matter o fact Split/OSS Commercial products work just the other way around: the application is open, plugin are proprietary.

    Am I missing something David?

  6. Roberto,

    You are most likely correct. The software support to engaging with value network analysis (VNA) is being IP’d, with many more features, and likely to be launched next year.

    However, the real value is not the software but the recognition that VNA offers a new perspective or “lens” with which to visualise more realistically how organisations work. The material for that is all open source, as to method. There is also an information object model published for consultation.

    A recent large scale application with some 100 personnel enabled Boeing to increase productivity by a factor of six in redesigning a new organisation – the flight test “center” for the new Dreamliner aircraft. “Composer” was not needed for that.

    Hope that helps.

    David

  7. Hi David,

    for IP’d do you mean closed sourced? If this is the case I don’t see the point to pretend it to be open source.

    I am a firm believer that transparency pays, and I would see as appropriate a clear statement in the download page saying it all.

  8. Ciao Giovanni,

    unfortunately I’m not so fluent in Spanish, but I had a look at it and it seems interesting, let me know if you write an English version.

    By the way, say Hi to Alfonso, I met him years ago in Brussels but after that our roads didn’t cross anymore.

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