Tuesday, November 6, 2007

How does open source make money?

When open source software entered the mainstream, it brought new advantages and new questions to an economy formerly built upon copyrights and licenses. The advantage: open source developers build upon one another's innovations in ways that would be against the interests of proprietary developers. The question: since open source software's distribution is not restricted by copyright, how can developers make money off of it? Good open source applications are available for free, so where's the profit?

Trademarks are a big part of the answer. Robert Young's book Open Sources: Voices from the Open Source Revolution compares selling open source software to selling ketchup. Anyone can make and sell ketchup without worrying about copyrights. Heinz ketchup sells the best not because some trade secret makes it better, but because it has marketed its brand name successfully. This illustrates that good marketing is profitable, but the analogy breaks down. Each unit of ketchup requires raw materials and manufacturing costs, but copying software is essentially free.

Software, then, is not a good; it is better viewed as a service. Open source developers don't sell licenses, but they still manage to sell software packages with their trusted brand name. They also sell tech support, books, and other services related to their software. For more open source marketing strategies, see Manageability.org's list of not quite 101 Ways to Make Money off Open Source. Proprietary companies make money by being software owners; open source distributors make money by being software experts.

No comments: