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7/28/2019 Open Source Business Models - Clarysse
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Best Practice in Innovation, Entrepreneurship & Design
Open-source business models: Creating valuefrom free stuff'
31 March 2010 - 18.00 to 19.30
Panellists: Prof. Bart Clarysse - Chair in Entrepreneurship, Imperial College Business School Ryan Ozimek - President, Open Source Matters and Co-Founder, CEO, PICnet Inc. Robert Ackland Technology Manager, The Symbian Foundation Prof. J ohn Mullins - The David and Elaine Potter Foundation Term Chair in
Entrepreneurship and Marketing, London Business School
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Open Source
Prof. Bart ClarysseChair in Entrepreneurshipb.clarysse@imperial.ac.uk
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Agenda
What is Open Source?
History of Open Source
Open Source Licenses
Business Models of Open Source
Conclusion
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What is Open Source?
Open source is a development method for software that harnessesthe power of distributed peer review and transparency of process.
(Open Source Initiative, OSI: www.opensource.org)
Source code is available (different from shareware for instance)
Everyone can contribute to development
Usage, modification and redistribution of source code are permittedunder the corresponding license conditions
OS software: Better quality, higher reliability, low cost
http://www.opensource.org/http://www.opensource.org/7/28/2019 Open Source Business Models - Clarysse
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History of Open Source (1/2)
Early 1960s to early 1980s: Operating systems were being
developed in academic settings like Berkeley & MIT, operating
code was being shared. Co-operative software development was
being undertaken for UNIX
Early 1980s: AT &T began enforcing its IP rights related to UNIX
1983: Free Software Foundation was setup by Richard Stallman,
and GNU project is launched
1989: General Public License (GPL) was written as part of GNU
project
Simple Economics of Open Source, Lerner & Tirole, J ournal of I ndustrial Economics, J une 2002, Vol. L(2)
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History of Open Source (2/2)
1991: Linus Trovalds makes his Unix Kernel, LINUX, available.
Early 1990s: Rise in internet access leads to acceleration of OS
activity. Interactions between commercial companies and OS
community rise. NewOpen Source projects emerged.
1998: The term Open Source is announced by Eric Raymond,
Open Source Initiative(OSI) established.
Today: Nearly 222,000 Open Source projects listed on
SourceForge.net
Simple Economics of Open Source, Lerner & Tirole, J ournal of Industrial E conomics, J une 2002, Vol. L(2)
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Open Source Licenses (1/3)
66 OS licenses listed on OSI (Open Source Initiative)
GNU GPL, GNU LGPL, BSD, Apache License, MIT are listed as
popular and widely used licenses by strong communities
Copyleft: the right to distribute copies and modified versions of a
work and requiring that the same rights be preserved in modified
versions of the work
Restrictive PermissiveStrong-Copyleft Weak-Copyleft No-Copyleft
-GNU GPL -GNU LGPL -BSD license-Mozilla -MIT license
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Open Source Licenses (2/3) Strong-copyleft:
Derivative work based on the original must be licensed similarly
Weak-copyleft: Derivative work based on the original must be licensed similarly
However, derivative software can be released under a differentlicense under certain conditions
Large works incorporating such software can be kept proprietary
No copyleft:
Developers are not obliged to inherit the license of the originalsoftware for any derivative software
Determinants of the choice of OS license, Sen et al.,J ournal of Management Information Systems, 2008, Vol 25 (3)Choosing an Open Source License, Engelfriet, A. I EEE Software, J an/ Feb 2010
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Open Source Licenses (3/3)
On 25th March 2010, SourceForge.net hosted 221979 Open Source Projects
49.67%
8.49%
5.48%
2.84%
3.15%
2.17%
28.21%
Open Source License distribution on SourceForge.net
GNU GPL GNU LGPL BSD Public Domain License Apache License MIT Rest
GNU GPL : 49.7%
GNU LGPL: 8.5%
BSD License: 5.5%
Apache License: 3.1%
Public Domain License: 3%
MIT License: 2.2 %
Rest: 28.2 %
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Business Models of Open Source Company that owns OSS
Dual License
Consulting and support services
Loss leader for traditional commercial software
Custom development
Merchandise/ Accessorising
Reducing development costs
Third-parties using non-corporate/ community OSS
Developing derivative products and extensions
Consulting and support services
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Who makes money with OSS
OSS
Corporate
owned
Corporate
owner
Community
owned
CommunityThird-
parties
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Ways of making revenues with Open Source
1) Corporate Owner
A. Reduce development costs
B. Generate revenues
Dual License/ Loss leader for traditional commercial software
(e.g. Alfresco Software, DotNetNuke)
Consulting and support services (e.g. Acquia, eZ Systems)
Custom development (e.g. Automattic Inc, Silverstripe)
Developing Extensions (e.g. Alkacon Software)
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Case: Alfresco Software, Inc
CMS: Alfresco
Dual Licensing for Alfresco Open Source CMS
Subscriptions for Enterprise Edition
Training & Consulting
Founded in 2005 (UK)
License: GNU GPL
VC funding: $19.45 million
#employees: 37
Sales: 7.8 million
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Case: DotNetNuke Corporation CMS: DotNetNuke
Dual licensing and commercial services
Founded in 2002 (USA)
License: MIT License
VC funding: $ 8 million (+)
#employees: 16
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Case: Acquia CMS: Drupal
Commercial support services for Drupal
Founded by Drupal creator Dries Buytaert in 2007 (USA)
License: GNU GPL
VC funding: $ 15 million
# employees: 25
Sales: $ 1.9 million
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Case: eZ Systems CMS: eZ Publish
Training and Consultation Services
Founded in 1999 (Norway)
License: GNU GPL, BSD, Own licenses
VC funding: $ 5 million (+)
# employees: 85
Sales: 3.3 million
Profits: .15 million
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Case: Automattic Inc. CMS: WordPress
Custom development, hire-out consultants
Founded in 2005 (USA)
License: GNU GPL
VC funding: $ 29.5 million (+)
# employees: 3
Sales: $ 0.19 milion
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Case: SilverStripe, Ltd. CMS: SilverStripe
Custom Website Development
Founded in 2005 (New Zealand)
License: BSD License
VC funding: No
SilverStripe recorded 190% revenue growth
between 2007 and 2009, ranking SilverStripe the
37th fastest growing business in New Zealand as
calculated by Deloitte for their 2009 New Zealand
Fast 50 awards
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Case: Alkacon Software CMS: OpenCMS
Developing Extensions
Founded in 2000 (Germany)
License: LGPL
VC funding: No
# employees: 10
Sales: 1 million
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Who makes money with OSS
OSS
Corporate
owned
Corporate
owner
Community
owned
CommunityThird-
parties
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Ways of making revenues with Open Source2) Community
Pay off the server and hosting expenses Merchandise/ Accessorising (e.g. J oomla!, DokuWiki)
Donations (e.g. e107, MediaWiki, Impress CMS)
Advertising (e.g. ModX)
3) Third-parties
Generate revenues
Developing derivative products and extensions
Consulting and support services
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Third Parties-Joomla Extensions and Service Providers
~300 micro and small companies, none have VC investment
Statistics*
Employees: 3 (900)#
2006- Revenues: 51,197 ( 15.4 million)
2007- Revenues: 115,706 ( 34.7 million)
2008- Revenues: 124,237 ( 37.2 million)
2006- Net Income: 12,786 ( 3.9 million)
2007- Net Income: 11,892 ( 3.6 million)
2008- Net Income: 13,576 ( 4.1 million)
*MEDIAN values based on financial data for EU companies available in Amadeus database
# Extrapolated for 300 companies
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Conclusion
Open Source is indeed changing how
software is built and how money is made!
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Biz meets open source CMS
A short, practical example of business success in a free stuff marketplace
Ryan Ozimek
Imperial College Business School
March 31, 2010
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 25
Who am I?
Ryan Ozimek
Chief Executive Officer, PICnet
President, Open Source Matters Evangelist, open source software
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 26
Overview
J oomla!: an open source success story
Business ecology around the J oomla software
Micro-level implementation and success
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 27
The key market opportunity
Open source freedom means free as in free kittens
An ecology of businesses blossom around providing servicesand extended the value of open source software
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 28
The key market opportunity deliverables Infrastructure tools and services
Productised add-on functionalities
Implementation services
Customisation services
Education and training
Support services
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 29
A short story of open source success
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 30
Joomlas success story
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 31
Joomlas success story
Content management system (Web framework)
Created by a corporation in Australia
Open sourced to the community Community involvement skyrockets, development boom
Small businesses begin selling add-ons
Consulting firms provide implementation services
Cloud computing firms virtualise services The results
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 32
Joomlas success story
15,605,591 downloads of J oomla
1,992,970 posts on the J oomla forums
365,883 registered community members 201,200+ registered developers
2,000,000+ estimated live sites
4,565 registered extensions (add-ons), all GPL licensed
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 33
Possible business models?
Products
Services
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 34
Product models
Design templates
Development extensions
Packaged suite offerings
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 35
Design templates
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 36
Develop productised extensions
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 37
Service models
Custom design/development services
Retained support services
Product delivery models
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 38
Success is in servicing the niche markets
www.nonprofitsoapbox.com
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 39
Success is also in the long tail
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 40
A short story of an OSS + biz relationship
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 41
PICnets short history1999 an NGO trip to Kosovo
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 42
PICnets short history2001 a political Web portal
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 43
PICnets short history2003 open source Web development firm
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 44
PICnets short history2007 software as a service provider platform
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 45
Integrate, dont reinvent Open source tools can provide the pivot point
Its 2010, theres TONS of great software and Webservices out there. Add value by delivering the nichesolutions to the marketplace.
Use the right tools for the problem
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 46
Be a bridge builder
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 47
How to build bridges
Build it yourself Build it together with
the community
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 48
Relationships are greater than the tools
>
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 49
What to look for in your OSS community Active communities with strong diversity (engineers,
businesses, users, views and values)
Strong local language community
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 50
What to look for in your OSS community Lots and lots of users, leverage the crowds
J oomla has more than 300k registered and active users,with more than 15.6 million downloads
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 51
Nurture relationships with the community Free support!
Easier access to thought leaders and experts yourbusiness might need for future solutions
Opportunity to reach large community of potential users
Cultivate relationships, dont just use tools
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 52
Impact of Joomlas success More than 2 million easy to manage sites published
Code valued at more than US$2,000,000
Provisioning of powerful and affordable software to thosewho normally couldnt afford it
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Imperial College Business School | Ryan Ozimek @cozimekMarch 31, 2010 53
Thanks!Ryan Ozimek
CEO, PICnet
www.picnet.net
President, Open Source Matters
www.joomla.org
Twitter: @cozimek
cozimek@picnet.net
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Nokia acquiresSymbian Ltd
1998
2008
Copyright 2009 Symbian Foundation. Public
Symbian Ltd wasfounded
2009
2006
100 millionphones shipped
250 different phone models250 million phones shipped
Initial codecontribution
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