Best Practice in Innovation, Entrepreneurship & Design
Open-source business models: Creating value from ‘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. John Mullins - The David and Elaine Potter Foundation Term Chair in
Entrepreneurship and Marketing, London Business School
Agenda
• What is Open Source?
• History of Open Source
• Open Source Licenses
• Business Models of Open Source
• Conclusion
What is Open Source?
• Open source is a development method for software that harnesses the 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 permitted under the corresponding license conditions
• OS software: Better quality, higher reliability, low cost
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 Industrial Economics, June 2002, Vol. L(2)
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. New Open 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 Economics, June 2002, Vol. L(2)
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 Permissive
“ Strong-Copyleft ” “ Weak-Copyleft ” “ No-Copyleft ”
-GNU GPL -GNU LGPL -BSD license
-Mozilla -MIT license
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 different license under certain conditions
• Large works incorporating such software can be kept proprietary
• No copyleft:
• Developers are not obliged to inherit the license of the original software 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. IEEE Software, Jan/ Feb 2010
Open Source Licenses (3/3)
On 25
thMarch 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 %
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
Who makes money with OSS
OSS
Corporate owned
Corporate owner
Community owned
Community Third-
parties
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)
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
Case: DotNetNuke Corporation
• CMS: DotNetNuke
• Dual licensing and commercial services
• Founded in 2002 (USA)
• License: MIT License
• VC funding: $ 8 million (+)
• # employees: 16
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
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
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
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
Case: Alkacon Software
• CMS: OpenCMS
• Developing Extensions
• Founded in 2000 (Germany)
• License: LGPL
• VC funding: No
• # employees: 10
• Sales: € 1 million
Who makes money with OSS
OSS
Corporate owned
Corporate owner
Community owned
Community Third-
parties
Ways of making revenues with Open Source
2) Community
Pay off the server and hosting expenses
» Merchandise/ Accessorising (e.g. Joomla!, 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
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
Conclusion
Open Source is indeed changing how
software is built and how money is made!
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
Imperial College Business School | Ryan Ozimek @cozimek
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Who am I?
• Ryan Ozimek
• Chief Executive Officer, PICnet
• President, Open Source Matters
• Evangelist, open source software
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March 31, 2010 26
Overview
• Joomla!: an open source success story
• Business ecology around the Joomla software
• Micro-level implementation and success
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The key market opportunity
• Open source “freedom” means “free” as in “free kittens”
• An ecology of businesses blossom around providing services
and extended the value of open source software
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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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A short story of open source success
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Joomla’s success story
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Joomla’s 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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Joomla’s success story
• 15,605,591 downloads of Joomla
• 1,992,970 posts on the Joomla 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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Possible business models?
• Products
• Services
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Product models
• Design templates
• Development extensions
• Packaged suite offerings
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Design templates
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Develop productised extensions
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Service models
• Custom design/development services
• Retained support services
• Product delivery models
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Success is in servicing the niche markets
www.nonprofitsoapbox.com
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Success is also in the long tail
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A short story of an OSS + biz relationship
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PICnet’s short history
1999 – an NGO trip to Kosovo
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PICnet’s short history
2001 – a political Web portal
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PICnet’s short history
2003 – open source Web development firm
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PICnet’s short history
2007 – software as a service provider platform
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Integrate, don’t reinvent
• Open source tools can provide the pivot point
• It’s 2010, there’s TONS of great software and Web services out there. Add value by delivering the niche solutions to the marketplace.
• Use the right tools for the problem
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Be a bridge builder
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How to build bridges
Build it yourself Build it together with
the community
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Relationships are greater than the tools
>
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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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What to look for in your OSS community
• Lots and lots of users, leverage the crowds
• Joomla has more than 300k registered and active users,
with more than 15.6 million downloads
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Nurture relationships with the community
• Free support!
• Easier access to thought leaders and experts your business might need for future solutions
• Opportunity to reach large community of potential users
• Cultivate relationships, don’t just use tools
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Impact of Joomla’s 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 those
who normally couldn’t afford it
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Thanks!
Ryan Ozimek CEO, PICnet www.picnet.net
President, Open Source Matters www.joomla.org
Twitter: @cozimek
[email protected]
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