OPEN SOURCE projects - how are they organized and financed

Adam Walczak - www.adamwalczak.info

There are many myths about the Open Source Community

www.projektyopensource.pl/ksiazka

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that most of them are working the as volunteers ...

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that they are driven by an utopian ideology ...

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that they make a living from donations ...

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?!


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The scale of open software
According to the research done for the European Committee
Economic impact of FLOSS on innovation and competitiveness of the EU ICT sector
●

It was estimated that services and products based on open source
software will make up to 32% of the IT sector till 2011. This would be
about 4% of the whole European market.

●

Open software supports in a large scale 29% software projects in the
UE and 49% in the USA.

●

Open source lets the world economy cut 36% of costs in software
research and development projects.

●

The value of resources invested in open source is estimated to be 22
billion euro which is 20.5 % of the overall investment in software
produced in the UE; in USA its 36 billion euro which makes up
to 20 % of the overall investment.


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A little history lesson ...

According to the NBER resource centers report
The economics of sharing: Open source and Beyond
The history of the Open Source and Free software movement
Is divided in to three eras:

●

the 60' i 70' – First era of collaborate software development

●

the 80' – Expansion of closed software

●

From the 90' – Rise of the net, mass collaboration and Open Source


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A not obvious division

free software

≈

open source

Richard Stallman

Eric S. Raymond

Moral choice

Practical choice

Restrictive licenses

Permissive licenses


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A not obvious division

Richard Stallmans speech when receiving the Linusa Torvaldsa Award for
his input to Open Source at the Linux World 1999 conference:

Giving the Linus Torvalds Award
to the Free Software Foundation
is a bit like giving the Han Solo Award
to the Rebel Fleet


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Motivations of open source participants

Very large

Significant

Small

None

60%

80%

Paid jobs or contract
Knowledge and experiance
Ideology
For fun
Future job/business opertunities
Received donations
0%


20%

40%

100%

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General organizational culture in open source projects
●

Treating software users as developers

●

Short release cycles

●

Open forms of communication in the project

●

Higher motivation of open source participants

●

egoless programming

●

No deadlines

●

A informal type of collaboration


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Biggest threat in an Open Source project


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FORK


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FORK
propozycja spolszczenia:

FOCH
:)


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project death
120000

Number of projects

100000
80000
60000
Active
Dead

40000
20000
0

Incubating

Usable

Stopień zaawansowania oprogramowania


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Organizational structures
●

Communities with benevolent dictators

●

Meritocratic communities

●

In house development, community feedback

●

Specification based community process

●

Fork

●

Umbrela project

●

Distribution


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Communities with benevolent dictator


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Communities with benevolent dictator

Examples:
●

Python – Guido van Rossum.

●

Blender – Ton Roosendaala.

●

Slackware – Patrick Volkerdinga.


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●

Every day based consensus based decision making

●

Votes done when necessary

●

Votes are NOT democratic

●

Both votes and advances in the communities hierarchy are
done in a meritocratic manner


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Apache Software Foundation


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In-house development, community feedback
●

Mixed practices

●

Easy control

●

Examples: MySQL, Qt


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●

Very formal

●

De facto develops specifications


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Examples

Java Community Process


Internet Standards Process

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Fork
Relationship with the mother project

Full departure


Symbiosis

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Fork
Examples

●

GNOME - GoneME

●

GCC – EGCS

●

Xfree86 - X.Org

●

Debian – Ubuntu

●

OpenOffice – LibreOffice


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Umbrella project

Examples:
●

GNU
●

GNOME
●

...

●

NUI Group

●

fundacja Apache


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Distribution
Examples
●

GNU/Linux: Debian, Ubuntu, Red Hat, SUSE

●

*BSD: NetBSD, FreeBSD, OpenBSD

●

Java application servers:
●
●

●

Oracle Glassfish
Apache Gieronimo

Portable Apps


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Distribution – Debian example


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Business models

X: How to gain profits if we give all for free ?
Y: Did we really give all for free ?
X: All our intellectual property ...
Y: Does IT only sell software licenses ?


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Business models

According to Bruce Perensa from George Washington University art.
The Emerging Economic Paradigm of Open Source

profits from selling software licenses
in the USA only make up to:

25%
of the IT market


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Business models

●

dual-licnesing

●

up-selling and cross-selling

●

selling related services

●

donations

●

other business goals which are not directly profitable


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Getting a client

Rule: 2% of your users generate 95% of your profits


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Open Source as a distribution model

Open Source generates a lot of business of business risks but is
also a light distribution model


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Dual-licensing

●

User segmentation

●

Large control over the project

According to the FLOSS Metrics Consorcium
5% of open source companies gain profit from this model


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Dual-licensing
Examples:

Qt

MySQL
Founded in the end of 90'

Bought by large IT companies in the last yers
by Nokia for 100 mln $


by Sun for 1 billion $

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Up-selling
●

De facto a selling technique

●

Base if open source, a more complex product is closed

●

Also known as freemium

●

Up-selling + dual-licensing = phased approach

According to the FLOSS Metrics Consorcium
12% of open source companies gain profit from this model


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Up-selling
Examples:
●

SugerCRM

●

Eclipse:
●

JBuilder

●

IBM Websphere Studio Workbench

●

JBoss Developer Studio


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Cross-selling
●

De facto a selling technique

●

Arguments sales of other products

IBM Software Cross Sell Reference Guide
describes 871 products and about 3400 relations among them


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Selling related services
●

Most popular model according to the The FLOSS Metrics
Consorcium 29%

●

Mostly done by business active in the project, only 2% of the
market is occupied by not participating companies

●

Service types:
●

Certified versions,

●

Consulting,

●

Support,

●

Integration,

●

Custom development,

●

Training and certification,


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Selling related services

Examples:
●

IBM, Oracle

●

Red Hat, SUSE, …

●

MySQL

●

....


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Donations
Free Software
Foundation

Mozilla
Foundation

Apache
Software
Foundation

WikiMedia
Foundation

Goals

Free software
promotion and
support

Support of
Mozilla projects

Support of
meritocratic
open source
projects

Support of the
free
encyclopedia

Yearly income

1 mln $

86,5 mln $

200 000 $

8,6 mln $

Founded by
companies and
institutions

>20%

96,60 %

>80 %

BD

Personal donations

BD

0,05 %

BD

>53 %

Biggest founders

Sun, IBM, HP,
Google

Google (about
70%), Yahoo,
Amazon

Google, Yahoo,
Microsoft

BD

Administration costs

9 %

19 %

5 %

26 %

Promotion costs

10 %

12 %

<0,01 %

7 %

Infrastructure costs

BD

4 %

49 %

>60 %

Development costs

BD

62 %

0 %

0 %


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Not directly profitable business goals
Przykłady:
●

Tokeneer System – biometric security system

●

Maemo – mobile software stack developed by Nokia. 10 mln lines of code 85%
from open source code, 15% written by Nokia

●

Google found 70% of Mozillas budget

●

loss leader strategy


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OPEN SOURCE projects - how are they organized and financed

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