Cases studies

As Richard Stallman explains in Selling Free Software [10] Selling Free Software is not at all in contradiction with the notion of Free Software (or Open Source).

We present here two examples of companies, Red Hat and Digital Creations. You can see a Tour of open-source startups in [12] and [13]. A very practical reading too is: How to Replace Windows NT with Linux[9] by Jon C. LeBlanc

Red Hat, Suse, Mandrake and the others Linux distribution vendors

Red Hat (as the other Linux distribution vendors) is not actually selling the software, the bits themselves, but the value added by assembling and testing a running operating system that is warranted (if only implicitly) to be merchantable and to be plug-compatible with other operating systems carrying the same brand.

Other elements of their value proposition include free installation support and the provision of options for continuing support contracts. The market-building effect of Open Source can be extremely powerful, especially for companies which are inevitably in a service position to begin with.

Digital Creations and Zope

One can cite here an extract of "The Magic Cauldron" [5] about the case of Digital Creations:

One very instructive recent case is Digital Creations, a website-design house started up in 1998 that specializes in complex database and transaction sites. Their major tool, the intellectual-property crown jewels of the company, is an object publisher that has been through several names and incarnations but is now called Zope.

When Digital Creations people went looking for venture capital, the VC they brought in carefully evaluated their prospective market niche, their people, and their tools. He then recommended that Digital Creations take Zope to open source.

By traditional software-industry standards, this looks like an absolutely crazy move. Conventional business-school wisdom has it that core intellectual property like Zope is a company's crown jewels, never under any circumstances to be given away. But the VC had two related insights. One is that Zope's true core asset is actually the brains and skills of its people. The second is that Zope is likely to generate more value as a market-builder than as a secret tool.

You can read the full story in The Business decision[11]

Zope is now the leading Open Source web application server.