Free Software and Business

The open-source model has a lot to offer the business world. Many companies are attempting to become profitable on the open source model. Red Hat, MandrakeSoft, SuSE, Digital Creation... all offer products and the source code free for download. Instead of paying for a license to use the software, users pay for technical support, manuals, and consulting fees. Abandoning licensing fees is possible because opening the source of your software allows companies to dramatically increase the talent pool without increasing head count. Open source companies are counting on cheaper, more reliable products delivered faster to gain superior market share and consulting/support contracts.

The open-source model has a lot to offer the business world[7]. It's a way to build open standards as actual software, rather than paper documents. It means also that many companies and individuals can collaborate on a product that none of them could achieve alone. It's the rapid bug-fixes and the changes that the user requests, done to the user's own schedule. The open-source model also means increased security. Because code is in the public view it will be exposed to extreme scrutiny, with problems found and fixed instead of kept secret until the wrong person discovers them. And last but not least, it's a way that the little guys can get together and have a good chance at beating a monopoly.

For an entrepreneur or start-up software producer, going open-source is a way to grab mindshare. The best new concept in the world won't make money unless people know it's interesting.

Whether this makes sense as a strategy depends on whether you think your main value proposition is in the software itself or in service and the expertise associated with the software. More often than one might think, the value is actually in service and integration.

In this model, one open-sources software to create a market position not for closed software (as in the Loss-Leader/Market-Positioner case) but for services.