Open-Source Licensing: Commoditizing Solutions

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One of the great things about open source is that it’s, well, open. You can change source code however you like, providing you report changes and/or give proper credit to whichever organization holds the license for your particular application. There are many different open-source licenses, all of which have different rules and regulations, so obligations vary. When considering licenses for the purpose of selling a particular open-source solution, there also are many ways to look at commoditization.

“From a development point of view, say I’m an applications developer creating a piece of software that I want to commoditize, by creating it as open source I can basically make my application a commodity by saying ‘OK, it’s free, but the services or additional components that are sold in conjunction or on top of that application are going to be for a fee,’” said Reuven Cohen, chief technologist and co-founder, Enomaly, an open-source service and consulting-based business. “By commoditizing I’m gaining access to a much broader market possibly, or maybe I’m taking a piece of a market more quickly than I would otherwise.”

Essentially, in the aforementioned situation, open-source licensing and commoditization means giving away a product in order to gain market share more quickly than might otherwise be possible. The core application will have a limited feature set, and if you want to get beyond that point you have to pay. Simplistically, it’s like a giving away a sample to get people hooked. “The sample is fully open, so they can take that sample and if they want to integrate it into their existing environment, make changes to it and do whatever they want to it. It’s open from that vantage point, and that’s the commodity aspect,” Cohen said.

However, open-source ‘sampling,’ such as downloading something to try it out, doesn’t necessarily mean you have to go outside your organization to get support. If you have the technical skills in house, why not use them? “The hope is that if 1 or 2 or 3 percent of the people who download and use it actually need the support and have a big enough market, you’re going to be able to do pretty well based on that commodity. It’s kind of a numbers game. The more people who use it, the more potential you have for sales,” Cohen explained.

There are numerous ways to commoditize open-source solutions including commercial and community avenues. In the former, companies such as MySQL and Alfresco build, market and release their software in hopes of gaining notoriety and getting their name out into the general technology space. They’re pushing a product and the ancillary services that go with it. Then there’s the community focus, which is similar to the style of a non-profit organization. “We hope that people use open source and then realize that there’s only a limited amount of places to look for that service, so they’ll come to us because we’re a specialist in that consulting realm,” Cohen said. “Organizations such as Apache, which does the Apache Web server, would be run in that type of fashion where it’s a non-profit organization that typically has a group of developers as the most common users of the system. Those could be like the IBM or Suns of the world. Their developers would be involved in submitting code and developing the application, but it’s done in a collaborative, non-profit approach. That is more a vanity type approach where you say, ‘We’re heavily involved in open source. We’re one of the main developers of this.’ But again it’s not a core product offering. It’s more of a branding exercise.”

To a certain degree in this scenario, you’re still offering a product for sale, but it’s more indirect. “One thing to be careful of is if you are perceived as making your software open source only for self-serving purposes. That might come back to haunt you, and that can spread quickly in the open-source world,” Cohen said. “You have to try and do it for the greater good in a sense or risk being alienated.

“I think going forward a lot of companies are realizing that open source makes sense, and information wants to be free. When you have a choice between an open-source product and a closed-source product, you’ve got choice, and you’ve got the ability to look and take the best parts of the application, and mix and match those components to build something totally new. Open source allows that fundamental intellectual proprietary that’s usually hidden to be visible and available to all who use it. In that sense you’re creating the ability for the concepts and technology to be furthered. That will create value.”

If you’re looking to commoditize an open-source solution and you’ve got the licensing issues handled, find areas that are underserved. A niche market can be a good way to break into the open-source solutions market. “If you’re going to jump into open source and there are a hundred Web content management systems, that’s probably not the best area to get into,” Cohen said. “But if you’re jumping into an area that’s totally underserved, that would be the appropriate way to get into that space. The same thing applies for business as a whole. In open source you’ve got a lot of opportunities that might not exist in a traditional business scene because there might be big players already in place. In open source there might be very little, which could provide a major opportunity.”

-Kellye Whitney,

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