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24 January 2008

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Niraj J

Good post. Could not agree more with "Regular readers of this blog have heard me rail against the idea that open source is some sort of different business model".

I think the only difference is that open source is a very different market capture strategy (to me the next level of Microsoft's tolerating Piracy strategy).

Another important aspect is knowing what kind of open source business you are in. There are commercial players and there are not for profit players(example Apache) - both have different models around running a business

some more perspectives on the topic
1.http://www.gandalf-lab.com/blog/2007/04/does-open-source-make-ecomonic-sense.html
2.http://www.gandalf-lab.com/blog/labels/open%20source.html

Michael Tiemann

Stephen, I think you have the right handle and the right sense here, namely that the larger the company, the more likely they are to consolidate support and buy from a qualified set of 3rd parties. This is precisely the dynamic that I have seen all over the world: the "early adopters" don't actually adopt support, just source code. But when the code is handed over to "mainstream" users, they want support because they know how to build and run a shop with defined support models.

I could swear that last year I came across a university-led survey that asked this same question, and concluded the same thing: that smaller outfits are more likely to self-support, whereas larger outfits are more likely to contract support. This may explain why building an open source business is so difficult: there just isn't a workable revenue model until you have enough scale, and you cannot get that scale until you prove to the mainstream customer, over a period of years, that they can trust you to be smart with their money.

That does not make open soure a poor business model, just a very, very defensible one. And it may explain why open source companies like MySQL and Trolltech are much more likely to be acquired by a company that does have scale than to attract market capital to become a company with scale.

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