InformationWeek

Nowhere is this acceptance more apparent than with Linux, the Unix-like open-source operating system. This year is shaping up to be the year that Linux becomes an IT contender. With Hewlett-Packard, IBM, Oracle, SAP, SGI, and other heavyweight vendors offering support in one form or another for Linux, it's never been easier for IT managers to justify deploying open-source software. Linux, of course, is just one of several pop-ular open-source software products that are widely used to build intranets, extranets, and Internet sites. The Apache Web server, Perl scripting language, and Sendmail mail-transport agent are easily the market-share leaders in their categories. Yet all three are available for free and with complete source code.

So how do you make money when open source is free? Raymond identifies seven business models for open-source software. In the case of Netscape's Mozilla browser, he calls the model the "Loss Leader/Market Positioner." This model uses open-source software to "create or maintain a market position for proprietary software that generates a direct revenue stream." Netscape wasn't making money with Communicator, but it needed to keep competing in that space to ensure Microsoft wouldn't get a browser monopoly. If Microsoft had done so, it would be in a position to dictate the standards in the lucrative server-side market.

Raymond calls a similar business model for software services "Give Away the Recipe, Open a Restaurant." This is used by Caldera, Red Hat, and other Linux distributors. They don't make money from selling the software itself, but from bundling other open-source software with Linux and selling the bundle as a tested, integrated product, and perhaps also offering extended support contracts.

The Magic Cauldron is a must-read for Internet entrepreneurs-if only to understand the possibilities of open-source business models. Raymond analyzes the "economic substrate of the open-source phenomenon," and his conclusions are compelling.