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451 Group: 'Open Source Not A Business Model'

It sounds like the title for an inflammatory puff piece, but it really isn't. It's the title of a new report issued by the 451 Group's Commercial Adoption of Open Source subdivision. And in it, the research firm makes a good case for its premise. Open source is a development model, but there's a whole slew of business models that fit on top of it.

The 451 folks analyzed the licensing, business models and software development models for 114 different vendors, and after crunching and slicing the numbers a bunch of ways, they learned a few things. The most important takeaway:

Open source is a business tactic, not a business model. Open source is not a market in and of itself, nor is it a vertical segment of the market. Open source is a software development and/or distribution model that is enabled by a licensing tactic.

The only exception I would take with the above is that for those looking specifically for open source solutions, open source is most definitely a market in and of itself. It may not ever be the preferred software development model for those who are shopping, but there's little question in my mind many people are now specifically interested in asking for open source solutions.

Some of the other insights gleaned from the report are worth repeating:

• There is a whole slew of combinations of development models, licensing, and revenue in use, not just four or five basic approaches.
• Most open source vendors use some kind of commercial license to make money.
• The choice of licensing -- reciprocal (GPLv2) or permissive (BSD) -- "has a strong influence on development, vendor licensing and revenue-generation strategies."
• Those selling solutions that use open source need direct sales staff "to bring in the largest proportion of revenue."
• "The cat is already out of the bag when it comes to open source-related business models and there is no way it is going back in."
• Most strikingly: "There is very little money being made out of open source software that doesn't involve proprietary software and services."

That last comment is probably going to fog up a few people's glasses, but from what I've seen, it's true. The number of companies out there who get most of their revenue via a support-only model are a fraction of the total -- barely 8% by 451's tally.

The whole report's worth reading if you can get your hands on it, but the above-linked blog piece is a good distillation of most of its basic points.

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