OSBC: Open Source: Why Freedom Makes a Better Business Model
Marten Mickos, CEO of MySQL, talked about how freedom leads to success. He's referring to freedom as opportunity – so eBay brings freedom to trade – anybody can trade with anyone. I didn't get some of his examples like how IKEA brings freedom to furnishings. New style, sure. Freedom?
He made a lot of quick points like:
- There are too many developers in the open source community for the proprietary world to compete.
- He says software profits come from innovation, network effects, scale of vendor and lock-in and open source does well on all of those except lock-in.
- Size is no guarantee of profitability. Open source companies can get to higher profitability faster because they spend less on sales and marketing – just compare how much RedHat spends on Linux advertising versus what the Unix vendors spent.
Then he moved on to a major point: open source is not religion and open source is not a business model – it's a smarter way to produce the goods and distribute the goods. (My note: there are business models that more effectively with open source than others.) When you create a business model you are targeting one of two groups: those who are willing to spend time to save money and those who are willing to spend money to save time. MySQL, because of its open source nature, is able to work with both groups. They provide value to those willing to spend time to save money (an open source database) and those willing to spend money to save time (commercial value-add ons like support and management.)
Then he suggested some business models like taking donations, selling ads, dual licensing, selling ad-on features, etc. You must give customers a compelling reason to buy – but make sure that it's not so compelling that the open source community doesn't abandon you to create an alternative. Lastly he said, realize that customers want everything to be free. Customers aren't worried about your profitability.
