Free Software Business Model

I wrote this article for my college magazine sometime late 2006

The Free Software Business Model: How to make money from something that is free

The term “Free Software” has been misunderstood a lot.So lets set it straight.Any software classified as free software must give you(the user) 3 freedoms-freedom to run the software as and when you wish, freedom to access and modify its source code,freedom to redistribute copies(modified or otherwise) of the software with or without a fee.It also allows you to keep your modifications private.But the question that comes to mind is…..

…. how do I make money from free software? There are various ways in which a software company can make money from free software.Look at HP,IBM,Sun,Red Hat,Google and MySQL.They are thriving examples of companies making money from free software.Its easy,all you need is a sound….

…..business model First you must realize that free software is not a business model in itself. It is only a production and distribution method.Keeping this in mind there can be two alternatives.

….the dual – license model where businesses offer a free version but charge a fee for a commercial license. MySQL and Sun, with Openoffice.org, follow this model.For this you need a compelling value proposition -a software that does,what it is supposed to,very well.Trolltech(you haven’t heard of it) has been growing consistently over the last 10 years using a dual-licensed policy for its Qt GUI development framework.

….the support model where you get software for peanuts but the company charges for support just like Red Hat. It discontinued support for all its Red Hat Linux products and decided to concentrate on the enterprise space(Red Hat Linux Enterprise) giving Red Hat a 40 pc yearly increase in revenue till date.Others like IBM, simply use free software to supply services to enterprise customers.Google is providing services and software for free and making money and lots of it.

In a nutshell if you want to profit from free software, you might need to be more business-savvy than you would in other businesses.But once you gain momentum….Bill Gates and Microsoft could well be history.

Recommended reading: The Cathedral and the Bazaar by Eric S. Raymond

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