Bernie Thompson
Linux Journal August 1999
In the first part of this series, we raced across the landscape of current efforts to drive innovation and make a living in the Open Source market.
In this second half, we introduce a system for consumer-driven Open Source funding. If successful, it could accelerate the pace of innovation further -- and create a small industry around developing free software.
THE NEED
Is there some graphics hardware you wish Linux supported better? A game you wish was ported from Windows? Or possibly a GUI application to ease some parts of system setup?
If so, what do you do about it? If you are a developer, you can just go write it yourself. That has been the Linux model: "scratch your own itch," and contribute it back to the community.
But if you aren't a developer, don't have the time, or don't have that skill -- you're out of luck. You have to wait and hope that some other sufficiently motivated developer with the same need will take on the project.
This can get quite frustrating. You need that graphics driver now. You could speed things up by hiring someone to develop the software just for you. But why should you pay a fortune to have a custom driver developed for a $50 graphics board?
What's needed is for a larger group to share the burden to develop a standard driver. There are probably several thousand people in the world with that same graphics card trying to run Linux. Why don't some of them get together and share the cost of having the work done?
The same concepts apply to scripts, helpfiles, applications -- anywhere there is a demand for software.
A BUYER'S CO-OP FOR OPEN SOURCE
The Internet is an amazing tool for bringing specialized communities together. A bunch of people needing the same software is just such a community.
The trick is to attract all of the interested parties to the same web site, where they can pool their resources with all the others that want the same thing. This site must coordinate the process of gathering support, selecting a developer, evaluating the resulting software, and collecting the funds to pay the developer.
THE FREE SOFTWARE BAZAAR
Axel Boldt's Free Software Bazaar was the first realization of these ideas. It opened in the fall of 1998, and within 6 months it collected over $25000 (USD) in offers, and over $1200 in payments towards Open Source projects.
The site works by letting users browse a list of existing offers. If the user is interested in sponsoring an existing project or creating a new one, they email Axel. He then adds their offer to the listing page.
These offers can be claimed by the first developer to successfully complete the work. Axel then notifies the sponsors, asking them to send payment directly to the developer.
What inspired you to create the Free Software Bazaar?
In a Usenet discussion, the question came up whether buying a RedHat CD is a good way to sponsor free software development. I then got the idea that there may be a better, more direct way to induce people to write free software, to "cut out the middleman".
Is money important for the free software movement?
In the grand scheme of free software development, money does not currently play a big role. Personally, I am not at all unhappy about that. I like to think of the Bazaar as a place where programmers can get ideas for projects that are actually needed out there, and where users can show their appreciation for the wealth of software they get for free.
Why would any individual commit money towards funding an Open Source project?
Two reasons: you need a certain piece of software and you think that the free software development model would produce the best results, or you feel the need to "give back" to the free software community. Most of the time, it's probably a combination of the two.
What does the system offer for developers?
Some money, but mainly ideas for new worthwhile projects.
What effect could cooperative funding have on the Open Source community at large?
It may help to establish better communication between users and producers of free software. Users will be able to outline a wishlist for a new project as opposed to just provide feedback and patches to already existing code.
What is your background?
I maintain the Linux kernel configuration help texts, the Linux CD Giveaway List (http://visar.csustan.edu/giveaway.html) and the programs tkinfo and WebFilter. I teach mathematics and computer science at Metro State University in St. Paul, Minnesota.
What are your plans for the future?
Retire early and keep playing with free software.
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COSOURCE.COM
The Free Software Bazaar is a great service to the Open Source community. However, a huge ongoing effort is required to maintain momentum and grow the movement into something powerful.
For cooperative funding to become a significant force in the Open Source market, the achievements of the Free Software Bazaar must be multiplied many-fold. Managing the demands of so many parties is a difficult problem. A cooperative funding service needs to be innovative in solving the confidence and communication problems between sponsors and developers. It should be convenient and simple. It must be professional and build a strong record of trust. And in the end, it is essential to attract and maintain a critical mass of sponsors and developers.
Cosource.com is an attempt to create a service that meets these demands. It is a commercial enterprise created to provide the range of services required to make cooperative funding a success for buyers, developers, and the Open Source community in general.
It intends to:
If all these goals can be achieved, it is hoped that cooperative funding will provide effective answers to the questions "How does one make a living on free software?" and "Who is motivated to innovate?"
The answers are that innovation is funded directly by users who pay for new features, which in turn supports a small army of independent software developers.
HOW DOES IT WORK FOR SPONSORS AND DEVELOPERS?
It starts with an unfulfilled need. Maybe it's a driver for their USB scanner, a plug-in to convert Excel spreadsheets, or a port of some game to Linux.
The user goes to www.cosource.com and finds the project to develop this feature. If it's not there, they can add it with a form.
What is it worth to them, if someone would develop this software? Maybe it's $10. Maybe it's $1000. They sponsor the project for that amount. This is not something done lightly. They are making a firm commitment to pay up if the software is developed.
Other motivated sponsors come along and do the same. Cosource goes out to corporations and seeks to supplement the individual sponsorships with a few large ones. Let's say it's an HP scanner driver project. While HP isn't yet ready to pay for the full cost of developing a Linux driver, they may be willing to pay 50% or 25% of the effort.
Developers, meanwhile, browse these same lists to identify projects in their area of expertise.
Say a developer has done a converter for the Excel file format before. That developer fills in a form to bid on the project:
How much would I have to be paid to do this work? What is my most conservative estimate for time to completion? What license would it be released under (e.g. GPL, BSD, etc.)? Who will judge the final product for completeness and quality (e.g. a known and trusted third-party authority, etc.)? What will be the URL of the project web page? Cosource then prices the bid for display on the system, marking up the bid for transaction costs, historical sponsor fraud, advance payments, project risk, etc.
As bids are entered, sponsors are notified and evaluate them. They sumbit a simple yes/no form in response. Voting yes to one or more bids is a final commitment involving a legal agreement to follow through if this developer succeeds. The first bid that gains sufficient sponsorship wins. From that point until the end of the bid schedule, the sponsors are not permitted to back out and shortchange the developer.
The winning developer then begins work on the project, providing updates on their project web page.
At some point, the developer believes he or she is complete. A release is done and judged whether it matches up to the requirements set out in the original project description. If the release fails, the developer may try again many times, until their committed schedule runs out. If that unfortunate event happens, the project goes back to the sponsor/bid phase.
If the release passes, the project is complete! The sponsors are notified to fulfill their commitments. They can pay easily by credit card. Finally, the payments are consolidated and a single check is mailed to the developer.
WHAT ARE THE GOALS
Obviously, this process is more complicated than a typical software buying experience.
In return, the consumer gains much more control over the quality and timeframe of work. If you needed one of the new features Windows 2000 provides, you had to wait 2-3 years after the initial promised ship date to get them. How can a corporation plan ahead for software rollouts with such uncertainty?
Cosourcing puts more control over features, schedule, and quality in the hands of the consumers.
Obviously, this system is not intended for charity or non-profit activity.
Rather, it is intended to be the most effective way to outsource the development of software, and have that cost be shared with other motivated buyers. It is intended to be a way for non-developers to "scratch their own itch." It is intended to be a fertile breeding ground for hundreds of individual and corporate developers. It is intended to make the funding of Open Source a collaborative effort in the same spirit that the development process is today.
In general, it is intended empower end-users to use their hard-earned money to make free software do what they need it to.
<
Sidebar: Software in 2010
With the rise of the Internet and the Open Source movement in the late 1900s, the basic building blocks of software -- operating systems and libraries that applications build upon -- starting becoming a collaborative effort. At first, few people believed that great software could result. Few believed that a rag-tag collection of individuals and companies, working in parallel, could produce a great platform to build upon.
But they did it.
Then, at the turn of the millennium, markets sprung up to collaboratively fund these same projects. Drivers, scripts, and middleware to connect Open Source with every kind of software and hardware device were developed. Lots of small but frustrating problems were fixed. Open Source was now the most interoperable software platform available. And it was getting all the polish and customizations needed to appeal to the full spectrum of end-users.
Open Source did not win out completely. Rather, the result was intense competition between closed and open source platforms that drove accelerating innovation for all.
In recent years, the open model has gone on to tackle problems beyond the platform. Highly parallel problems that require a huge collaborative effort. Projects that require complete openness and collaboration. Efforts that are beyond the resources of a single corporation. Modern pyramids of software.
In 2004, the first of these successes -- the Interling project -- was completed. It is, of course, the software we use to translate hundreds of written and spoken languages to and from the common Interling language. Dozens of programmers were required for each dialect to produce the complex grammar processing codes. The project was only possible through the participation of thousands of programmers world wide, with work on each language funded by motivated individuals, corporations, and governments.
In 2006, we completed the initial work of the Historica Humanica project. Every piece of writing, every painted canvas, and every available oral history was scanned and entered into our huge searchable database. While not every individual has or will publish a full autobiography, many have willed that their invaluable memoirs be made available at their death. What can we learn from history? We've found we can learn much, especially at the personal level. The human psyche has not changed dramatically over the ages. We are now able to search our records for others who have felt the same pain or dealt with the same concern. In these writings, we have found perspective and understanding to guide our path forward in everyday life.
Now, in these last few years, we've begun to tackle the most daunting effort yet -- the Neuroscape project to approximate and emulate the human brain. We learned early in our AI work that no one simple algorithm can replicate the wonder of the human brain. Rather, the brain is made up of millions of flexible, evolving rules and guidelines. The equivalent of billions of lines of software code.
It is a project we can only hope to achieve through the most massive parallel effort ever undertaken by humankind...
>
MAKING A NEW MARKET
On one end of the software market spectrum is "closed" software, where intellectual property is licensed on a per-copy basis. On the other end is free software where intellectual property is created without payment, and voluntarily given to the community at large.
Both of these will continue to grow and thrive. On one hand, closed software will continue to be a billion-dollar market. On the other hand, innovative free software will continue to be developed by students, hobbyists, and professionals for various reasons. Both systems make sense, and they will continue to compete with each other.
But there is a possibility for a vibrant third market. One which blends and bridges the differences between the other two. One that brings the free market to free software.
This is a market that sells software as a service rather than a product, so it is compatible with Richard Stallman's original and ongoing vision for Public License code. A market that serves the needs of the end-users, to drive more innovation in the areas that matter most to them. A market that brings financial vitality to free software, so thousands of individuals and small companies can make their living developing it.
This may all be a pipe dream. Consumer psychology has rarely dealt with a case where a group of consumers pay for the development of a product, and then allow that product to be given away freely from that time forward. Psychologically, this is a strange mix of self-interest and altruism.
Cosource.com and others are going to put it to the test. If you've ever complained about some missing piece of free software, now you can put your money where your mouth is.
Will you?
Bernie Thompson is one of the founders of cosource.com. He lives just down the hill from Microsoft, and believes that a great and healthy rivalry has begun where the big winner will be end users. Send comments and ideas to bernie@cosource.com.
References
"The Street Performer Protocol", Kelsey and Schneier, http://www.counterpane.com/street_performer.html
"The Free Software Bazaar", Axel Boldt, http://visar.csustan.edu/bazaar/
"The Catallactics of Free Software", Francois-Rene Rideau, http://www.tunes.org/~fare/articles/cata_fs.html
"A Free Software Auction Service", Francois-Rene Rideau, http://www.tunes.org/~fare/articles/fsas.html
"Open Source Funding" (Slashdot feature), Jim Thompson, http://slashdot.org/article.pl?sid=99/02/09/0954219
(c) 1999 Bernie Thompson. Bernie Thompson
Open Source is software which has been freed. It allows bits to be copied and reused endlessly. It allows inspection of the source code. It allows new innovations to be built upon old, without having to duplicate past efforts. It is free software, with the emphasis on freedom.
This past year has seen an explosive rise in visibility for this curious market. The computer world at large has gained at least limited understanding and respect its workings. Much of this attention would have been unimaginable even a year or two ago.
During this time, Open Source has been put under heavy scrutiny. While certain technical benefits are undeniable, every analysis invariably confronts two simple, critical questions: "How does one make a living on free software?" and "Who is motivated to innovate?"
The strength of the answers to these questions will determine if Open Source will achieve its full potential for the greatest possible audience. It must be economically viable.
This article will attempt to answer these two questions by surveying the field of current business models and analyzing their financial strength. It will also speculate on future innovations that may alter these dynamics.
Business Models
"Money rests on the axiom that every man is the owner of his mind and his effort ... Money permits you to obtain for your goods and your labor that which they are worth, but not more ... Money is your means of survival."
The obvious challenge of Open Source is that it may be copied freely, even if purchased initially. So a $10 Linux disc may legally be used to install one machine or a thousand machines. It would seem there is no incentive to put effort into improving a product like this.
Because of this characteristic, Open Source is often equated with a kind of communism: a system that offers something for nothing, a system that exploits the labor of others without rewarding them, in short, a system that is unsustainable because it puts people's self interest in conflict with the greater good.
These concerns should not be dismissed out of hand, nor taken as factual. The truth is more complicated.
Central to these concerns is the lack of exclusive copyright protections. But copyright and patent laws are not inherently part of the free market. They are intended to create limited monopolies for the companies that own the rights. This is done to reward research and encourage innovation.
Open Source is a voluntary system that waives exclusive ownership of software, in exchange for other benefits. These benefits include wider adoption, faster collective innovation, and a level competitive playing field. This makes for a frictionless, dynamic, and highly competitive market without the very profitable "vendor lock-in" that is facilitated by traditional copyrighted software.
Despite the resulting competitiveness, several business models have proven themselves to be profitable. These models leverage the unique new possibilities afforded by Open Source, in return for their sacrifice of certain copyrights.
What is still unclear is how these models will generate as much innovation and value as traditional software companies, given the handicap that a person's work can benefit their competition as much as it benefits themselves. But, as we'll see, one of the surprising things about free software is where the innovations have been coming from.
In the following sections, we introduce the markets that are producing innovation and jobs today. These are the research, service, and customization economies, and the many business models that fall into these groups.
The Research Economy
Open Source corporations are important growth engines, but to date they have mostly built upon the efforts of others. The bedrock of the market is the thousands of individual students and moonlighting professionals who make small and large contributions every day.
These developers are not paid for their efforts. They begin a project with no promises or commitments. They work at their own pace, use their own judgement, and set their own priorities. They are the university researchers and basement scientists of software, working together to make their contribution to the world.
Often these developers are only learning or honing their craft, so many projects fail. Yet out of this soup of individual and group efforts rises some of the best software available today.
Because of the Internet, these successful efforts can instantly be copied and put into use world-wide. They can be enhanced and customized by thousands of others. They can continue to evolve like an organism, adapting to new software and hardware architectures as the years go on.
The first and most unshakable answer to "Who will innovate?" is these students and moonlighters, motivated by their desire to learn and create, and inspired by the energy and clarity of tackling new problems. The profit-oriented market may fail, but these software research activities will go on. Slowly, surely, they will continue to add to the body of free software available to the world.
Yet despite the best efforts of the students and moonlighters, their software has common flaws. Because development goals are driven by the author's own needs, it results in software "by developers, for developers." The threshold at which a developer is satisfied with ease of use is much lower than for typical users. These are truly research projects, with all the beauties and warts that implies.
The Service Economy
In the cases where the beauty has outweighed the warts, a critical mass of technical and non-technical users has been built. Apache, Linux, Perl, and a long list of other programs have made this breakthrough to mass market utility. This expanded base of consumers has driven the need for many support services built around the software itself. These services add polish and value to the base provided by the initial project.
No one is required to pay for any services. Given only a net connection, they could download what they need and figure out everything themselves. But many consumers find their time more valuable than that. They seek services to make their lives easier.
This is where "commercial" Open Source steps in to distribute the software, provide technical support, and educate users.
Distribution
The Internet is great for downloading small software, but for larger products it is too slow. Also, finding the software you want among the jungle of projects on the web can be difficult.
From this need rose companies like RedHat, Caldera, Suse, and Walnut Creek CDROM. On one convenient disc, you have an organized collection of the best available software applications. These companies are achieving significant revenue and earnings with these services.
Opportunities exist for further specialization. LinuxPPC has made a solid business out of focusing on the PowerPC market. A small company could take this further by taking one of the most popular (Dell, Linux, eMachines) PCs and producing a distribution that is tailored and tuned to that hardware. It could guarantee that all devices are recognized and install flawlessly. It could optimize every program to the particular processor used on that machine. You could imagine Intel co-marketing and co-developing with a company to optimize for their latest chips.
Open Source can be a key in a drive towards mass specialization of computer products and services. As the overall size of the market increases, more opportunities will be created in these small niches and sub-niches. All of this is made possible by the full access to source that free software provides.
Technical Support
When a single company owns exclusive rights to a software product, it is obvious where the most informed technical support comes from: you buy a Microsoft product, you go to Microsoft for technical support.
The fact that Open Source does not have an exclusive support provider has repeatedly been portrayed as a weakness. This is a fundamentally flawed notion. Rather, Open Source allows a whole market of support providers to all compete on a level playing field of equal access to the code.
Through this heightened competition, the level and quality of support is capable of rising above the best standards of today's closed software market.
RedHat, LinuxCare, and many other companies and individual consultants have stepped up to serve this market. Early in 1999, IBM recognized these extraordinary opportunities and announced Linux support and consulting services. The competition between these companies will become intense, and customers will be well served.
If Open Source support services can achieve their full potential, it will become a major selling point for corporate users and consumers. Innovations in providing these services will provide the foundation for many viable new businesses.
Education
O'Reilly Associates has built a booming book publishing business which topped $40 million dollars in 1998. More than half of this revenue was from books about free software topics.
As the market grows in size, more educational services will be needed. These are significant opportunities since any educator, author, or consultant can delve into the inner workings of the code to produce definitive training materials for a subject. By working on and teaching about specific areas, a valuable reputation can be created. Later, we present a survey of the consulting market. Several of the most successful consultants built their businesses by being a recognized world-wide
expert in a particular technology.
The Customization Economy
The next step beyond servicing existing software is the creation of new applications to solve outstanding problems. This may be in the form of hardware devices that come pre-configured for a particular need. Or, it may be through employees or consultants who configure and enhance software for particular needs.
In a world dominated by a single vendor, there are limits to the innovations a new product can provide because of high prices, too few features, too many features, logo requirements, etc. Many interesting new applications are suddenly possible when these shackles are removed. You just need freedom to customize.
Hardware Bundles
Hardware preloads and bundles are some of the most compelling uses of free software, because the cost of developing or enhancing free software for the machine can be included the price of the hardware.
One example is the Cobalt Qube. This is a space-age blue 18.4x18.4x19.7cm server appliance running Linux on a RISC processor. It is a general purpose workgroup server for email, web, etc. Having full access to the Linux source code gave Cobalt the capability to fully customize the software for this uniquely simple but very powerful hardware platform.
Another is the Snap! network storage server from Meridian Data. It's a fixed-function server appliance that shares disk space onto the network. It is built from custom hardware combined with Open Source software. Consumers don't need to know it uses free software, they just need to know what it does. Because customers expect the price of network storage to scale with the price of disk storage, the hardware and software cost of using a proprietary software system could have greatly reduced the attractiveness of the product.
Obviously, one big advantage here is having no per-device software royalty. This is particularly true for price-sensitive high-volume products. In a few years we may find dozens of companies embedding Open Source operating systems and applications on millions of small, fixed-function hardware devices.
IT Professionals
Beyond hardware devices, there is a need to customize and adapt software applications to the exact business processes and needs organization.
This always requires some custom work. In most medium and large organizations, there is a crew of IT professionals whose job it is to customize hardware and software to make the business run more smoothly. These professionals would like to start with the most functional products possible, and customize from there. This has meant proprietary software in most cases.
Recently, Open Source software has achieved levels of functionality that match proprietary software in many cases. And the software has the advantage of not being tied to one vendor for support or product updates.
Rather quickly, it may become cost effective to customize free software, rather than pay for thousands of licenses of commercial software and build from there. This shift in the market will require a growing number of professionals who specialize in Open Source.
This is perhaps reflected in the salaries of IT Professionals. A 1998 salary survey of 7189 professionals asked which operating system they used primarily. Of those that reported Linux as the primary OS, their salary was $61,027 (US) vs. an overall average $60,991. The Linux salaries had increased 16.5% from the previous year, which represented the fastest salary increase of any system. (source: Sans Institute)
In-house staff is not the only option, however. Again, because of the freedom to inspect and study the software down to the lowest levels, a competitive industry is able to grow to serve whatever needs arise. The resulting alternative to in-house staff is a competitive market of independent consultants.
Consultants
When the cost of the software itself goes to zero, the value is in customizing for specific problems. Consultants already make their living providing these per-hour or per-project services. Open Sources are not a sacrifice, they are an opportunity.
An example is comprehensive support. Most business want a single point of contact to take full responsibility for getting a project done. With closed source, contractors are at the mercy of bugs and limitations in the operating systems and applications they purchase. In effect, they cannot guarantee success. They do not have full control of the technology.
With Open Source, they have complete access to solve every problem, no matter what level or layer it occurs in. A small company with a skilled force of engineers can provide a level of comprehensive application-to-operating system service that only IBM or HP or Sun can provide today, and probably at much lower prices.
To get an understanding of the size and health of the Open Source consulting market, those registered in the Linux Consultants HOWTO were surveyed.
They were asked:
1. How many consultants at your company are involved with Open Source work?
2. Approximately how much money did your company (or yourself, if independent) earn in 1998 on Open Source-related work? (Convert to US$)
3. In 1999, based on numbers from recent months, how much do you expect this to increase/decrease? (as a percentage)
4. In 1999, do you believe it is possible to make a living doing Open Source consulting work? (yes/no)
This is a very diverse group of VARs, integrators, and consultants. Over 50% are from outside the US, where cost of living may sometimes be lower. In most cases, Open Source work is just a piece of the total business.
While this is certainly not a scientifically rigorous study, it does give some flavor of the market.
A key point from the survey is the importance of being a "jack of all trades." You must focus on serving the needs of the customer, including doing work on closed source. In 1998, the median earnings per consultant on Open Source alone were not enough to make a living, and only 12.7% of the consultants made more than the $61,027 salary of IT professionals
mentioned above. Business has picked up dramatically in recent months, however. As a whole, the consultants were very bullish on the coming year.
In the previous sections, we've covered the current business models that provide a living for employees, and innovations for consumers. There are certainly strengths, but the market is still tiny compared to traditional shrink-wrapped software. Young companies with new ideas are needed to grow the market.
Funding New Companies
Capital is the fuel for companies that will serve any new market. This money may come from the on-going operations of the business, or from banks or investors. What is the current environment for getting this funding?
Venture Capitalists, the investment partnerships that fund high-risk/high-return companies, are skeptical so far. Their analysis of these opportunities keeps coming back to a critical point: Open Source, by definition, eliminates the barriers of entry to a market. How can a company build a sustainable market advantage if their work can immediately be used by a competitor?
Given this limit on the upside, only a limited number of Open Source companies have received funding. These companies have identified key factors that can protect them from competitors. For RedHat, it is a strong brand. For Sendmail, it is having an open/closed mix in their software product line. For a company like Cobalt Networks, it is combining closed hardware with open software.
Until then, companies must bootstrap themselves. Ironically, this is especially feasible because of those same low barriers to entry that scare off investors. An Open Source company can build on the past efforts of others, meaning that less capital is required to start the company.
Problems Companies Must Solve
In summary, what are the problems that companies must solve in order to grow the market in new directions?
Traditional software products harness the free market to solve these issues. Consumers pay to buy a software product if it meets their needs, which means it must be very polished. Successful products are profitable for the companies that create them. Unsuccessful products die off. Through these mechanisms, good developers make a living and consumers get good choices.
Open Source needs to create systems to provide these consumer checks and balances.
The Search For Solutions
The business models described throughout this article are by no means a comprehensive list. This is a young market that we're only beginning to understand. It could yet defy the skeptics and evolve into something that serves customers better and is financially strong.
Part two of this series will explore one particular possibility in this universe of interesting but unproven ideas.
It is a consumer co-op for software contracts. It uses the web to let consumers commit funds up-front to pay for the development of specific applications, feature enhancements, or bug fixes which are critical to them. Resources are pooled, so each person only pays a small portion of the total cost. It is a system compatible with, and tailored to, Open Source.
We will analyze this idea in detail, describe our attempt to create a web service which provides the necessary mechanisms, and speculate how this system might affect the progress of the Open Source market.
With this idea and many others, the Open Source market is a fascinating mix of possibilities and dangers. In recent years, it has grown from thousands to millions of users. Several profitable companies are now serving the needs of these consumers.
The next few years will certainly see continued innovation from the Open Source research community. From the business side, it remains to be seen whether the current momentum will continue or be struck down by market realities. It may very well depend on the innovations created by the upcoming generation of Open Source entrepreneurs.
It's a free market. May the best products win.
Bernie Thompson has worked in both "evil empires": IBM and Microsoft. He also published in the very first issue of Linux Journal. Please send any comments or requests to bernie@veriteam.com, or see the Veriteam company page.
(c) 1999 Bernie Thompson
First appearing in Linux Journal
You are welcome to reprint this article. Please just email me first.MAKING MONEY IN THE BAZAAR (part 1 in a series)
Linux Journal July 1999
-- Ayn Rand, Atlas Shrugged
[table 1. Existing Open Source Business Models]
Model Example
-------------- -----------------
Distribution RedHat
Support LinuxCare
Training and Education O'Reilly
Custom Development Cygnus
Hardware Systems VA Research
Hardware Appliances Cobalt Networks
Hardware Accessories Cyclades
Open/Closed Mix Sendmail
Loss Leader Netscape
Nearly all companies are hybrids of several different business models.
[end table: Existing Open Source Business Models]
[Table 2. Linux Consultant Survey]
Responses 79
Median 1998 Earnings per Consultant $15000 (USD)
Minimum Earnings per Consultant $0 (USD)
Maximum Earnings per Consultant $312500 (USD)
Median Predicted 1999 growth 70%
"Possible to make a living" in 1999 77%
Results for Open Source work only. Survey conducted in February, 1999.
[end table]
[table: Open Source Venture Funding]
Company Size Date Who
----------- ------- --------- --------------------------------------------
RedHat unknown Sept 1998 Greylock, Benchmark Partners, Intel, Netscape
Sendmail $7M Fall 1998 Silicon Valley Band of Angels
Cygnus $6M Feb 1997 Greylock, August Capital
VA Research unknown Fall 1998 Sequoia Capital
ActiveState unknown 1997 Tim O'Reilly
Scriptics $400K Jan 1998 Advance Sales
[end table]
As this market matures, more companies may achieve profitability and attract investment dollars for everyone.
You are welcome to reprint this
article, please email me first. (A special thank you to Linux Journal
for allowing their authors to retain rights to material).