SandHill.com has an article by Shirish Netke, who says: “As open source gains momentum, it becomes clear that the revolution is in the business model, not the pricing.”
While the proliferation of Linux is used as a benchmark for open source adoption, the real opportunity in open source is in infrastructure components such as databases, application servers and portal which form the “plumbing” of an enterprise software application. Implementing an optimal combination of software components requires a sophisticated understanding of infrastructure technologies and product engineering skills. Intellectual service providers with product building skills are well suited to create built-to-order plumbing for applications.
This availability of built-to-order open source infrastructure presents a unique opportunity for application software vendors, especially start ups. A typical start up spends a significant amount of time and effort in building the plumbing of their application before it focuses on the value-added, domain specific aspects of their solution. This time and effort can be minimized to bring the product to customers faster and potentially cheaper than before. Large software vendors who have built their products more than a few years ago also benefit from migrating proprietary components of their software to open source. The resulting saving in licensing fees can be passed on directly to their enterprise customers making them more competitive.
The proliferation of open source has also led to new business models for infrastructure software players. JBOSS (www.jboss.com) forgoes licensing fees on its product but has a revenue stream based on subscription, maintenance and support. Jaspersoft (www.jaspersoft.com) takes advantage of JasperReports, a popular open source reporting solution to provide a commercial solution which includes support and services.
The new economics of open-source software are similar to the economics of free Internet search, TV, radio, or checking accounts the money is not in the product; it’s in the services and value delivered around the product. In a sense, the new breed of intellectual service providers are the modern day version of inn keepers and blue jeans suppliers of the open source ecosystem.