open source projects - how are they organized and financed

Adam Walczak - www.adamwalczak.info

Adam Walczakwww.projektyopensource.pl/ksiazka

There are many myths about the Open Source Community



that most of them are working the as volunteers ...



that they are driven by an utopian ideology ...



that they make a living from donations ...



?!


According to the research done for the European Committee

Economic impact of FLOSS on innovation and competitiveness of the EU ICT sector

The scale of open software

● It was estimated that services and products based on open source software will make up to 32% of the IT sector till 2011. This would be about 4% of the whole European market.

● Open software supports in a large scale 29% software projects in the UE and 49% in the USA.

● Open source lets the world economy cut 36% of costs in software research and development projects.

● The value of resources invested in open source is estimated to be 22 billion euro which is 20.5 % of the overall investment in software produced in the UE; in USA its 36 billion euro which makes up to 20 % of the overall investment.


According to the NBER resource centers report

The economics of sharing: Open source and Beyond

The history of the Open Source and Free software movementIs divided in to three eras:

A little history lesson ...

● the 60' i 70' – First era of collaborate software development

● the 80' – Expansion of closed software

● From the 90' – Rise of the net, mass collaboration and Open Source


A not obvious division

free software ≈ open source

Richard Stallman

Moral choice

Restrictive licenses

Eric S. Raymond

Practical choice

Permissive licenses


A not obvious division

Richard Stallmans speech when receiving the Linusa Torvaldsa Award for his input to Open Source at the Linux World 1999 conference:

Giving the Linus Torvalds Awardto the Free Software Foundation

is a bit like giving the Han Solo Awardto the Rebel Fleet


Motivations of open source participants

Paid jobs or contract

Knowledge and experiance

Ideology

For fun

Future job/business opertunities

Received donations

0% 20% 40% 60% 80% 100%

Very large Significant Small None


General organizational culture in open source projects

● Treating software users as developers

● Short release cycles

● Open forms of communication in the project

● Higher motivation of open source participants

● egoless programming

● No deadlines

● A informal type of collaboration


Biggest threat in an Open Source project



FORK



FORKpropozycja spolszczenia:

FOCH:)



project death

Incubating Usable0

20000

40000

60000

80000

100000

120000

ActiveDead

Stopień zaawansowania oprogramowania

Num

ber

of p

roj e

cts


Organizational structures

● Communities with benevolent dictators

● Meritocratic communities

● In house development, community feedback

● Specification based community process

● Fork

● Umbrela project

● Distribution


Communities with benevolent dictator


Communities with benevolent dictator

Examples:

● Python – Guido van Rossum.

● Blender – Ton Roosendaala.

● Slackware – Patrick Volkerdinga.


Meritocratic communities

● Every day based consensus based decision making

● Votes done when necessary

● Votes are NOT democratic

● Both votes and advances in the communities hierarchy are done in a meritocratic manner


Meritocratic communities

Apache Software Foundation


In-house development, community feedback

● Mixed practices

● Easy control

● Examples: MySQL, Qt


Specification based community process

● Very formal

● De facto develops specifications



Java Community Process

Examples

Internet Standards Process


Fork

Full departure

Relationship with the mother project

Symbiosis


Fork

● GNOME - GoneME

● GCC – EGCS

● Xfree86 - X.Org

● Debian – Ubuntu

● OpenOffice – LibreOffice

Examples


Umbrella project

Examples:

● GNU

● GNOME● ...

● NUI Group

● fundacja Apache


Distribution

● GNU/Linux: Debian, Ubuntu, Red Hat, SUSE

● *BSD: NetBSD, FreeBSD, OpenBSD

● Java application servers:

● Oracle Glassfish

● Apache Gieronimo

● Portable Apps

Examples


Distribution – Debian example


Business models

X: How to gain profits if we give all for free ?

Y: Did we really give all for free ?

X: All our intellectual property ...

Y: Does IT only sell software licenses ?


Business models

According to Bruce Perensa from George Washington University art.

The Emerging Economic Paradigm of Open Source

profits from selling software licenses

in the USA only make up to:

25%

of the IT market


Business models

● dual-licnesing

● up-selling and cross-selling

● selling related services

● donations

● other business goals which are not directly profitable


Getting a client

Rule: 2% of your users generate 95% of your profits


Open Source as a distribution model

Open Source generates a lot of business of business risks but is also a light distribution model


Dual-licensing

● User segmentation

● Large control over the project

According to the FLOSS Metrics Consorcium5% of open source companies gain profit from this model


Dual-licensing

Examples:

Qt MySQL

Founded in the end of 90'

Bought by large IT companies in the last yers

by Nokia for 100 mln $ by Sun for 1 billion $


Up-selling

● De facto a selling technique

● Base if open source, a more complex product is closed

● Also known as freemium

● Up-selling + dual-licensing = phased approach

According to the FLOSS Metrics Consorcium12% of open source companies gain profit from this model


Up-selling

Examples:

● SugerCRM

● Eclipse:

● JBuilder

● IBM Websphere Studio Workbench

● JBoss Developer Studio


Cross-selling

● De facto a selling technique

● Arguments sales of other products

IBM Software Cross Sell Reference Guide

describes 871 products and about 3400 relations among them


Selling related services

● Most popular model according to the The FLOSS Metrics Consorcium 29%

● Mostly done by business active in the project, only 2% of the market is occupied by not participating companies

● Service types:

● Certified versions,

● Consulting,

● Support,

● Integration,

● Custom development,

● Training and certification,


Selling related services

Examples:

● IBM, Oracle

● Red Hat, SUSE, …

● MySQL

● ....


Donations

Free Software Foundation

Mozilla Foundation

Apache Software

Foundation

WikiMedia Foundation

Goals Free software promotion and support

Support of Mozilla projects

Support of meritocratic open source projects

Support of the free encyclopedia

Yearly income 1 mln $ 86,5 mln $ 200 000 $ 8,6 mln $

Founded by companies and institutions

>20% 96,60 % >80 % BD

Personal donations BD 0,05 % BD >53 %

Biggest founders Sun, IBM, HP, Google

Google (about 70%), Yahoo, Amazon

Google, Yahoo, Microsoft

BD

Administration costs 9 % 19 % 5 % 26 %

Promotion costs 10 % 12 % <0,01 % 7 %

Infrastructure costs BD 4 % 49 % >60 %

Development costs BD 62 % 0 % 0 %


Not directly profitable business goals

Przykłady:

● Tokeneer System – biometric security system

● Maemo – mobile software stack developed by Nokia. 10 mln lines of code 85% from open source code, 15% written by Nokia

● Google found 70% of Mozillas budget

● loss leader strategy

Adam Walczak - www.adamwalczak.info

open source projects - how are they organized and financed

Technology