IT Manager‘s Journal | Making money from FLOSS

Many people are already convinced that the Free/Libre and Open Source Software (FLOSS) development model is superior to proprietary methods. Others see strong ethical and philosophical reasons to prefer it. But what‘s less clear is how to make money from it -- not to Bill Gates scope but by building a strong company or making a decent living. How can you make any money when you give away your work for free? 
The evidence is hard to argue with. FLOSS has been around for decades, and in an industry where a company can go from zero to billions in a few years (and many do), not a single company has even nearly achieved that by making money from FLOSS. (Many have used FLOSS and made money elsewhere, from advertising for example, but that‘s not what we‘re talking about.)
So we have a challenge. Success stories are few and far between.
But all is not lost. None of us are likely to achieve the success Microsoft or Intel has had the last decade (and we might not wish to). Yet it is possible to make a good living from FLOSS and for pure FLOSS companies to flourish.
Develop bespoke software for a client
More and more organisations are realising that buying off-the-shelf software can be a false economy. The up-front license fee may seem reasonable, but then you find out the package you purchased doesn‘t do half the things you want, you can‘t get extra features added or bugs fixed, and you‘re tied to a vendor with little chance of escape.
Many forward-thinking organisations are realising that perhaps the old-fashioned in-house software development teams weren‘t such as bad idea after all.
FLOSS development offers the best of both worlds -- software that has the right features, control over the applications, and no worries about vendor tie-ins or licensing -- and all this without having to maintain in-house programmers; just outsource the work and have it developed under a suitable FLOSS license. If the organisation wants to keep the software for itself, it can get the developers to sign a non-disclosure agreement, which is perfectly in line with the GNU General Public License (GPL).
Develop black box solutions
There is a growing market for systems that work out of the box, and FLOSS has a proven track record as a good way to create them. We all know about Linux embedded in routers and mobile phones. Companies such asEmbedded Software Foundry in the UK will embed Linux in pretty much any device, allowing the hardware vendor to sell a highly functional product without paying licensing costs to proprietary software vendors.
Other companies build pre-installed servers, PCs, or thin clients for specific purposes. Trivial to install and low-maintenance, they can be sold for a reasonable unit price because the hardware and software ship together and the people who want to buy them don‘t want the hassle of installing something themselves.
Charge for implementation, support, and documentation
Who wants software that only sort-of works and takes months to get working correctly (though that‘s what we seem to get from the proprietary vendors most of the time)? Companies will pay good money to have free software well-implemented and -supported. Throw consultancy, training, and hardware into the mix and there‘s a good revenue stream.
Adding features
How often have you used a piece of software and thought, "This would be really great if only it had feature X"? Ever tried getting your feature added to proprietary software? If you‘re lucky, your request for a new feature goes into a long queue and may be added some years later. Companies that use FLOSS can avoid that headache -- they can pay someone to add on the features they want.
Clockwork Software Systems in the UK has generated significant business customising its open source accounting suite to meet the needs of clients who were willing to pay to get the right features working correctly.
Apply different licenses
MySQL AB uses multiple licenses to make money from FLOSS. If the application running on top of the database is purely for private use, or is released under a FLOSS license, then you need not pay to use it. If you don‘t want to release your code under a FLOSS license, just purchase a commercial license.
If you are thinking about whether this is the right route for your software, bear in mind that, according to MySQL AB, for every one commercial licensee, a thousand use the database under the GPL. You may need a lot of users to make it pay.
There are other variations, and certainly room for a lot more creativity. You could have different licenses for non-commercial entities and for companies. Some companies initially develop and sell software as proprietary and later release it as open source (IBM being an obvious example).
Government or academic funding
Historically, FLOSS has been made possible in no small part by funding from governments and academia. This should come as no surprise: the FLOSS development model has a lot in common with the way progress is made in science, which also has a strong academic slant.
TheSakai project is a recent example where a number of US academic institutions, starting with Indiana University and the University of Michigan, have worked together to develop a CMS and surrounding tools to meet their needs.
Around the world, governments are coming to realise the benefits of FLOSS. In the UK, theOpen Source Consortium is a group of around 80 smaller FLOSS companies working together. Jointly they have the size to help the UK public sector use FLOSS effectively and, of course, to increase their own revenue in the process. Similar organisations exist elsewhere, with more springing up.
Have your clients band together
Developing software can be an expensive business. A single customer might want some software but not be able to afford your development costs. If you can persuade several clients to come together and share the costs, you might well find that everyone wins. Be careful though -- such projects require careful management to keep everyone moving in the same direction.
Work for a FLOSS company
My suggestions so far have mostly been relevant to companies, but what if you just want a job? There are a surprisingly large number of FLOSS companies out there. The problem is, the vast majority are small and in no position to take on well-paid employees.
You could go to work for someone like IBM or Sun, but I doubt your new boss would take kindly to any refusal to work on non-FLOSS projects, so some compromise would be necessary.
If you‘re not lucky enough to find a permanent position with a FLOSS company, consider freelance work. In the UK, the Open Source Consortium is one of the organisations helping FLOSS freelancers and companies get together.
Of course with the growing success of Linux and FLOSS, there are more jobs in system administration and programming for all the organisations using the technology.
Conclusion
These are exciting times for those building businesses around FLOSS, but anyone equating "exciting" with "easy" will be in for a nasty surprise. A lot more people will be making a good living from FLOSS in five years time than today and there will be many more successful FLOSS companies.
Iain Roberts is a member of the Open Source Consortium‘s Executive Council and a director of UK FLOSS companyAxiom Tech.
_xyz