Freedom in the software business does not necessarily mean free of charge, said MySQL CEO Marten Mickos, who reviewed a list of business models for open source at the Open Source Business Conference in San Francisco on Wednesday.
Open source vendors differ from proprietary vendors in that they offer free software but not necessarily perks such as specialized editions of their software, which Mickos likened to "free beer."
"We don't give you free beer. We give you free software and it takes time for customers to realize the value of this," Mickos said.
Big, closed source vendors have trouble keeping up with open source because they must rely on a smaller community to work on improving the software, he said. Open source has this large group because of the Internet, he said.
"It's so difficult for big companies to keep up with open source," Mickos said. In an apparent reference to Microsoft's complaints about open source violating patents, Mickos said some closed source companies resort to legal tactics to defend their business because they cannot keep up with innovation anymore.
There are several ways to make large profits in software, such as through innovation, as with Google or Adobe, Mickos said. Other ways include vendor lock-in, with Mickos citing database rivals Oracle and Microsoft in this category. Leveraging network effects, such as eBay and Google, is another way, he added.
"By choosing open source licensing, we have more or less agreed to not apply vendor lock-in and even if we tried, we are not able to," Mickos said.
But open source is not a business model. It is used as a market and a method for distribution, Mickos pointed out.
"Open source is just a smarter way to produce the goods and a smarter way to distribute the goods," Mickos said.
He listed numerous open source business models for free software:
* Donations are needed, such as with the Apache and Eclipse foundations.
* Ads and placements are sold, like with Mozilla.
* Fees are charged if the free software is embedded in closed-source software. MySQL is an example of this.
* Services are fee-based, such as with Ubuntu.
* Ongoing maintenance, monitoring and binaries are sold, such as with MySQL again, or JBoss or Red Hat.
* Some enterprise features are sold, like with SugarCRM.
* A closed-source product is built around an open source technology, such as with EnterpriseDB.
* Hardware is sold to supplement the free software. Sun Microsystems is in this category, Mickos said. Although the open source software is free, everything else is sold, including closed source software. Mickos cited IBM as applying this methodology for monetizing open source.
* Open source software is free, but the real business is something else. Ruby on Rails was listed as an example. (David Heinemeier Hansson offers Rails for free but works for 37signals.)
* Offering free software is later regretted. Borland Softrware's doings with Interbase were cited.
* A purveyor of software decides it does not want its software anymore.
* Driving of Web traffic is leveraged.