Hello everyone and welcome back to our course on commercial open source software startups

and how to spin one off from university.

We are squarely in the middle or just beyond the middle of this course in terms of lectures.

This is the third lecture in the middle part on commercial open source software and strategies.

The next lecture will also be on commercial open source strategies with a specific focus

on cloud computing.

But today I would like to introduce commercial open source and what I consider the three

core strategies or patterns for business models.

Of these single vendor open source firms are the most important one perhaps at least by

numbers and open source distributor firms and finally their service and support firms.

To understand why companies choose a commercial open source strategy we also need to look

at the benefits that this strategy brings to the effectiveness of different business

functions.

So with that what is commercial open source?

It's actually not that easy to come up with a definition.

Mine is commercial open source software.

It is open source software that is being developed by one or more vendors so there are companies

behind it for the purposes of deriving indirect revenues from it.

The crux of this definition is open source software itself because of the open source

license is always free to use so you can't make money off it really.

You can only make money off something complementary to it and be it as basic as providing the

software for download or putting it on a CD or DVD and distributing it like that.

So the revenues generated from the open source software are always indirect something complementary

to it and that will be the challenge of commercial open source.

Users still pay for what we've called basic or whole product in the past that is being

provided then by what becomes the commercial open source software vendor but it is not

the open source software itself.

To look ahead why do companies do that?

The implication here is develop software and give it away for free as open source software.

The purpose of this strategic move is to drive adoption of the software and implicitly then

the underlying product in its markets to drive adoption with users and turn those users eventually

into paying customers.

Using open source to drive adoption has also been called frictionless distribution.

You make it really easy for initially users possibly later customers to get acquainted

to start using it.

They are as we will see a zero dollar line item in a budget to develop some software

or just run some software because there are no barriers to using it.

Quite differently from to pay for software or even for software that has a freemium model

or has a trial that expires after three months or something like it.

Once you are establishing or have established such a base with users it will be harder for

competitors to possibly get their foot in the door with the users and the potential customers.

As we will see the revenue sources what customers those users who eventually become customers

actually pay for that is not new.

These are the classic revenue sources that we have already discussed.

But then the business functions around it and how to be effective at them changes.

Sometimes it is extensions, linear extensions of what is already there.

Sometimes it is drastically different and we will also discuss this today.

There are lots of commercial open source firms these days some of which you may know.

So I am pretty sure you have heard of MySQL or MongoDB or MongoDB until recently was an

open source commercial open source firm.