“Show Me The Money”

Stefano Maffulli
Community Manager
Funambol
This document is licensed under the Creative Commons BY-SA 3.0 license.
© 2009 Dirk Riehle, Stefano Maffulli http://dirkriehle.com. Some Rights Reserved.
Summary

Where is the money

How to get the money

Why Open Source is good for you

How Funambol does it

Conclusions
The bad news
The IT market is exiting its worst year
ever with spending dropping a
projected 5.2 percent from 2008 to
2009. 2010 is about balancing the
focus on cost, risk and growth. For
more than 50 percent of CIOs, the IT
budget will be zero percent or less in
growth terms. It will only slowly
improve in 2011.
The good news
More good news

IDC's latest studies, "Asia/Pacific (Excluding Japan)

Open Source Software Adoption in 2009" …
reveal that organizations have started to evaluate
open source software (OSS) as a viable alternative
while they are trying to find ways to reduce their
operational expenses.
Where is the money?
At least some of it!
A bit of history

Richard Stallman Linus Torvalds Eric Raymond et al.

Open Source Initiative
1985 1996 2001
What is Open Source anyway?

A marketing pitch for Free/Libre Software

What is Free/Libre Software then?

Four simple principles

A user of software must be free to:

Run the program for any purpose

Study the program and adapt to new uses (need source)

Modify the program to suit her needs (need source)

Distribute copies, gratis or for a fee, to help others

Embedded in legally binding documents

The declaration of independence for a digital
society
Commercial or non-commercial?

There is no such thing

All Free/Libre Open Source Software
is commercial

Free/Libre Software can be sold

Stallman sold copies of GNU to support himself

Only further copies cannot be limited
Money is in Open Source.

But how to get it out of there

if further copies cannot be stopped?
What changes in
Commercial Open Source?

Community

It's crucial, can make the difference

Revenue streams and business models

Cannot count copies, cannot sell 'per copy'

Copyright, patents, trademark and secrets

“Intellectual property” is treated differently
Benefits of a User Community

Sales

Prospect is already a user

Process is faster and easier

Sale
Download Install Use Lead Prospect Customer

Sales funnel for Commercial Open Source

Benefits of a User Community

Marketing

Can turn users into evangelists

Creates credible testimonials

Product Management

Get feedback rapidly from users / market

Get almost-free market research

Community is source of innovation
Benefits of a User Community

Engineering

Fast feedback about bugs, performance

Wide testing in unusual circumstances

Software code

Extensions and add-ons

Pre-screening of potential employees
Benefits of a User Community

Support

User community is self sustaining

Fast source of support at any time, in any language

Web searchable content

Maintains its own documentation

Reduced support costs
Revenue Streams / Business Models

Three macro business models

“Pure Free/Libre” “Dual licensing” “Added Value”

More Respect of users freedoms Less

Indirect revenues Mixed direct and

indirect revenues
Direct revenues
Three macro sources of revenues (mostly)
The “pure” model

Also known as “Service Model”

Commercialization of support, training, assurance,
consulting

Can (or not) monetize software developed internally

Example: RedHat

Variant: service delivered over a network

Cloud computing or SaaS

Can be tricky to balance openness and avoid free-
riding
The “Dual licensing” model

One code base with two licenses

A free software license, usually copyleft

A non-free software license

Useful to segment customers

Free/libre version creates a community

Those afraid of copyleft can buy a different license

Example: Trolltech, Sleepycat
The “Added Value” model

Also known as “freedom deprived” or “open

core”

Commodity free/libre core available gratis

Revenues from non-free extra software

A way to directly monetize development

Need careful management of copyright

Need careful management of community

Contributors to core can feel expropriated

Example: MySQL, SugarCRM
The “Intellectual Property” issue

In brief:

Know the existing licenses

http://www.fsf.org/licensing/licenses

Don't invent a new one

http://opensource.org/licenses

It's not that complex, but it's a different game

Especially for embedded systems: be careful

http://www.fsfe.org/projects/ftf/

Deserves a dedicated session
 Acquirer / Exit / IPO Value on Open Source Business
Company
IPO Date that Date License model

Same as OSS +
Red Hat IPO Aug 99 ~$1B
upstream Services

Open Source OSS +

Suse Novell Nov 03 $210M
License Services

Dual
Innobase OY Oracle Oct 05 undisclosed GPL2
license

Sleepycat
Dual
Sleepycat Oracle Feb 06 $50M? License (copyleft
license
license)

OSS +
JBoss Red Hat Apr 06 $350M LGPL
Services

Zimbra PL Dual
Zimbra Yahoo! Sep 07 $350M
(Based on MPL) license

OSS +
XenSource Citrix Oct 07 $500M GPL2
Services

Dual
MySQL Sun Jan 08 $1B GPL2
license

Sugar PL (based Dual

SugarCRM TBD TBD TBD
on MPL) license

Dual
Funambol TBD TBD $1B ;-) AGPLv3
license
 Funambol

The leading provider of Open Source mobile cloud

sync

Based on open standard OMA DS (SyncML)

Cross platform push and synchronization

Supports most handsets
Funambol's way to dual licensing

Two segments

Funambol Community Edition, for enterprises

Affero GPLv3, copyleft, closes the SaaS loophole

Funambol Carrier Edition, for large installations

Proprietary license and add-ons

“Do not upsell your community” guideline

Do not sell anything to our open source community

Nope, do not even sell them support
The (Mobile) Cloud is the future

• Revenues will come from

– Software usage (e.g. per user per year, based
on bandwidth consumption or a similar model)
– Recurring revenues are sustainable (and the
market likes them)
• Advertising
– the software is free, the ads pay for it
– Advertising is what made the Internet
Companies
Conclusions

There is money in Open Source

It doesn't come for free

There are many ways to profit respecting user's
freedom

Identify your revenue stream

Love your community
Contact

Stefano Maffulli
maffulli@Funambol.com
http://www.funambol.com
Resources

The 451 Group: http://blogs.the451group.com/opensource/

Open-Core Licensing: http://bit.ly/1IOZpG

Making Billions with Open Source, Revisited http://bit.ly/FkqrR

Top Commercial Reasons Why Open Source Communities Matter
http://bit.ly/42FwB4

On open source business strategies (again) http://bit.ly/1N69fA

Dirk Riehle: Open Source Economics - The Economic Motivation of Open Source
Software: Stakeholder Perspectives http://bit.ly/isuiG

Roberto Galoppini: Commercial Open Source is a Juggling act http://bit.ly/1qLfS
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© 2009 Dirk Riehle and Stefano Maffulli
Photo © Ben Fournier, John Leach
http://www.flickr.com/photos/destruct_photo_design/3267960065/
http://geekz.co.uk/lovesraymond/