The three open source markets

Open source was originally a business model, and business models remain its main challenge. How do we extract a fair price from the consumer market?

A decade ago, when I was working for another publisher, they put all readers into three boxes, the makers, the sellers, and the buyers of technology. (Early English fishwives kept their money close in pockets like this. From the Tyne and Wear Museum in northeast England.)

In covering open source for ZDNet I find the market breaks down similarly, into three parts:

  1. The Corporate Market, defined as firms big enough to have their own computer departments. This is the sweet spot for most open source projects. The customers understand paying for value, and see open source as a way to gain control over operations.
  2. The Re-seller Market, small businesses who buy their solutions from re-sellers. These firms, which may be large or small themselves, see open source as a way to gain control over customers. Doctors may think they know Windows, but most don't pretend to know Linux.
  3. The Consumer Market, ordinary users who are mainly seeking free solutions or alternatives to Microsoft. Few consumers will ever try to understand, let alone manipulate, their own code. This is where desktop Linux tries to play, and where it constantly fails.

As you move up-market, from consumers to corporates, the prospect list decreases, but it gets easier to extract money from individual prospects, because they understand the value proposition.

As you move down-market, toward consumers, the prospect list increases geometrically, but much of the money comes from vendors, whose motivation may be to financially "dis-arm" rivals. 

Open source was originally a business model, and business models remain its main challenge. How do we extract a fair price from the consumer market? How do we get into pockets like the one above? Finding an answer to that question will determine how far open source goes in the future.

Your suggestions, as always, are welcome.

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