The little red hen business model

The little red hen business model

Summary: One reason closed-source developers may continue to feel smug is they have a working business model. Charging for code is an easy business model.

TOPICS: Open Source

With Love, Little Red HenOne reason closed-source developers may continue to feel smug is they have a working business model.

Charging for code is an easy business model. You know how hard to work on a project based on how many people pay you for it, and how much they pay.

I know open source code doesn't always mean free code. The heart of the idea isn't in the price but in the fact that the buyer can look at it, and may then be under an obligation to share improvements.

But most open source projects don't charge for code. Thus many open source projects don't know the market demand for their work, and are forced to beg.

Such projects can be in big trouble if a key sponsor drops out. This happened to the Open Graphics Project recently. The project leaders are continuing to go ahead on their own dime, but they're looking for $1 million, from either investors or a partner.

This is just one troubled project. There are others. David Berlind wrote recently how JasperSoft took over its open source reporting tool, JasperReports and began charging for it, calling the result "commercial open source."

The link between the funding and the work is one big fault line for the open source world. Open source advocates keep talking about "support," but that only kicks in once someone has taken what they made. Paid source developers can usually get by on a little capital, a few loans, and the pre-orders. As projects become more complex, requiring more time and money to accomplish, the advantages of this paid source model will increase.

How can open source advocates turn this around? They might use the Little Red Hen business model.

Companies that really want the software may pre-pay for support. Future support charges might be discounted to those who provide help. This can come in many forms, staff time, physical resources, even testing.

Those who grow the wheat and bake the bread should get to eat it first. I suspect many open source projects already work in this way, and it makes a lot of sense. What do you think? Let me know in TalkBack.

Topic: Open Source

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  • what's free??

    The open source movement needs to tap the brainpower of people to work, and really amazingly in my opinion, it has produced more software than I could have imagined it would. I mean if you had an open source home project, I doubt many homes would get built. Unfortunately people who would contribute (like retirees) are just not ripe for this kind of thing. As a business model communism has never worked, so figure the odds. I do however believe that since I pay for my software, I should have the means to modify, fix, or otherwise screw with it. If I actually knew enough about how to improve it, I should have access to the source code, as well as anyone else I might want to get to fix it. so at the end of the day I would want to have a linux like OS as opposed to a Microsoft proprietary black box. I don't think I should have to be in some "club" to be allowed to understand how things work. It seems like every hacker does anyway, every virus writer manages to break in, so what's the deal?
    I hope that linux can find a way to stay open source, and make a profit.
    • What do you mean by "pay"?

      This is one of the areas where FOSS and the free/beer or free/speech issue gets confusing. You are NOT paying for Windows - you are paying a very small fraction of what it cost MS to create Windows, and for that small fraction you get the right to use it for a while (the same holds true for AIX or MacOS or any other commercially available operating system).

      If, on the other hand, you actually DO pay for the software (and that means all the development costs) then, yes, you should be able to modify it, inspect it, wallpaper your house with the printouts, whatever you like. You own it.

      FOSS changes that, and in some ways that's a bad thing. The whole concept of ownership disappears, and the Tragedy of the Commons starts to apply. FOSS relies on a committed core of zealots (in the strict sense of that word) to make it work. Too many freeloaders, and it all falls apart.
      • Tragedy of the Commons

        That is an interesting turn of phrase.

        What exactly is the tragedy of the commons?

        I'd be very interested in that. I'm not being flip, either. I do indeed want to be educated on this.

        I believe having a commons is a very positive good. But I can be convinced otherwise.
        • Should have quoted that phrase...

          It's not that a commons is a tragedy, it's a philosophical/political shorthand for the situation that occurs when an unowned resource (the commons) is exploited beyond its ability to support the exploitation. See this article for the origin of the term:

          What it really means is, if we all own something, then nobody owns it. Hence, freeloaders.

          The GPL attempts to get around this by exposing a different kind of ownership model, consisting of forcing contributing users to give back their contributions to the community. This works as long as there are sufficient contributors, and with Linux, Apache and a bunch of other well-known FOSS projects, there is a critical mass that so far has been able to absorb the demands of the freeloaders. How long that can continue is an open question.
          • Thanks for the Explanation

            I agree that if an unowned resource is allowed to be exploited then it will be.

            What's needed, always, is a set of laws that can be enforced within the commons, a group to enforce that set of laws, and a funding mechanism that will pay the people to do the enforcing.

            This tragedy befell many, many parks until the funding requirements came to be met.

            Point is, the tragedy doesn't have to happen. I think you note that in your paragraph about the GPL. It's the obligation to "give back" that keeps the GPL commons going.

            Which leads to a political attack on the other side. When you attack the GPL as "restrictive," aren't you demanding a right to freeload?

            That's the trouble with analogies. They lead to more.

            Thanks again...
      • Tragedy of the Commons does not apply

        It assumes that the value of the shared resource somehow is depleated by the use of freeloaders. In software that is not the case.
    • The origins of open source

      Pesky brings up an interesting point about the origins of open source.

      I don't think it springs from communism. I think it springs from the more egalitarian spirit of 19th century America.

      Parks are an example of this commons in action. I really like a quote from Frederick Law Olmsted, the father of many of our greatest parks. It was addressed to future generations. "Look, we built this for you!"

      The American Founding Fathers believed strongly in a commons. They described copyrights and patents as "monopolies," granted reluctantly in the Constitution for a limited time and to a limited purpose, mainly to provide an incentive for creating more.

      It's not a property right. Intellectual creations should move toward the commons over time.

      But that's not the direction in which the law has moved in our time.

      Open source, as a concept then, is as old as the Revolution. The American one, not the Russian one.
  • linux and communists

    I did not mean to imply that linux springs from communist doctrine, but rather to infer that it will share the same fate due to it's business model, which does force some payback, but seemingly less than the invested costs (which is what you are saying about windows.) I have bought a car on several occasions, and it was never implied that I should pay for r&d or the entire amortized cost of general motors doing business. Microsoft is argueably one of the most profitable companies out there right now, if they weren't recouping thier costs through what they have charged me for software, then they must be dealing drugs or something to make that kind of money. I have been sold several "lemons" as well by microsoft, as some of the blatent coding errors have left holes the size of washington state in the software.

    In all I think that we must reach some sort of middleground where innovation on the part of the computing community is not stifled by the greed of one meglomaniac, or left to the whims of people working without monetary incentive.

    The United States economy, and our future is at stake, as China and other foreign countries laugh at our intellectual property laws. The only good defense in this situation is a good offense.
    • Nonsense.

      <blockquote>it's business model, which does force some payback, but seemingly less than the invested costs</blockquote>How much does development time cost? GPL contributors get back the development time of any other developers that work on the project.<blockquote>left to the whims of people working without monetary incentive.</blockquote>
      Most development in the US is NOT done for the shrinkwrap software industry (Microsoft, etc.). Most programming is done to modify and develop software in house. Software houses that have their own products generally make most of their money customising the software for their clients. It is easy to see that the OSS business model (paying for modifications) fits easily with most development done in this country (and indeed, the world).<blockquote>The United States economy, and our future is at stake</blockquote>I agree. Hanging on to outmoded development practices (like hiding the source code and deliberately limiting the developer base) is probably the worst course of action that anyone could take.
  • projects

    What are the available business models? As you will most certainly notice when you look a bit deeper is that a companies business model is not always what they proport it to be. Why? Think about it! How many business models can you count within a large company? How many aspects of business does a large company deal with? Not only for it's better know strong area's either. Who are the people/programs that each specific company will use to move the company into a profitable senerio. Not an easy set of questions to answer, is it? As we get dragged down the path of convienence (admit it - we all want more convienence, whatever name we give it) which business model do you use when it appears that all the business models are broken.
    • Patent

      the patent method, or some variation (where the originator gets some return on his investment and time, no matter what the mechanism)is the original model our forefathers had in mind. I think that if we had a residual system, that allowed the creator (creators)of new technology to benefit directly, and allowed everyone to be able to see and use the patents, no matter what originator says (aka microsoft holding intellectual property for ransom) then we have moved forward. sure it's a lot of paperwork, but I beleive that the computer has made that easier, hasn't it? something more akin to the scientific community where credit due is given (and paid for if it's worth it.) This would allow disparate groups to work towards the same end (improving software, linux, what have you) without having to swallow the whole enchalada (aka microsoft)
  • JasperSoft took over its open source reporting tool, JasperReports and beg

    Actually, if you read the press release and the accurate associated print, JasperSoft is NOT charging for JasperReports. They have promised to keep it as a pure open source reporting solution. My understanding is that JasperSoft is offering support for JasperReports and they have stated their intention to improve and enhance the product, but are committed to keeping it open source - which to me is goodness. The reason that they are calling themselves a commercial open source company is because they also offer a commercial reporting soltuion called JasperDecisions - which is a seperate product from JasperReports. I do believe they are offering the ability for reports that have been developed in JasperReports to be run within the JasperDecisions Server. If you go to their website and read the press release, it is pretty clear.
  • JasperReports remains FREE!

    Dana, I just want to correct some of the assumptions you made in your article about the JasperReports project. I'm the founder and achitect of this project and it was indeed acquired by JasperSoft. However, as stated quite clearly David Berlind's podcast discussion with JasperSoft's CEO, Paul Doscher, there has never been any intention to charge for its use. It will remain open source and there are no plans to change that.

    As the founder of JasperReports, I feel very strongly that it will remain open source. Teaming up with JasperSoft made a lot of sense. We have a very large user base and that community of JasperReports users was clamoring for more support and additional functionality.
    Frankly, I didn't have the time or the bandwidth to do this on my own.
    JasperSoft's going to make sure that happens without taking away the essence of what makes this an open source project.

    In short, the "commercial" aspect revolves around the additional support they will be offering and around JasperDecisions, their commercial reporting solution. That product will actually run reports designed by JasperReports. But it is a separate product and has never been open source.

    JasperReports itself will continue to be offered to users as an open source project -- free of charge!

    Teodor Danciu
  • Responses Without Knowledge

    For people who obviously have very little experience with open source development (or Communism ;) you certainly have well formed opinions.

    The main problem with the story and comments would be obvious to anyone who has participated in an open source project. The missing concept is the mistaken belief that you can only buy things with money. The fact is that many business buy things with services or property (intellectual or real).

    Open source development is, in my experience, usually a Strategic Partnership. An individual or company needs a piece of software and does not have all the resources to develop it. So they partner with others to develop that software. Each partner receives benefits greater value than their investment.

    The reasons for the initial need may be the high cost of existing solutions, the high costs of vendor lock-in, or that the specific software or a feature is not available.

    I reason open source has taken off is the advent of the Internet which allows this type of distributed development to exist. It simply was not possible to do this type of development easily before the Internet and tools like SourceForge existed.

    That a few companies opt to charge for services is an obvious development in any market. It is no different in software.

    It is funny that the term Open Source was made up so people wearing "Only Capitalism Good" blinders could accept a new (and therefore scary) form of strategic partnership.
  • One question

    So, if I want to make money according to the articleI should use closed source and charge people to use it. That sounds fine, but how do I protect myself against people that decide that they want to sell services instead of software?

    Their software may not be as good as mine, but they give it away for free, and it may well be good enough for most people. By giving the product away they steal my market. Unless I lower my prices I will not be able to sell anything. In the end I will have to give away my product as well. The only difference is that I still is the only one who knows the code to my product. This means that I never will get any suggestions from my users on how to improve it giving me somewhat higher development costs.

    In essence the free software phenomenom is much like telecom companies giving away free cellphones to get more customers. I really dislike the communists running companies like Wodaphone, even their logo is red.
  • Pay ahead of time

    Having everyone pay ahead of time for FOSS wouldn't work, at least as you describe it. The first person to pay could just redistribute the software to everyone else. However, sponsored development is fairly common. This is a situation in which a company interested in adding a feature to a FOSS (typically copyleft) program pays a company to implement it (keeping the software FOSS). Alternatively, companies that want such features can develop them first for their own customers (and use marketing to make it very obvious). In both cases, self-interest drives the development without anything being proprietary.