Free Software and Free Market

[eliasan]

Since it's beginning, Free Open Source Software was the center of a lot of debates. Offering a product with all its code open and accessible by all is a revolution and a challenge to any traditional business idea. It looked like madness. Committing business suicide. But Free Open Source projects managed to stay alive and some of them become profitable types of businesses.

But how can you have profit when you offer the main product for free?

That is a good and very common question between people involved in the Free Open Source Software. In this article, I will not talk about F.O.S.S. in general, but I will focus on Content Management Systems, because this is the market that Elxis is competing.

Free Open Source Content Management Systems bring a great value to a lot of people and companies because they use them to build websites that promote their business. That way they generate more revenue. They also can invest the money they saved to other activities, increasing more their revenue.

In one side we have a clear winner. The user / consumer.

So, what is for the other side? What is for the developers and for people organizing and running a Free Open Source Content Management System like Elxis?

To every physical activity it should be a balance between parties involved. Otherwise the equilibrium will fail and the system will collapse. In an Open Source CMS like Elxis, the balance can be achieved in two ways:

From people using it and contributing back code and effort or
From people using it and contributing back money or assets (tangible or intangible).

My experience says that only a very small percent of people using an Open Source CMS can contribute back code, so the balance turns towards the other types of contribution.

Of course, an important ingredient for this to work is maturity from the people using Elxis. People should be able to understand and value the money and time they are saving. They have to realize that not only they, but also people producing the products they use, live in the same real world. As cost counts for them, so does for the people producing the product they are using. As users invest on Elxis, by learning and using it, they have to be concerned about its ability to survive as a project. And they do have a word on this process.

As you can't earn money from the CMS itself, you have to find other ways. In fact 8 business models exist and support this idea. I will present them and note which ones can or will be used with Elxis.

The devise of these models came up as a necessity through out the years, as an answer to how could Open Source be profitable.

Support Sellers
In the "Support Sellers" model software-related revenue comes from media distribution, branding, training, consulting, custom development, and post-sales support instead of from traditional software licensing fees. This is the original free software business model advocated by Richard Stallman in the GNU Manifesto.
Elxis uses and encourages that model.

Loss Leader
In the "Loss Leader" model a no-charge open-source product is used as a loss leader for traditional commercial software; the open-source product generates little or no revenue, but providing the product makes it more likely that customers will buy other products that are sold using the traditional software business model.
Elxis uses and encourages that model. In this model 3rd party software development and software developed by GO UP Inc. is based on.

Widget Frosting
The "Widget Frosting" business model is intended for companies that are in business primarily to sell hardware ("widgets") but which use the open-source model for enabling software such as driver and interface code ("frosting") distributed at no charge along with the hardware.
Elxis doesn't use this model as no hardware is directly involved.

Accessorizing
The "Accessorizing" business model is for companies that distribute books and other physical items (as opposed to software and services) associated with and supportive of open source software. Here the company does not typically participate in open source development per se, but rather for the most part piggybacks on open-source software developed and maintained by others.
Elxis uses and encourages that model. Publishing of books from GO UP Inc., is based on this.

Service Enabler
In the "Service Enabler" business model a company creates and distributes open-source software primarily to support access to revenue-generating on-line services. (The services may generate revenue, e.g., through subscription fees or advertising.)
That can also be used with Elxis, but there is no current use.

Sell it, Free it
The "Sell It, Free It" model is essentially the "Loss Leader" model repeated and extended through time. In this model a company would deliberately structure its development and licensing practices so as to release software products first as traditional commercial products and then convert them to open-source products when they reach an appropriate point in their life cycle where the benefits of developing them in an open-source environment outweigh the direct software license revenue they produce. The newly freed open-source products would still add value to the remaining proprietary products, as in the "Loss Leader" model; in fact, if the proper open-source license were chosen (e.g., a BSD-style license or the Mozilla Public License) then newer proprietary products could be based in part on code from older products now released as open source.
Elxis does not uses this model as Elxis CMS is released as a Free Open Source product from day one.

Brand Licensing
In the "Brand Licensing" model a company makes the software product itself open source but retains the rights to its product trademarks and related intellectual property, and charges other companies for the right to use those trademarks in creating derivative products distributed under the exact same brand name.
Elxis does not support this model, as there are no plans to sell licensing rights.

Software Franchising
"Software Franchising" is a possible business model based on taking to their logical conclusion the ideas of some of the preceding models, in particular "Brand Licensing" and "Support Sellers". The "raw materials" underlying a support seller's business are available to anyone, but it's reasonable to assume that some may be better at the business than others and as a result may build value in a particular brand associated with the company's services. If the company then wishes to expand, one possibility would be to grow not through direct hiring and acquisition but rather through franchising; in other words, the company would authorize other developers to use its brand names and trademarks in creating associated organizations doing open-source support and custom software development in particular geographic areas or vertical markets. The "Widget Frosting" model does not appeal to companies only, as it is based on the promotion of the software in order to sale the hardware the company produces.
Elxis could use that model in the future, but currently there are no plans.

As a conclusion, I believe that in Elxis CMS we have to encourage any business activity that promotes and strengthens it. This is an important prerequisite for it to evolve and continue to be a reliable and free alternative to commercial or other FOSS.