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How free software makes money!

The Free Software Movement

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Penguin MarchThe Free Software Movement

While Microsoft keeps churning out newer and newer versions of Windows at more and more unreasonable prices, the ‘Free Software Movement’ marches on. Ever wondered why a perfectly respectable system like Ubuntu Linux ships completely free of cost all the way from Africa?

While many people focus on this point, it is actually just a consequence of something else — Ubuntu is only incidentally free of cost. Good people donate to it and sponsor its shipping costs because they like it. What is so special about Ubuntu? Why is it considered noble to donate to Ubuntu but not Microsoft Windows?

Ubuntu is “Free Software” or “Software Libre.” “Free as in Freedom, Not Cost” which gives us 4 fundamental rights;

  1. The freedom to run the program, for any purpose.
  2. The freedom to study how the program works, and adapt it to your needs. Access to the source code is a precondition for this.
  3. The freedom to redistribute copies so you can help your neighbor.
  4. The freedom to improve the program, and release your improvements to the public, so that the whole community benefits. Access to the source code is a precondition for this.

Free software promotes sharing, kindness and humanity towards others, which is what Ubuntu the operating system represents. Instead of illegally sharing software you know nothing about and barely trust, running into the risk of being thrown in prison, why not simply use free software? People say it’s impractical. How will a company that makes free sofware earn money and sustain? Who will work for free?

To understand how to, lets consider the two simple alternatives when I write a software;

  1. I’m evil. I close up the software, don’t release the source code, don’t tell anyone how it works and sell it at a high price. People will find ways around paying for my software and piracy will prevail. But I’ll earn anyway and people will abuse me if the software doesn’t work. I become greedy for more money, write some malicious code into the software to steal people’s credit card numbers and distribute it again. Since nobody has access to the source code, nobody can actually prove that their credit card numbers are being stolen. They just have a gut feeling. People start hating me and each other for sharing the software in the first place.
  2. I’m not evil. I release the source code along with the software and license it using a free software license like the GNU General Public License, BSD license or MIT license.

Ofcourse, The First one is the easy way out. You create something, you package it and sell it, the same way the vegetable vendor sells vegetables on the street. Price per piece. Extremely simple revenue model and extremely evil. But how do I “sell” free software? Certainly not like vegetables on the street, because I’ve given everyone the right to redistribute it. So who’s actually going to come to me and pay for it? Well, it turns out that there are many other creative ways to make money. Since the models tend to be complicated hybrids, lets do some illustration with these examples;

  • SpikeSource is an example of a very successful company that follows a pure service model. They specialize in maintenance, certification, and integration of free software into large workstations. They capitalize on the fact that they have the power to study the source code (modifying it when necessary) and pinpoint exactly what went wrong during tech support. Free software typically comes with no warranty of any kind. SpikeSource fills this void for large corporations.
  • RedHat offers RHEL, or RedHat Enterprise Linux which they build by gluing together various free software components and charge for the service of maintaining it. They capitalize on the fact that they are familiar with exactly what they built.
  • MySQL and Trolltech Qt follow a double-license model. Why would people choose the proprietary license? The proprietary license offers some additional rights over the software over and above the fundamental free software license rights. Yes, it works. The proprietary license is available at a price.

Many companies also tend to maintain two versions of their software — a free software “community” version that the community continually improves and a proprietary version that can be purchased at a cost.

Zimbra, the email client, is one significant example. Their desktop edition is free software but their network edition for large enterprises comes at a cost. RHEL/Fedora is another example — RedHat constantly use ideas and code from Fedora, the community edition, to maintain RHEL (No, RHEL isn’t proprietary, but neither is it developed by the community).

Many free software projects are funded by companies interested in seeing the project come up. SuSe, for example, sponsors a project called OpenSync because they want to see certain features in it that they probably wouldn’t see otherwise. They additionally get some good publicity and a major say in any crucial decision. Instead of creating their own synchronization solution for their operating system, why not sponsor an already ongoing project? It’s far cheaper and they get additional programmer passionate about the software to work on it for free (yes, I worked on it for a while too because I liked it).

Just like Google pays Firefox to get their homepage opened at startup by default, several companies might have interests in different popular free software. For example, if OpenSync becomes really popular and supports synchronization with Nokia and Sony phones, Motorola will immediately jump in and help OpenSync support their phones by funding the project. Zimbra did so well that it was acquired by Yahoo! in September 2007.

Well, as you can see from the few exmaples above, nobody is really doing free social service. Everything’s rather business, just that the company doesn’t need to burn down half the Amazon Rainforest to do it.

18 Comments

  1. Big players will always make big money no matter if its free or commercial.

    How would you suggest the smaller open source players to monetize their efforts?

  2. Big players will always make big money no matter if its free or commercial.

    How would you suggest the smaller open source players to monetize their efforts?

  3. As I said on Twitter, I really respect you and your work but this article is extremely weak.

    First, you say that 'Everything is strictly business' and later on say that "Free software promotes sharing, kindness and humanity towards others, which is what Ubuntu the operating system represents" well, which one is it?

    Also, it is not fair to say that if I decide to keep my software close-source, I am evil. By this account, Macromedia/Adobe is evil and you shouldn't be evangelizing their products.

    On a broader note, you have chosen a 'service model' to make money and someone else chose 'licensing model'. Both of you are doing it to make money and there is nothing evil with either approach. The bottom line is we are all selfish and greedy. And that is fine. That's what makes this world tick. I am sure you are not creating oCricket as a service to millions of cricketing fans and are working for potential monetary reward. [I would highly recommend that you read Milton Friedman's book 'Capitalism and Freedom' and 'Free To Choose'.]

    You showed us an example of making money by 'selling' free software in 'creative ways'. After putting an enormous amount of effort in creating software, why should I also put in lot of creative effort to sell it?

    If you look bit deeper, there are only two ways to sell the software.

    1. Either you sell Product License OR
    2. You give away product and sell services.

    In second scenario, your growth is limited to number of hours you can put towards servicing your customers where as in first scenario, your grown has no relation to the man hours you put in. The revenue generated by this model can help you develop more products to solve the endless problems which needs solving.

    Enough with my ranting, I hope I am able to provide some food for thought.

    And yes, good luck with oCricket!

  4. As I said on Twitter, I really respect you and your work but this article is extremely weak.

    First, you say that 'Everything is strictly business' and later on say that "Free software promotes sharing, kindness and humanity towards others, which is what Ubuntu the operating system represents" well, which one is it?

    Also, it is not fair to say that if I decide to keep my software close-source, I am evil. By this account, Macromedia/Adobe is evil and you shouldn't be evangelizing their products.

    On a broader note, you have chosen a 'service model' to make money and someone else chose 'licensing model'. Both of you are doing it to make money and there is nothing evil with either approach. The bottom line is we are all selfish and greedy. And that is fine. That's what makes this world tick. I am sure you are not creating oCricket as a service to millions of cricketing fans and are working for potential monetary reward. [I would highly recommend that you read Milton Friedman's book 'Capitalism and Freedom' and 'Free To Choose'.]

    You showed us an example of making money by 'selling' free software in 'creative ways'. After putting an enormous amount of effort in creating software, why should I also put in lot of creative effort to sell it?

    If you look bit deeper, there are only two ways to sell the software.

    1. Either you sell Product License OR
    2. You give away product and sell services.

    In second scenario, your growth is limited to number of hours you can put towards servicing your customers where as in first scenario, your grown has no relation to the man hours you put in. The revenue generated by this model can help you develop more products to solve the endless problems which needs solving.

    Enough with my ranting, I hope I am able to provide some food for thought.

    And yes, good luck with oCricket!

  5. "I'm evil. I close up the software, don't release the source code, don't tell anyone how it works and sell it at a high price."

    That's just rubbish.

  6. "I'm evil. I close up the software, don't release the source code, don't tell anyone how it works and sell it at a high price."

    That's just rubbish.

  7. >> First, you say that "Everything is strictly business" and later on say that "Free software promotes sharing, kindness and humanity towards others, which is what Ubuntu the operating system represents" well, which one is it?

    Both statements are perfectly logically correct. Does business have to represent ruthlessness and inhumanity? :P Ubuntu is made for the community and represents all those things that I said. It doesn't really do business and is just supported by donations. The examples I gave follow a strict business model but they don't operate on the basis of vendor lock-ins.

    >> Also, it is not fair to say that if I decide to keep my software close-source, I am evil. By this account, Macromedia/Adobe is evil and you shouldn't be evangelizing their products.

    I don't evangelize their products :)
    Well, that's a personal opinion. Richard Stallman believes that all software should be free while Eric Raymond feels that proprietary software and free software can co-exist. Who is right? These are just their personal opinions.

    >> After putting an enormous amount of effort in creating software, why should I also put in lot of creative effort to sell it?

    I don't personally think it takes a lot more creative effort to monetize free software but that's a personal opinion. You don't have to maintain your software, run into lawsuits because users' computers were fried or keep searching and circumventing cracks for your software if it's free.

    >> How would you suggest the smaller open source players to monetize their efforts?

    Good question. If it's a really tiny initiative and doesn't plan to ever be large, it can simply be supported by donations like Vimperator, a Firefox plugin. Other small projects like Conduit, Amarok like do go under umbrella organizations/ being part of a larger project like GNOME/ KDE.

    >> You give away product and sell services

    I wouldn't classify double-licensing and dual-versioning under "services". I'm just trying to say that there are lots of ways to monetize a product, not just the price-per-piece model.

    >> Both of you are doing it to make money and there is nothing evil with either approach. The bottom line is we are all selfish and greedy. And that is fine. That's what makes this world tick.

    Agreed. Everyone wants to make money. Nothing wrong with that. There's a limit to greed though. If setting up your industry involves burning down half the Amazon forest, I think the business should be stopped immediately. The question at hand is very simple: Is locking up software that big an issue?

    All I'm trying to say is that there are nicer ways to make money than by vendor lock-ins, spyware and DRM. True, there's a lot of proprietary software that does none of this: Then the question arises "Why? Why lock up the software in the first place then?"

    >> That's just rubbish.

    Wow! That was an amazingly constructive comment! You've really given me a lot of room to respond to that.

  8. >> First, you say that "Everything is strictly business" and later on say that "Free software promotes sharing, kindness and humanity towards others, which is what Ubuntu the operating system represents" well, which one is it?

    Both statements are perfectly logically correct. Does business have to represent ruthlessness and inhumanity? :P Ubuntu is made for the community and represents all those things that I said. It doesn't really do business and is just supported by donations. The examples I gave follow a strict business model but they don't operate on the basis of vendor lock-ins.

    >> Also, it is not fair to say that if I decide to keep my software close-source, I am evil. By this account, Macromedia/Adobe is evil and you shouldn't be evangelizing their products.

    I don't evangelize their products :)
    Well, that's a personal opinion. Richard Stallman believes that all software should be free while Eric Raymond feels that proprietary software and free software can co-exist. Who is right? These are just their personal opinions.

    >> After putting an enormous amount of effort in creating software, why should I also put in lot of creative effort to sell it?

    I don't personally think it takes a lot more creative effort to monetize free software but that's a personal opinion. You don't have to maintain your software, run into lawsuits because users' computers were fried or keep searching and circumventing cracks for your software if it's free.

    >> How would you suggest the smaller open source players to monetize their efforts?

    Good question. If it's a really tiny initiative and doesn't plan to ever be large, it can simply be supported by donations like Vimperator, a Firefox plugin. Other small projects like Conduit, Amarok like do go under umbrella organizations/ being part of a larger project like GNOME/ KDE.

    >> You give away product and sell services

    I wouldn't classify double-licensing and dual-versioning under "services". I'm just trying to say that there are lots of ways to monetize a product, not just the price-per-piece model.

    >> Both of you are doing it to make money and there is nothing evil with either approach. The bottom line is we are all selfish and greedy. And that is fine. That's what makes this world tick.

    Agreed. Everyone wants to make money. Nothing wrong with that. There's a limit to greed though. If setting up your industry involves burning down half the Amazon forest, I think the business should be stopped immediately. The question at hand is very simple: Is locking up software that big an issue?

    All I'm trying to say is that there are nicer ways to make money than by vendor lock-ins, spyware and DRM. True, there's a lot of proprietary software that does none of this: Then the question arises "Why? Why lock up the software in the first place then?"

    >> That's just rubbish.

    Wow! That was an amazingly constructive comment! You've really given me a lot of room to respond to that.

  9. A better example than you OpenSync is GCC, because not only one company supports it, GCC is supported my Intel, AMD, IBM, Apple etc. Many companys because it is very useful.

    You also could include Linux, it's a good example. RedHat, Google, IBM, Novel, Astaro, Intel a whole lot of companies support it, and non-profits, eg Linux Foundation.

  10. A better example than you OpenSync is GCC, because not only one company supports it, GCC is supported my Intel, AMD, IBM, Apple etc. Many companys because it is very useful.

    You also could include Linux, it's a good example. RedHat, Google, IBM, Novel, Astaro, Intel a whole lot of companies support it, and non-profits, eg Linux Foundation.

  11. This post is lame. Just because a software publisher is asking for money for the software doesn't mean he is "evil". It just means he wants money to earn from his work just like a book writer wants to earn money from his writings.

    Just because the software isn't opened it doesn't mean it steals credit cards. In fact i never heard of one single software publisher that did that. That is a rubbish comment from you.

    Giving a software for free doesn't generate any money. The only ones that make money are the big ones, Google (they call them software, i'd call them web pages), Mozilla (taking money from Google), Sun (real software, but struggling). A smaller company that doesn't have such a large public will make $0. Not all software require support and noone guarantees you that people will ask for support from the company that produces it.

  12. This post is lame. Just because a software publisher is asking for money for the software doesn't mean he is "evil". It just means he wants money to earn from his work just like a book writer wants to earn money from his writings.

    Just because the software isn't opened it doesn't mean it steals credit cards. In fact i never heard of one single software publisher that did that. That is a rubbish comment from you.

    Giving a software for free doesn't generate any money. The only ones that make money are the big ones, Google (they call them software, i'd call them web pages), Mozilla (taking money from Google), Sun (real software, but struggling). A smaller company that doesn't have such a large public will make $0. Not all software require support and noone guarantees you that people will ask for support from the company that produces it.

  13. What if it's a piece of software that doesn't need support like a database service, or an operating system, just a program like winzip, or something like that, why make it free, no one will ever contact you for support, and if they do, is not going to be enough to pay the bills.
    I understand projects and learning and community stuff, but there seems to be a flaw in not charging for the software at all.

  14. What if it's a piece of software that doesn't need support like a database service, or an operating system, just a program like winzip, or something like that, why make it free, no one will ever contact you for support, and if they do, is not going to be enough to pay the bills.
    I understand projects and learning and community stuff, but there seems to be a flaw in not charging for the software at all.

  15. Lame post and bad title choice..."free software" is not the same as "open source", open source may be a special case of free software and in describing open source you are including things that are not true, like unnecessarily demonizing "for profit software".

    Waste of time.

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