Exactly where is the revenue? Technologies Commercialization Possibilities, Aspect 1: Open Supply Application – Technologies and Sources @ Morgan Lewis

When the subject of technologies commercialization tactics comes up, the most frequently described alternatives include things like promoting the technologies or creating a small business about the technologies by promoting goods or giving licenses or subscriptions to technologies-primarily based options.

In this series, we’ll appear at significantly less-discussed technologies commercialization alternatives. In the very first component, we appear at how corporations can use open supply software program (OSS) as a commercialization approach. In the upcoming Aspect two, we will concentrate on the solution of “white labeling” the technologies as a commercialization approach.

WHY OPEN Supply?

We’ve highlighted OSS challenges in a quantity of weblog posts: we’ve talked about trends in OSS usage, as effectively as challenges to look at in the context of representations and warranties in M&A transactions. Our colleagues also discussed the small business dangers connected with employing OSS.

In this post, nevertheless, we concentrate on why an enterprise may possibly choose to pursue an open supply approach and how enterprises can nevertheless advantage commercially from OSS. The central concept of ​​OSS is to leverage the breadth and depth of the developer neighborhood, which aids determine and do away with bugs and safety challenges, as effectively as boost software program functions and user expertise primarily based on user feedback.

This remains a important benefit for OSS-primarily based enterprises: as shown in RedHat’s State of the Enterprise Open Supply report, 89% of respondents think that enterprise open supply is as safe or a lot more safe than proprietary software program. Nevertheless, open supply corporations have also verified that they can be lucrative corporations, and a number of current initial public offerings in the sector prove this.

OSS COMMERCIALIZATION Possibilities

Prior to we appear at how OSS owners can make revenue, it is worth noting that the industrial achievement of OSS can mostly be attributed to (i) the degree of interest in the solution and the developer and consumer communities to take benefit of the important positive aspects of open supply as above highlighted and (ii) the credibility and reputation of the OSS owner, as cybersecurity challenges are normally a major priority for customers. Now, let’s turn to the alternatives.

Open, but not absolutely free

Even though OSS is normally perceived as absolutely free software program, this is not necessarily the case. The creator may possibly publish the supply code beneath a license that would limit rights of use and modification or impose a income-sharing obligation on the licensee if the solution in which the software program is incorporated is commercialized, which encourages prospective industrial customers to enter into a separate industrial license with the creator.

This solution is also referred to as restrictive licensing and has been criticized by the open supply neighborhood as deviating from the original intent of OSS. Note that converting to a restrictive license just after the solution is very first released without having any restrictions may possibly not be effectively received by customers (see our coverage of the Dungeons and Dragons case earlier this year).

Free of charge vs paid versions

This solution is from time to time referred to as dual licensing, due to the fact the software program owner may possibly enable absolutely free use of the software program with simple alternatives, but will charge a charge for versions that include things like extra functionality or are intended particularly for enterprise use. This pricing approach is from time to time referred to as “freemium.”

Open the kernel

A variation of the dual licensing model is recognized as the “open core” model. In the open core model, the developer opens up most of the code and makes it possible for it to be created as typical OSS, but keeps particular functions and functionality proprietary and readily available for industrial licensing.

For instance, picture a browser or mobile operating program that comes with a marketplace of plugins and extensions developed by the owner as effectively as independent developers, exactly where some of these plugins and extensions are readily available for a charge.

Hosting

Simply because not all corporations have the capacity to deploy and run OSS, some vendors may possibly decide on to present a remote OSS server with extra functionality such as OSS backups and upgrades.

Nevertheless, considering that remote servers are largely the territory of cloud vendors, there may possibly be competitors amongst OSS developers and cloud vendors who present OSS as a service at no extra expense to the consumer. This competitors has led some OSS providers to include things like restrictions in their licenses to avoid them from promoting their software program as a service without having paying royalties.

Help and consulting

OSS developers can leverage their experience and present shoppers paid assistance connected to OSS deployment, configuration, integration, instruction, or troubleshooting. There are differing views on irrespective of whether this is a sustainable operating model in the lengthy term, as numerous argue that OSS ought to boost more than time, and customers will not be inclined to continue paying just after the initial deployment phase. As a outcome, some providers decide on to use this function collectively with proprietary OSS or open-core compatible functions.

In addition to the above, there are a number of approaches to raise revenue, such as certification costs, crowdsourcing, branded distribution or hybrid licensing, for instance, the so-referred to as franchising model exactly where the OSS owner certifies chosen partners to develop into “authorized” OSS providers and they use a single from commercialization tactics and spend a charge to the OSS owner.