Building an Open Source Business
"There are many great open source projects that have dedicated developers, users and admirers. But only a few have the possibility of becoming legitimate businesses. The trick is to figure out the market, the business context and the viability of sustained revenue...
Here is a short list of tips to consider when funding and building an open source business...
Get Your IP in Order...
Any open source company seeking backing has to be as clean as possible with its code ownership. This means knowing exactly what is in the product it distributes and who wrote it...
The intellectual property aspect is also very important in relation to an acquisition. No one wants to be negotiating terms of a buyout only to find that the code they have based their whole company on is in violation of licensing terms.
Leverage the Community...
Keep Keeping Costs Down...
Cost control can be accomplished through a variety of means, including community development and communications programs, but the underlying mission is to keep your cost of goods sold (COGS) very low. If you don't control your COGS then the whole open source model goes up in smoke.
Find the Right Price
Pricing remains one of the great mysteries of any business. Open source companies tend to look at the cost of their nearest competitor and price their offering at some percentage discount.
While this pricing method is helpful for marketing purposes, it doesn't build an effective business model. Pricing must be thought through and tested amongst friendly parties who will give honest feedback on the value of the service or software.
Get Help with the Never-Ending Legal Stuff
One aspect that continues to recur is the need for sound legal advice and contracts. Open source is still very unknown to many large and small companies. The best thing an open source business can do is find knowledgeable and trustworthy legal help..."
Read more in this excellent article from Sandhill.com by Dave Rosenberg, CEO of MuleSource, and co-author of InfoWorld's "Open Sources blog.
