Open Source Economics

At a session on Web2.0 at last week's NTC conference in Washington, a woman took the microphone to comment on a conundrum her non-profit is facing. About 40% of her organization's revenue comes from the sale of educational video's in the K-12 market. They suspected they could significantly increase their visability by posting content for free on the internet - but this would destroy their sustainability. How can they take advantage of these new web-based distribution tools without going broke? It's the same problem the record labels are facing. New distribution technology is forcing new business models. Independent Software Vendors (ISV's) have been wrestling with this for years, as the success of the Open Source movement places a downward pressure on the value of software. While the Free and Open Source community has always stressed that Free in the FOSS context is "Free as in Free Speech, not Free as in Free Beer", the reality is that much open source software is available at no cost. To adopt or compete with this model, independent developers who must generate revenue to meet payroll have created new business models. Some vendors, such as MySQL, have a split model - a free license and a commercial license, for example. Others, such as Red Hat, expect to make their money from implementation and support services. But generating enough cash to amortize software development this way is a challenge. A few years back,Steven J. Vaughan-Nichols wrote a piece in eweek called Going Broke with Free Software that documented the stress the developers of open-source software were under to produce revenue, and he interviewed several who had taken positions in proprietary firms like Microsoft to pay the the bills. Just yesterday, I spotted this programmer's blog post about why he has opted NOT to provide his work as Open-Source. Vaughan-Nichols concludes Yes, you can pay nothing for most open-source software, but if you want to see the next and better version of it, you'd better start paying something for it. This week, Michelle Murraine in her blog takes non-profit pundit Michael Gilbert to task for charging for his new journal, Journal of Information Technology in Social Change. Michelle also publishes Michael's response, where he cites the necessity of raising revenue to sustain publication. Since Free and Open Source groceries and housing don't seem to be on the horizon, I think this tension between free distribution and the need to sustain organizations will be with us for while. image posted as http://www.flickr.com/photos/loneprimate/451169287/