It seems an unlikely model for business success, but the people at the bottled water companies sure seem to have it figured out.

However, it's something that folks in the open source community have been grappling with for years.

If your software is available for free online, how do you expect to make any money out of it?

By offering value added customisation and support services has been the answer so far.

But now, a report from IT industry analysts The 451 Group, concludes that open source is no longer a viable business model in the software sector.

The findings are causing a lot of debate in the open source community.

Entitled 'Open Source is Not a Business Model' the study points out that whole proposition has changed from a theoretical question — 'How is it possible to generate revenue from something that is free?' — to a practical question — 'What products and services do open source vendors provide that customers are prepared to pay for?'

The report states, 'As the open source development and distribution model has been adopted, either partially or fully, by both startups and established software vendors, some of the assumptions about open source software have taken a back seat to commercial reality.

'For example, the idea of a community of individuals sharing the development of software projects for the greater good has been superceded by the image of a community of vendor employees sharing the development of software projects to increase code quality and lower production costs.'

In fact, the overriding conclusion of the study is that there is very little money being made out of open source software.

This is sure to set the cat amongst the pigeons. And there are already pages and pages of blog posts from open source purists arguing against many of the assumptions of the study.

The bottom line of their argument (so far), is if there are so many profitable open source software houses, how can you deny the viability of the model?

The answer, according to The 451 Group, lies in the fact that the line between proprietary software and open source software is becoming increasingly blurred as open source software is embedded in broader proprietary products and proprietary extensions are used to attract more customers.

To explore the theory, the researchers analysed the business strategies of 114 open source-related vendors, including open source specialists such as Red Hat and Alfresco, and those for which open source is used more tactically, such as IBM and Oracle.

According to a blog published by The 451 Group, some of the more interesting findings are as follows:

>>The majority of open source vendors utilise some form of commercial licensing to distribute, or generate revenue from, open source software.

>>Half the vendors assessed are using hybrid development models — combining code developed via open source projects with software developed out-of-sight of open source project members.

>>Vendors using hybrid development and licensing models are balancing higher development and marketing costs with the ability to increase revenue-generation opportunities from commercially licensed software.

>>The licence used for an open source project (reciprocal or permissive) has a strong influence on development, vendor licensing and revenue-generation strategies.

Indeed, the study found that, contrary to the popular notion that the open source model is quite simple, there are actually more than 80 different combinations of development model, vendor licensing strategy and primary revenue triggers being used today by the vendors.

So it seems that open source is a business tactic, not a business model, according to this study.

It's a software development and distribution model and it's difficult to argue the point.

Regardless, open source is a model that unleashes an incredible flood of creativity for the greater good of all software users, and that has always been its raison d'etre, not the revenues it earns.


>>Sherrilynne Starkie is the managing partner of Strive Public Relations, a strategic communications consultancy serving the Isle of Man. Visit her business blog, Strive Notes for frequent updates www.strivepr.com/notes or follow her on twitter.com/sherrilynne