What makes a Free Software company?

(The debates on the European Software Strategy came across several issues that are of general interest, but the debates themselves cannot be disclosed for reasons of procedural confidentiality. Instead, this article takes one issue and discusses it from a personal perspective.)

Although it seems somewhat antiquated today, “How do you make money with Free Software?” was a very common question just a few years ago. Today, that question has evolved into “What are successful business strategies that can be implemented on top of Free Software?”

This question is a lot more focussed already, and came up several times during the discussions around the European Software Strategy, with pointers to noteworthy contributions from various people, such as Matthew Aslett, Carlo Daffara or Matt Asay. Another person who recently took a shot at answering this question is Anoop John, who I met in Kerala two years ago.

After several years in the field, helping entrepreneurs find business models that work for them, discussing the question of Free Software companies, and the diversity of a community that is both commercial and non-commercial at the same time, a few things occurred to me that I wanted to share.

Point 1: Think clearly

In order to develop business strategies, it is first necessary to have a clear understanding of the different aspects that you seek to address. Unfortunately this is not made easier by popular ambiguous use of some terms for fundamentally different concepts and issues, e.g. “Open Source” being used for a software model, development model, or business model.

These models are orthogonal, like the three axes of the three-dimensional coordinate system, their respective differentiators are control (software model), collaboration (development model), revenue (business model).

The software model axis is the one that is discussed most often. On the one hand there is proprietary software, for which the vendor retains full control over the software and the user receives limited usage permission through a license, which is granted according to certain conditions. On the other hand there is Free Software, which provides the user with unprecedented control over their software through an ex-ante grant of irrevocable and universal rights to use, study, modify and distribute the software.

The development model axis describes the barrier to collaboration, ranging from projects that are developed by a single person or vendor to projects that allow extensive global collaboration. This is independent from the software model. There is proprietary software that allows for far-reaching collaboration, e.g. SAP with it’s partnership program, and Free Software projects that are developed by a single person or company with little or no outside input.

The business model axis describes what kind of revenue model was chosen for the software. Options on this axis include training, services, integration, custom development, subscription models, “Commercial Off The Shelve” (COTS), “Software as a Service” (SaaS) and more.

These three axes open the space in which any software project and any product of any company can freely position itself. That is not to say all these combinations will be successful. A revenue model based on lock-in strategies with rapid paid upgrade cycles is unlikely to work with Free Software as the underlying software model. This approach typically occurs on top of a proprietary software model for which the business model mandates a completed financial transaction as one of the conditions to grant a license.

It should be noted that the overlap of possible business models on top of the different software models is much larger than usually understood. The ex-ante grant of the Free Software model makes it generally impossible to attach conditions to the granting of a license, including the condition of financial transaction. But it is possible to implement very similar revenue streams in the business model through contractual constructions, trademarks and/or certification.

Each of these axes warrants individual consideration and careful planning for the goals of the project.

If, for instance the goal is to work with competitors on a non-differentiating component in order to achieve independence from a potential monopolistic supplier, it would seem appropriate to focus on collaboration and choose a software model that includes a strong Copyleft licence. The business model could potentially be neglected in this case, as the expected return on investment comes in the form of strategic independence benefits, and lower licence costs.

In another case, a company might choose a very collaborative community development model on top of a strong Copyleft licence, with a revenue model based on enterprise-ready releases that are audited for maturity, stability and security by the company for its customers.

The number of possible combinations is almost endless, and the choices made will determine the individual character and competitive strengths and weaknesses of each company. Thinking clearly about these parameters is key to a successful business strategy.

Point 2: Freedom moving up the stack

According to Gartner, usage of Free Software will reach 100 percent by November 2009. That makes usage of Free Software a poor criterion for what makes a Free Software company. Contribution to Free Software projects seems a slightly better choice, but as many Free Software projects have adopted a collaborative development model in which the users themselves drive development, that label would then also apply to companies that aren’t Information Technology (IT) companies.

IT companies are among the most intensive users of software, and will often find themselves as part of a larger stack or environment of applications. Being part of that stack, their use of software not only refers to desktops and servers used by the company’s employees, but also to the platform on top of which the company’s software or solution is provided.

Maintaining proprietary custom platforms for a solution is inefficient and expensive, and depending upon other proprietary companies for the platform is dangerous. In response, large proprietary enterprises have begun to phase out their proprietary platforms and are moving towards Free Software in order to leverage the strategic advantages provided by this software model for their own use of software on the platform level. These companies will often interact well with the projects they depend upon, contribute to them, and foster their growth as a way to develop strategic independence as a user of software.

What makes these enterprises proprietary is that for the parts where they are not primarily users of software, but suppliers to their downstream customers, the software model is proprietary, withholding from its customers the same strategic benefits of Free Software that the company is using to improve its own competitiveness.

From a customer perspective, that solution itself becomes part of the platform on which the company’s differentiating activities are based. This, as stated before, is inefficient, expensive and a dangerous strategy.

Assuming a market perspective, it represents an inefficiency that provides business opportunity for other companies to provide customers with a stack that is Free Software entirely, and it is strategically and economically sane for customers to prefer those providers over proprietary ones for the very same reasons that their proprietary suppliers have chosen Free Software platforms themselves.

Strategically speaking, any company that includes proprietary software model components in its revenue model should be aware that its revenue flow largely depends upon lack of Free Software alternatives, and that growth of the market, as well as supernatural profits generated through the proprietary model both serve to attract other companies that will make proprietary models unsustainable. When that moment comes, the company can either move its revenue model to a different market, or it has to transform its revenue source to work on top of a software model that is entirely Free Software.

So usage of and contribution to Free Software are not differentiators for what makes a Free Software company. The critical differentiator is provision of Free Software downstream to customers. In other words: Free Software companies are companies that have adopted business models in which the revenue streams are not tied to proprietary software model licensing conditions.

Up next

But every company naturally needs a differentiator that provides its unique sales proposition, the one thing that it can do better, cheaper, faster than anyone else and that provides the reason for customers to choose that particular company over another.

Traditionally, many IT companies have relied upon proprietary software models and patents for uniqueness and differentiation. This is particularly apparent in the venture capital environment, and lack of these sources of uniqueness is often perceived as a strategic weakness.

So in one of my next articles I am planning to show how differentiators used by Free Software companies can be as strong as those of proprietary companies, and that the differentiators of proprietary companies are often much less unique than it appears.

Be Sociable, Share!

About Georg Greve

Georg Greve is a technologist and entrepreneur. Background as a software developer and physicist. Head of product development and Chairman at Vereign AG. Founding president of the Free Software Foundation Europe (FSFE). Previously president and CEO at Kolab Systems AG, a Swiss Open Source ISV. In 2009 Georg was awarded the Federal Cross of Merit on Ribbon by the Federal Republic of Germany for his contributions to Open Source and Open Standards.
This entry was posted in Free Software Business and tagged , . Bookmark the permalink.

300 Responses to What makes a Free Software company?

  1. Law is one of such subjects where you have to deal with strenuous assignment pressure. You also must not forget the bulky books and lots of information that you need to remember. Law Assignment Help works as a helping hand to lessen the burden. Preparing your law assignments in time, the team saves an ample amount of time so that you can focus on your study. Our expert writers proffer assignment help for criminal law, taxation law, business law, civil law and so on.

  2. neha Kumavat says:

    We are providing the different kind of assignment to all over the world moreoverwe took some offers for you which is Engineering assignment help

  3. neha Kumavat says:

    We are providing the different kind of assignment to all over the world moreover we took some offers for you which is Engineering assignment help

  4. Get help from certified technicians to manage your Microsoft account by visiting office.com/setup. You can get help for complete Microsoft office suites including Outlook and Microsoft 365. Certified technicians are available 365 days round the clock to offer instant service to the customers. If you have any issue regarding Microsoft office, contact us right now.

  5. Hello
    This is john smith
    Get best assignment help Australia for students

  6. We are working with the amazing knowledge in academic subjects such as IT, English, hospitality, fashion studies, nursing, economics, etc. The professional assignment writers at StudentsAssignmentHelp.com are giving its best Online Assignment Help services for all the students studying in Singaporean colleges or universities.

  7. thank you so much this is awesome.

  8. andrew symond says:

    This is a excellent post. So thanks a lot for sharing this good post. pay someone to do my assignment singapore

  9. Thanks for sharing this article. You can learn many things from this. Imagination is really good.

  10. Hello
    My name is Chris Paul and This is a very awesome post. Thanks for sharing this.

  11. This post is not just informative but impressive also.This is really a good source of information,I will follow it to know more information and expand my knowledge,I think everyone should know it.And more information related to Programming homework don’t worry about that simply contact with us.

  12. Thanks for sharing this information.I feel really happy to have seen your webpage.If you have any query related to Microsoft Tech Support contact with us.

  13. Students Assignment Help caters the best homework assignment help online services to the students at a low price. Our expert writer can write any type of complicated coursework as they are well-versed with every assignment topic.

  14. It is only understandable for students studying in universities to grapple with their academic writing tasks, as they aren’t just intricate but they also demand an immense amount of time. In such circumstances, the need arises for the student to make use of a Cheap coursework writing service. It is necessary for the student to utilize the help extended by an affordable service, as it is plausible for students to struggle with their monetary resources, owing to their financial limitations, and hence acquiring the expertise-driven help of an economical writing facility is the best choice available. With that being said, while these services are reduced in price, they are nevertheless, not low in quality. These services are equipped with the foremost and most qualified academic technicians, these individuals have gained degrees from the top-most universities in the country, and they never allow themselves to falter in the quality they produce. They’re deeply invested in the process of producing precisely what is requested by the student, they align their narratives with the mentioned specifications and they constantly push the parameters, as settling for mediocrity is not inculcated into their being. Hence, place an order today to benefit your academic performance and achievements.

  15. james stephens says:

    Irelandassignmenthelp.com is one place for the all type of academic writing problems and difficult Management assignment help subjects which create tension in students life.

  16. Students Assignment Help is the best essay writing NZ service provider agency. Our experts help students to accomplish their assignment writing task at the cheapest cost. Our services are provided by the experts’ writers around the world.

  17. I really appreciate the kind of topics you post here. Thanks for sharing us a great information that is actually helpful. Good day! Dissertation Writing Service UK

  18. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often. Assignment Helper

  19. Piabet says:

    piabet bahis şirketinin güncel giriş adreslerine bizi takip ederek ulaşabilirsiniz.

  20. I savored the experience of over read your blog section. Your blog have not too bad information, I got savvy musings from this amazing on the web diary. I am ceaselessly resembling this sort blog section. I believe I will see yet again.

  21. thank you so much for this article

  22. We are providing the different kind of assignment to all over the world moreover
    Best Interior Designers Service in Delhi & Gurgaon

  23. Hot Deals says:

    Thanks for sharing this great article.
    deals india,

  24. 3D Rendering says:

    3D VisualFx is a 3d Rendering firm which offer 3d Animation, best Architectural visualization, 3d rendering services, 3d walkthrough company in Delhi.

  25. what a software company should actually be

  26. Alpineinfosoft is a company which gives Laptop on rent in Delhi Noida. We provide laptops of all the generations as well as we also provide apple macbook too. Call us at 9811623325 for booking of your laptop from our company. We are the best laptop dealers across the city.
    Laptop on Rent in Delhi NCR

  27. Scott Lee says:

    Nice Post
    My name is Scott Lee and thanks for sharing this information.
    Get the best Finance Assignment Help in Australia 24*7.

  28. That is a really great share. the way you share the post is really great.

    Laptop on Rent in Delhi NCR

  29. From your blog, I can take in some new learning, I like the profitable data you give in your articles.

  30. Abc assignment help is a customized online Software assignment help offering adroit academic help to students studying in any college/university across the globe. We have an in-house team of PhD writers holding a vast experience in managing assignments as per the specific university guidelines. We make every effort to improve the overall grades of students through our round-the-year support and assistance in any of the subjects.

  31. This post is not just informative but impressive also. The post is so convincing that it created an urge to choose Dissertation Writing Help Services. You can email us at info@ukdissertationhelp.co.uk or Phone Number: 020 8144 9988.

  32. Listen to kids songs to improve your English vocabulary and speaking skills.

  33. how to use verizon pay my bill formate for setting auto pay my account.

  34. Most students are rightfully concerned about protecting their personal information and private details when they associate themselves with a writing service. As a consequence, students should work on utilising an essay help, such as UK Essays Experts, as they’re strict adherents of the Data Protection Policy and shall therefore not divulge any information to any third party person.

  35. thank you so much for this article.

  36. Will be exposing and your prepared to writing buddies.Thank you for your benefits. This was a really amazing material. Thanks for offering these details. :)
    Led Lcd Tv Repairing Course In Delhi

  37. famitofu says:

    Out there, they’re picking up each other. In his heart, he silently welcomed the rain. Who are we now? basketball games

  38. Scorpio says:

    Great post! I really love to read such a nice article. Thanks! keep rocking.

  39. Usually, I never comment on blogs but your article is so convincing that I never stop myself to say something about it. You’re doing a great job Man, Keep it up.

  40. The article is quite informative. With the increased number of software companies, it takes an extra effort for a particular company to Stand out.

  41. Expert Football Predictions » Best Soccer Odds » Betpredictors
    100% Free Betting Tips & Predictions
    For over 4 years now, Betpredictors has been the number one site on the internet for tips and advice. Year on year, our tipsters deliver the best free betting tips

  42. Thank you so much for sharing this article with us.

  43. What a fantastic post! This is so chock full of useful information. I con’t wait to dig deep and start utilizing the information you have given me.

  44. 123.hp.com says:

    Thanks for sharing Great Information. Please keep it up.

  45. mywifiext says:

    I am very happy to see this post because it really a nice post .Thanks

  46. Such a nice information and helpful.


  47. The post is great. It asks a question, what makes a Free Software company. The article mentions that ‘The debates on the European Software Strategy came across several issues that are of general interest, but the debates themselves cannot be disclosed for reasons of procedural confidentiality’.

  48. nice post but the debates themselves cannot be disclosed for reasons of procedural confidentiality’.

  49. james says:

    Microsoft Office is a productivity suite that is used by millions of people around the country in their computers and laptops. It is a tool that saves time and makes work easier.

    You can do wonders with your Office because of its fantastic features. If you are new to Microsoft Office or unable to use any of its features, you can get all answers to your queries by simply making a call. Just dial 1-877-916-7666 to never face any interruption with your Microsoft Office product. This Microsoft Office support number remains open on all 24 hours and 7 days of the week.


Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Spam Protection by WP-SpamFree