Revenue Models in the Open Source Software Business

Revenue Models in the Open Source Software Business

Risto Rajala (Helsinki School of Economics, Finland) and Jussi Nissilä (University of Turku, Finland)
DOI: 10.4018/978-1-59140-999-1.ch042
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Abstract

Profit-oriented business behavior has increased within the open source software movement. However, it has proved to be a challenging and complex issue due to the fact that open source software (OSS) business models are based on software that typically is freely distributed or accessed by any interested party, usually free of charge. It should be noted, however, that like all traditional software businesses, the business models based on OSS ultimately aim at generating profits. The aim of this chapter is to explore the key considerations in designing profitable revenue models for businesses based on OSS. We approach the issue through two business cases: Red Hat and MySQL, both of which illustrate the complexity and heterogeneity of solutions and options in the field of OSS. We focus on the managerial implications derived from the cases, discussing how different business model elements should be managed when doing business with OSS.

Key Terms in this Chapter

Offering: An inseparable part of a business model that includes aspects such as complexity; the essential benefit that the customer is really buying; and product features, styling, quality, brand name, and packaging of the product offered for sale.

Resources: Specific properties that are subordinate to the core competencies of companies.

Software Licensing: The definition and agreement of rights to use, redistribute, or modify software.

Relationships: The ties and interaction of companies with other actors.

Revenue Model: The method of value capturing that includes the description of the sources of revenue, price-quotation principle, and cost structure.

Source Code: The programming that allows software to perform a particular function or operation.

Business model: An abstraction of business, or the manifestation of strategy, that characterizes the business and specifies in which the company is positioned in its value-creating network.

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