Where’s the Funds? Choices for Commercializing Technologies, Component 1: Open Supply Computer software – Tech & Sourcing @ Morgan Lewis

When the subject of technologies commercialization tactics comes up, the most widespread choices ordinarily described incorporate the sale of a technologies or constructing a business enterprise about technologies by promoting items or giving licenses or subscriptions to technologies-primarily based options.

In this series, we will appear at technologies commercialization choices that are significantly less typically discussed. In Component 1, we talk about how firms could be capable to make use of open supply computer software (OSS) as a commercialization technique. In a forthcoming Component two, we will concentrate on the choice to “white label” technologies as a commercialization technique.

WHY OPEN Supply?

We have highlighted problems connected to OSS in a quantity of weblog posts: we spoke about trends in leveraging OSS, as effectively as problems to take into account in the context of representations and warranties in M&ampA transactions. Our colleagues also discussed business enterprise dangers linked with the use of OSS.

In this post, even so, we turn our concentrate to why a business enterprise could pick out to pursue an open supply technique and how companies could nonetheless acquire industrial advantage from OSS.
The central concept of OSS is to leverage the breadth and depth of the developer neighborhood, which aids in identifying and eliminating bugs and safety problems, as effectively as enhancing computer software characteristics and user encounter primarily based on user feedback.

This remains the core advantage of OSS-primarily based companies: as demonstrated by a RedHat report on the state of enterprise open supply, 89% of respondents saw enterprise open supply as additional safe or as safe as proprietary computer software. Nonetheless, open supply firms have also proved that they can be lucrative companies, and a couple of current initial public offerings in the sector prove as a lot.

OSS COMMERCIALIZATION Choices

Ahead of we appear into how OSS owners can make income, it is worth mentioning that the industrial achievement of OSS is largely attributable to (i) the scale of interest in the solution from each the developer neighborhood and consumers in order to make use of the core advantage of open supply as highlighted above and (ii) the credibility and reputation of the OSS owner, as cybersecurity problems are normally best priority for consumers. Now, let’s turn to the choices.

Open But Not Cost-free

Even though OSS is normally perceived as a no cost computer software, that is not necessarily the case. The creator could publish the supply code below a license that would limit the use and modification rights or impose an earnings-sharing obligation on the licensee if a solution embedding the computer software is commercialized, which incentivizes prospective industrial customers to enter into a separate industrial license with the creator.

This choice is also known as restrictive licensing and has been criticized by the open supply neighborhood as departing from the original intent of OSS. Note that converting to a restrictive license right after a solution was 1st marketed with out any restrictions could not be effectively received by customers (see our coverage of the Dungeons and Dragons case earlier this year).

Cost-free vs. Paid Versions

This choice is often known as dual licensing, as the computer software owner could let no cost use of the computer software with fundamental choices but will charge a charge for the versions that incorporate further functionality or are intended particularly for enterprise use. This pricing technique is often known as “freemium.”

Open Core

A variation of the dual licensing model is identified as the “open core” model. In the open core model, the developer open-sources the majority of the code and enables it to create as an ordinary OSS, but keeps particular characteristics and functionality proprietary and offered for industrial licensing.

For instance, envision a browser or mobile operating technique that comes with a marketplace of add-ons and extensions produced by the owner as effectively as independent developers, exactly where some of these add-ons and extensions are offered for a charge.

Hosting

For the reason that not all companies have the required capacity to deploy and run OSS, some vendors could pick out to give a remote server to run the OSS with added functionality such as backups and upgrades of the OSS.

Nonetheless, offered that remote servers usually are the territory of cloud vendors, there could be competitors in between OSS developers and cloud vendors providing OSS as a service with out further price to the consumer. This competitors has resulted in some OSS providers like limitations in their licenses to avoid promoting their computer software as a service with out paying royalties.

Assistance and Consulting

OSS creators could make use of their experience and give consumers paid assistance in relation to OSS deployment, configuration, integration, education, or troubleshooting. There are distinctive views as to regardless of whether this is a sustainable operational model extended term, as a lot of would claim that OSS ought to increase more than time, and consumers will not be inclined to continue paying right after the initial deployment stage. As a outcome, some providers pick out to use this function with each other with proprietary characteristics compatible with OSS or with open core.

In addition to the above, there are additional strategies to raise income, such as certification costs, crowdsourcing, branded distribution, or hybrid licensing, e.g., a so-known as franchising model exactly where the OSS owner certifies chosen partners to turn into “authorized” vendors of the OSS and they make use of 1 of the commercialization tactics and spend a charge to the OSS owner.