Where’s the Funds? Selections for Commercializing Technologies, Component 1: Open Supply Software program | Morgan Lewis – Tech & Sourcing
When the subject of technologies commercialization methods comes up, the most prevalent alternatives commonly pointed out incorporate the sale of a technologies or creating a organization about technologies by promoting merchandise or giving licenses or subscriptions to technologies-primarily based options.
In this series, we will appear at technologies commercialization alternatives that are much less typically discussed. In Component 1, we go over how corporations might be in a position to make use of open supply software program (OSS) as a commercialization method. In a forthcoming Component two, we will concentrate on the solution to “white label” technologies as a commercialization method.
WHY OPEN Supply?
We have highlighted concerns associated to OSS in a quantity of weblog posts: we spoke about trends in leveraging OSS, as properly as concerns to look at in the context of representations and warranties in M&A transactions. Our colleagues also discussed organization dangers related with the use of OSS.
In this post, nonetheless, we turn our concentrate to why a organization might pick to pursue an open supply method and how companies might nevertheless get industrial advantage from OSS. The central thought of OSS is to leverage the breadth and depth of the developer neighborhood, which aids in identifying and eliminating bugs and safety concerns, as properly as enhancing software program functions and user practical experience 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 far more safe or as safe as proprietary software program. Even so, open supply corporations have also proved that they can be lucrative companies, and a couple of current initial public offerings in the sector prove as substantially.
OSS COMMERCIALIZATION Selections
Ahead of we appear into how OSS owners can make funds, it is worth mentioning that the industrial achievement of OSS is mainly 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 concerns are frequently major priority for consumers. Now, let’s turn to the alternatives.
Open But Not Totally free
Although OSS is frequently perceived as a no cost software program, that is not necessarily the case. The creator might publish the supply code below a license that would limit the use and modification rights or impose an revenue-sharing obligation on the licensee if a solution embedding the software program is commercialized, which incentivizes possible industrial customers to enter into a separate industrial license with the creator.
This solution is also referred to 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 initially marketed without having any restrictions might not be properly received by customers (see our coverage of the Dungeons and Dragons case earlier this year).
Totally free vs. Paid Versions
This solution is often referred to as dual licensing, as the software program owner might permit no cost use of the software program with simple alternatives but will charge a charge for the versions that incorporate added functionality or are intended especially for enterprise use. This pricing method is often referred to as “freemium.”
A variation of the dual licensing model is recognized as the “open core” model. In the open core model, the developer open-sources the majority of the code and permits it to create as an ordinary OSS, but keeps particular functions and functionality proprietary and accessible for industrial licensing.
For instance, envision a browser or mobile operating technique that comes with a marketplace of add-ons and extensions designed by the owner as properly as independent developers, exactly where some of these add-ons and extensions are accessible for a charge.
Due to the fact not all companies have the needed capacity to deploy and run OSS, some vendors might pick to supply a remote server to run the OSS with added functionality such as backups and upgrades of the OSS.
Even so, provided that remote servers frequently are the territory of cloud vendors, there might be competitors amongst OSS developers and cloud vendors supplying OSS as a service without having further expense to the client. This competitors has resulted in some OSS providers like limitations in their licenses to stop promoting their software program as a service without having paying royalties.
Help and Consulting
OSS creators might make use of their experience and supply consumers paid help in relation to OSS deployment, configuration, integration, instruction, or troubleshooting. There are distinctive views as to no matter whether this is a sustainable operational model lengthy term, as several would claim that OSS must enhance more than time, and consumers will not be inclined to continue paying right after the initial deployment stage. As a outcome, some providers pick to use this function collectively with proprietary functions compatible with OSS or with open core.
In addition to the above, there are far more strategies to raise funds, such as certification costs, crowdsourcing, branded distribution, or hybrid licensing, e.g., a so-referred to as franchising model exactly where the OSS owner certifies chosen partners to grow to be “authorized” vendors of the OSS and they make use of a single of the commercialization methods and spend a charge to the OSS owner.