The price is right: Next open source business model

This short list of positives could fill more than a few blog pages of course, so much so that it’s tempting to declare a full-on open source gold rush. Everyone grab a pan and head for San Francisco! It’s no wonder, then, that we’re seeing so many mainstream vendors jumping headlong into the open source stream, looking for gold. In just the past month or so, unusual suspects such as Intel, Microsoft (in a way), 3Com, ARM, Autodesk, Adobe, and QNX have announced varied projects and programs based on open source software.

Most of these vendors are not rolling out traditional business models, where customers lay down annual subscription dollars in exchange for support, training, education, and such. Rather, many of these vendors are looking to simplify and lower internal development costs, better support ISV partners, or just buy some street cred for solutions that would otherwise be considered frumpy by open source devotees.

With such happy-happy-joy-joy support for open source infusing the software industry right now, I think the industry and open source is ready, and it’s mature enough to move on to a more directly profitable business model. What I’d like to suggest is that the open source industry adopt a new (some may call it old) business model that will garner revenue not just from the enterprise, but also from the average consumer. Call it YEPR, Your Estimated Price is Right open source licensing. Think of it as an individualized equity trade, or fair market value as defined by the individual customer. The idea is a lot like donationware, which Wikipedia defines as:

“A reasonably satisfied user is suggested to compensate the programmer if real value or use is achieved from the program. The compensation amount is left up to the discretion of the user. This amount is based on a value the user estimates they derived from the program.”

However you want to classify or name it, what I’m suggesting is a model where users, in order to download open source, must pay for the code itself. The trick is that users can name the price they are willing to pay. If the software is worth nothing to them (nothing to be ashamed of), users can declare a value of $0.00. If it’s worth $2,000, then that’s what it’s worth, and that’s what it should cost. For a non-enterprise customers, perhaps the value of Red Hat’s JBoss Application Server is $10, which is $10 Red Hat wouldn’t have received otherwise. For an enterprise customer, perhaps this product is worth far more, assuming that value gets applied toward the cost of a traditional support contract. In that way, YEPR looks like a regular open source model for customers choosing to upgrade to subscription servers.

For an early look at how this might play out within the software industry, consider the popular British band Radiohead. Now divorced from the controlling power of EMI, the band has chosen to pre-release its new studio album, “In Rainbows,” with an online shopping cart where users can specify the value they’re willing to pay to download the new music. If you think the album is worth 1 pound, that’s all you have to pay, simple as that. Users who want a little extra can also purchase a traditional CD “discbox,” which includes a bonus CD from the recording sessions, a hardcover book, and a two-record vinyl edition of “In Rainbows.”

Interestingly, initial reports indicate that more people have opted for the band’s discbox than for the potentially free download. Obviously engaged fans want the works, while more casual interlopers, who may not really know Radiohead, may choose not to pay for this album … then again, if they really like the music, perhaps they’ll simply buy the discbox for “In Rainbows,” or they’ll drop some dollars down the road for the band’s next release.

It can and should be the same for open source customers, who should be given the opportunity to place some value upon the excellent software developed these days. Sure, open source is already free, unlike music (outside of newsgroups and Gnutella). But by creating an environment where software can take on value, ideas like YEPR create a more complete value chain for software and give open source vendors a mechanism to earn revenue outside of the traditional subscription model.