Where’s the Revenue? Possibilities for Commercializing Technologies, Portion 1: Open Supply Computer software | Morgan Lewis – Tech & Sourcing

When the subject of technologies commercialization techniques comes up, the most popular solutions generally talked about incorporate the sale of a technologies or creating a business enterprise about technologies by promoting items or offering licenses or subscriptions to technologies-primarily based options.

In this series, we will appear at technologies commercialization solutions that are significantly less typically discussed. In Portion 1, we talk about how providers might be in a position to use open supply computer software (OSS) as a commercialization method. In a forthcoming Portion two, we will concentrate on the solution to “white label” technologies as a commercialization method.

WHY OPEN Supply?

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

In this post, on the other hand, we turn our concentrate to why a business enterprise might opt for to pursue an open supply method and how companies might nonetheless get industrial advantage from OSS. The central notion of OSS is to leverage the breadth and depth of the developer neighborhood, which assists in identifying and eliminating bugs and safety concerns, as properly as enhancing computer software attributes 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 much more safe or as safe as proprietary computer software. Nevertheless, open supply providers have also proved that they can be lucrative companies, and a handful of current initial public offerings in the sector prove as substantially.

OSS COMMERCIALIZATION Possibilities

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

Open But Not Totally free

Though OSS is normally perceived as a no cost computer software, 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 computer software is commercialized, which incentivizes prospective 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 following a solution was 1st marketed with no 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 occasionally referred to as dual licensing, as the computer software owner might let no cost use of the computer software with fundamental solutions but will charge a charge for the versions that incorporate more functionality or are intended particularly for enterprise use. This pricing method is occasionally referred to 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 makes it possible for it to create as an ordinary OSS, but keeps particular attributes and functionality proprietary and readily available for industrial licensing.

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

Hosting

Due to the fact not all companies have the needed capacity to deploy and run OSS, some vendors might opt for to give a remote server to run the OSS with added functionality such as backups and upgrades of the OSS.

Nevertheless, provided that remote servers commonly are the territory of cloud vendors, there might be competitors in between OSS developers and cloud vendors supplying OSS as a service with no additional 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 no paying royalties.

Help and Consulting

OSS creators might use their experience and give consumers paid help in relation to OSS deployment, configuration, integration, education, or troubleshooting. There are unique views as to whether or not this is a sustainable operational model extended term, as quite a few would claim that OSS must strengthen more than time, and consumers will not be inclined to continue paying following the initial deployment stage. As a outcome, some providers opt for to use this function collectively with proprietary attributes compatible with OSS or with open core.

In addition to the above, there are much more strategies to raise dollars, such as certification charges, crowdsourcing, branded distribution, or hybrid licensing, e.g., a so-referred to as franchising model exactly where the OSS owner certifies chosen partners to turn out to be “authorized” vendors of the OSS and they use a single of the commercialization techniques and spend a charge to the OSS owner.

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